Good morning, everyone, and thank you all for joining us this morning. I'm Maria Ripps, Internet Analyst here at Canaccord Genuity, and it's my pleasure to introduce Margaret Tooth, President and CEO of Trupanion. Margaret, thank you so much for joining us today. Thank you for having me. Awesome. Just to start off, maybe give us a high-level overview of the pet health insurance market today and talk about how your strategy has evolved over the past couple of years. I guess, what are some of the key strategic priorities for you going forward? Yeah, so if we take a step back, for those less familiar with Trupanion and pet insurance as a category, this is an incredibly underpenetrated category that we're in today. There's around 4% of puppies and kittens and cats and dogs have insurance, around a market of 180+ million households across the North American market. You compare that to more heavily penetrated markets like the UK, which is at 25%. There's a long runway. From Trupanion's perspective, we've been in the business now for 25 years, and our model has always been to operate as a cost-plus model, operating the highest value proposition for the life of a pet to help pet parents budget. Our business has always been fueled on taking the profits per pet that we get to reinvest them at high internal rates of return and seeing that compounding growth. For the last 22 years, up until 2022, our focus was on gross pet ads, really helping to penetrate the market, make sure we could get Trupanion into the hands of more pet parents. In 2022, we started to see industry inflation at levels we'd never seen before. When we think about that gross pet ad journey, we suddenly started to think about our margin, which got cut in half, to how do we build that back up? We've been on a journey for the last three years, which has really been one of kind of vigorous pricing increases that we've had to do because of the price of cost of care, veterinary care. That's led us to a compounding increase of over 50% inflation over a three to four-year period, significantly ahead of the curve on a macro environment level. From our point of view, we've now got to the point where we've finally, after these years, actually got our margins back on track. We announced that in our Q2 results, which is a huge win for the company, and our strategy now pivots to being back into that growth mode in the sense of we know the margin per pet we're getting is higher than it has been for a long time. We can see those high lifetime values, focusing on retention and doubling down on making sure that members that have received these compounding increases continue to stay with us, which they are doing, and really leaning into the market that we have available today. Looking at acquisition, looking at retention, and maintaining that value prop over the long term. Perfect. That's a great overview. I guess, starting with financials, last week you reported your Q2 results. The results were pretty solid, and I think you raised your adjusted operating income guidance by over 10%. Maybe talk about what's behind this strength. Yeah, we were really pleased. I mean, the results of the quarter, like I said, are a combination of a number of quarters of really hard work and solid execution. That midpoint that you mentioned in the raise was an 11% increase from our expectations, largely driven by adjusted operating income, which is growing at close to 30%, so 28%. That implies a midpoint year-over-year growth, which is huge growth for us and testament to making sure the pricing, the value proposition is where it needs to be, but also looking at the operating costs and expenses of the business to ensure that they stay in line with our low-cost operating model. You're seeing the two of them come together in tandem to really kind of put pressure on kind of how we're operating, making sure that we're running the business efficiently. That's led to the nice step down we saw in the quarter, which now for kind of the rest of the year leaves us in a really good position from a value prop perspective to kind of double down on growth, which is both retention and acquisition. Right. I want to expand a little bit on that point. Last week, you highlighted that inflation has been decelerating modestly, but it has been decelerating after years of accelerating. Yeah. Talk about what that means for your platform and for the industry overall. It is a real tailwind. I think, you know, if we think about the overall kind of model, retention is a fuel that drives the business. We know that when we can have consistency of pricing, which is either typical inflation that's consistent, or we see that inflation starts to decelerate, it means pricing remains pretty consistent for members, which is really where we don't see, we avoid that volatility. Right. Therefore, the churn is weaker. When we think about the industry at large, we needed to see pricing increases come through. From a vet perspective, if you think about veterinarians, for the last 20 years, the world has changed dramatically. It's gone from having revenue streams of pharmacy, of food, of visits, to now really being focused on vet visits. Food has gone to big box retailers. Pharmacy has also done that too. They're looking at how do I get my revenue. They needed to increase the prices. We've been in support of that. I think kind of where we are now is they're starting to feel the pinch of pet parents coming into the hospital who can't afford care. That's the problem that we solve, and it's something that is a real tailwind for us as a business, that the pet parents that don't have insurance today are not going to the vet. More pet parents are waking up to the fact that you have to plan. Whether you have a cat or a dog, whether you live in Boise, Idaho, or downtown Manhattan, you have to make sure that you're thinking ahead for the price of the cost of care, which we've always encouraged. I think when that price point becomes that much greater from a cost of care perspective, you see more of that education happening, which I think is a fantastic opportunity for not only Trupanion, but for the category as a whole. Yeah, that's a good point. Is there just, you know, with inflation here for a second, are there any variables that could potentially accelerate inflation as we look maybe to the end of, towards the end of this year and into next year? Obviously, I can't tell the future, but I would say that by and large, the second half of the year is usually a little lighter. We typically see costs come in at the first quarter of the year. It would be very unusual, not only given the macro pressures on the industry, on the animal health industry, but also just in terms of how those prices tend to flow through the book. I think we are in a very strong position to see those prices abate over the course of the next few months. Really for us, the tell will be what happens in Q1 of 2026. If we see that back up into a 15% sort of high double digit, mid double digit number, or if it's starting to come back down below 10%, which is where it historically has been. Got it. Let's talk about pet acquisition and retention next. As you alluded to, now much of the book is sort of appropriately priced, and you're leaning more into pet acquisition. Where is this incremental spend going to, and how are you thinking about generating leads versus driving conversion? The incremental spend is going across the board: lead, convert, and first-year retentions. We think about those buckets. That's historically where we've always had sort of the spend has been dissected. We are now also back into the realm of introducing brand spend. It's sort of like an overarching halo effect. That investment is typically not something that we're going to see yield a return in that quarter. We think about our internal rates of return. We normally will spend in a quarter in lead, and we'll see that kind of convert in the period. We're starting to overlay, which is a great position to be in, more of a kind of brand spend. We see a halo effect around everything that we do. We've incrementally turned that up this year predominantly. The end of last year, we saw a very marginal increase in pet acquisition spend. This year, it went up nicely. We've seen that grow on the trot. It's still not at the top levels that we saw in 2019. I think that's important because 2019 for us was sort of the culmination of six years of consistent increases in our pet acquisition investment, which allowed us to build that brand. We're now two quarters really into kind of building that up again. That bodes well for the future as we think about the lead and conversion tools. For both lead and convert, we've been testing marginally with some channels and really kind of pushing more aggressively into conversion to help people understand the cost of care. If they don't understand it, then it becomes, it's a bit of a shock, you know, when you suddenly start to educate people of how much it costs to look after your puppy or kitten. First-year retention is another area where I expect we'll see more investment there as we grow that gross pet ads. Excuse me, are there any channels that are sort of complementary to vet hospitals that you're investing in? Yeah, when we think about the cycle, if you have a puppy going from a breeder to a vet, that's complementary. You get that consistency of brand. A breeder or a shelter will tell someone who's adopting their pet for the first time, this is the food you should feed them. You should think about insurance. You should think about grooming and all these other things. You kind of take them in your head. If you then go to the vet and the vet says, you should think about insurance, it just helps to normalize it. Beyond that, we look at how do you attribute different stages of the funnel to continue to build on that conversation. We try where we can to get the puppy or the kitten in the very early stages of life before, not only are they really cute, but before they actually kind of get pre-existing conditions. We know the best member experience is puppy as just with a human child. You get them early, you go in, you have the health check. That then leads to very few surprises further down the line, which we know then will lead to longer lifetime value. It tends to be the sort of the early acquisition channels and then supplementing that with content that can, content sites and partners that can help us just build on that education. Let's dive a little bit deeper into conversion and driving improvement, sort of conversion. In the past, you talked about sort of improving your web conversion. I think it's sort of a less important acquisition channel for you, but maybe talk about sort of your efforts there overall and then specifically about sort of web conversion. Yeah, web conversion has always been and will always likely be an area of focus for us because that's where the majority of pet parents go today, or for the majority of people, are online. Continuing to test and refine it, I think there is a very different audience that we're speaking to today than five years ago. If we think about Gen Zs, communicating with them in a way that actually resonates, whether that's video content, short bite-sized content that will help to kind of connect the dots along the way. We've brought in some new talent within the team to help us kind of figure out sort of more of that in a quicker way, but also leaning into what the contact center can do from a sales perspective. That sales team continues to be world-class in conversion rate. The reason that's useful for us is there are sound bites to use within those conversations we can then take to apply to online messaging. I'd say we've made some nice progress. It's always slow and steady because we don't ever want to test with too big a chunk of traffic when it comes through. The more traffic we get through the website, which naturally is increasing all the time, the more we'll be able to test and learn. A lot of opportunity in front of us, but the conversion rate is looking quite good, but never good enough. Just to wrap up this topic, I think typically there is a lag between sort of PAC and then sort of pet acquisition phase. Given your recent investments, how should we think about sort of pet growth in the second half of the year to the extent you can talk about that? There will continue to be a build-up of PAC. As I mentioned, when we think about IRR, typically we've tried to target that quarterly investment to say, okay, we've acquired this much, we spent this much, we acquired this many pets, and what would that return be? Now we're taking a little bit more of a longer-term look, only because we recognize the margins we're getting today from today's pets are significantly higher than the margins we're getting from the pets we enrolled a year ago. That being said, I think our IRR is conservative. As we think about that moving forward, we would look to try and push that brand spend across the year. I'd expect to see pet count, it should pick up a little bit this year, but really 2026 is where I expect to see that brand spend start to take hold because it takes time to get that to resonate in the marketplace. The other tactics that we're rolling out, some will drop this quarter, some will drop next quarter. Our plan at this point, now we've got our pricing where it needs to be, is to continue to build on an investment over time and allow every quarter to be bigger than the next, which means that you're going to have far more brand presence across the markets we're in. A little bit this year, a lot more in 2026, 2027, and 2028. Got it. Let's talk about your non-core subscriptions in North America. Products like PHI Direct, Forkin, Chewy, and Aflac cumulatively represented about 10% of gross ads recently. Can you maybe talk about how these products are progressing and where you see them over the next couple of years? Yeah, they've definitely added, as you mentioned, 10%. That number's come down a little bit over recent years as we've really dialed back our spend. When we knew that we couldn't spend as much money to acquire pets when our margins came compressed, we really looked at where do we put this money in the most effective way. That was really with the core business and remains still today. We don't invest hugely in those markets and products. I'd say they're a mixed bag. Some have been underperforming and some have performed better than we expected. When we think about a couple of them, we've really done a very good job of focusing on the higher value products and higher value, the high lifetime value. Units alone don't tell the full story when we think about the lifetime value of a wellness plan versus an insurance plan. I would say that the work we've done there has been really good because it's helped to really drive some nice movement from an internal rate of return perspective, seeing that higher retention rate come through from an insurance product. Wellness is notoriously lower. They're good. I think it's helpful always to have the brand associated with other strong brands in the category. It helps to normalize us and give us credibility as a product and as a brand. We've got a lot of opportunity to go with them. I think as the category becomes more widely known, more opportunities come our way and always looking at ways we can expand the space. Can you maybe talk about your conversion rates for PHI Direct and Forkin? I think that was an area of focus for you a couple of years ago. Where are you there? It was. I mean, the spend on those products now is tiny, really, really negligible in the PAC spend. What the team has been doing is refining what they have on web and phone. PHI Direct is a web-only product and a much lower cost product. That one we haven't seen a lot of movement. Furkin has been healthy, and it's nice to have the comparison between Furkin and the core Trupanion product in the Canadian market. There's definitely a space for a product of that ilk. We'll continue to lean into the learnings we've got from it to see how do we take that and kind of refine our learnings to do more. Got it. Let's talk about your international business. Last September, you launched your first European Trupanion-branded product in Germany and Switzerland. How has it performed so far, and how should we think about you bringing your Trupanion brand to other European markets? Yeah, we were thrilled to have the Trupanion brand launched. It's been a little while coming, and having that in Germany and Switzerland has been great from a sort of a global partnership perspective. When we think about animal health companies, they tend to be global, so it helps to kind of build on that. It's fairly slow going. We've got about 50,000 hospitals across the European markets that we could work with, so double the size of the North American market, so huge opportunity there. We're taking it piece by piece and trying to be very controlled. We're currently in around 10% of those numbers, working with the same model as we have in the North American market, having people on the ground who are connecting with the vet hospitals, building that partnership and that foundational level, paying the vet directly. We're resolving the problem that the pet parent has of being out of pocket. We're seeing some very small growth. I would say it's consistent with the investment we've made so far. Really for us, the international strategy was all around the next sort of phase and chapter of the company's history. As we come to the end of our current strategic plan, expect to see us do a lot more from an international perspective in building the markets we're in today. The second part of your question in terms of what should we expect next, we are currently present in Czechia, Slovakia, and Belgium with a different brand. That's a Pet Expert by Trupanion product. We will look to rebrand that into Trupanion over the coming sort of three to six years. We expect to see some build from there in terms of brand investment. That again kind of comes back to that pet acquisition deployment. The more we can spend to build a brand in North America, the more that will help kind of that flywheel in the European category as well. Expanding on that point, you mentioned 50,000 hospitals. How sort of similar or different are those markets compared to the U.S. in terms of expanding your presence across vet hospitals? They're not massively different. I mean, I think the different point for some of those territories is the cost of care is quite different. In terms of kind of share of wallet, you're seeing quite a different performance there. By and large, there's a veterinary trust and relationship with the pet parent is there. The ability to have MRIs, CT scans, cancer diagnostic treatments, all of those, they still apply. We're really in a market, all of those markets are areas that we think there is a huge opportunity for growth. Leaning into places where we feel we can replicate the core Trupanion product because it's consistent with what we've learned here. Yes, there are geographical nuances, and we won't be ignorant to adjusting the way we do things depending on the cultures in those markets. A lot of opportunity in front of us globally, and that's kind of where we've chosen to put our flag for now. Anything you can share with us in terms of expanding outside of Europe? I know that our international team would love to be expanding quicker than we are, but we're being very disciplined. I think there's a huge market in South America. Brazil is a huge market. I think across the world, pets are playing an increasing part in our lives. Generationally, we see that. We see investment for pet food continuing. Share of wallet that pets take is continuing to go up. I think that will be the case as we look at kind of generational shifts and behavior. We will take our time. There's no rush. The main thing for us is making sure that we are able to execute well in the markets we've chosen. It just goes to show there's a huge runway globally, and we're prepared to take that step into the global market, but it'll be over several decades. Got it. That makes sense. I want to pause here and see if we have any questions from the audience. All right, I'll. G o ahead. I mean, there's been such a great growth in this market over time. What's been the competitive response? Do you see the loss and buying ratio structurally changing at all over the next five years, particularly in the next? The question was around competitor activity and growth. As we think about how that has shifted, and loss ratio structurally changed, from our perspective, we haven't seen a huge shift in competition. I would say the last couple of years, we've seen a little bit more in terms of organization of that competition, in so much that we now have one company that owns 11 of the brands across the North American market, which I think for the category is a really big step forward. Hopefully, we'll see an influx of capital to help grow the awareness of it, given especially that we're still sort of in early, you know, 4% penetration in a market that probably can get to 25%. I think as a loss ratio perspective, it really comes down to where individual providers set their stand. For us, we've always maintained that the highest value proposition over the life of the pet is going to have the highest retention rate. We see that proving out. There's absolutely room for products that don't have a higher loss ratio, and as long as they're cheaper and they have representative cost structure, that's good as the market grows because you want something different depending on the customers you see coming through. We're seeing a little bit more sophistication. I would say we still have a massive unique selling point in the sense that we're the only provider that can pay the vet directly at the time of invoice. That is basically your dental-like experience that is unreplicated. We've seen competitors come and go in the space that have tried to replicate something similar to that. That is a patented process that we spent a lot of money and time investing in years ago. As a solution, we have to get better as a category at being clear around what those other solutions could be. At this point in time, there's so much green space out there. Having good competition is actually helpful for us and accretive to the category at large. It just adds more credibility. Hopefully, over the next few years, we'll see some more good competition come through, increased investment into the space, and we'll see everybody improve. Loss ratio is really, I think, kind of going to be the thing that makes or breaks the number of competitors. We've seen it in the past and where people haven't been priced appropriately, it can catch them up. Pet pricing for the life of the pet is not as easy as one might think. I think often competitors fall foul of that. Getting your pricing right up front is really critical. Do we have any other questions from the audience? Maria, maybe expanding on that point a little bit, can you talk about your other business where you underwrite plans for one of your competitors? I know you've been sort of scaling that down a little bit. Just maybe talk about that. Yeah, we continue to underwrite the book of business for Pets Best. We've been working with them now for a number of years, and we've been slowly seeing that business move over to their other underwriter. We do still enroll pets in two states. Some fairly big states, we're still adding pets, which we didn't anticipate doing at this stage. It's really low margin business, and it's helpful for us just in terms of kind of getting that sort of overall to scale, and it helps in that regard. By and large, there's not a significant value to be had there. Over time, we're not looking to kind of grow in the space of being a sort of a third-party underwriter for others. It has been helpful, I think, from a capital investment perspective. It's been quite capital intensive, and it's therefore why we're sort of trying to step back when that margin is tiny compared to the overall book of business. Like I said, at a point in time, it's helpful to get to scale and good to get data on pet health because it just enriches what we have as a company. Happy that that starts to trundle down over the next few quarters and see that being less of the book of business. Got it. That makes sense. I wanted to ask you about your food brand that you've been talking about for some time. Where are you in the process of maybe rolling that out or bringing that to market? Yeah, so food is an increasing share of wallet. I think it's the latest stat that I've seen is 40% of the pet parents' investment in their pet goes towards food. It's something that we're still really excited about. This is an initiative that we started back in 2019, 2020, and now we've got to a point where we've made some really good progress. We haven't revealed too much. We'll share a little bit more at our invest today that's coming up, but really keeping that under wraps because it's something that we think can really be a game changer for Trupanion. Our hypothesis is if you can feed your pet a monthly subscription food that helps that pet to be healthier, the cost to the risk associated with that pet is therefore less, and we can pass that back to our members. We also think there is a huge opportunity to put revenue back in the hands of the veterinarians who have had to increase their prices. I think the expectation around that product is there. Super early days, and we won't be in a position to roll that out over the next couple of years, but we'll keep you posted on progress. Thank you for asking. Perfect. I think we have a minute or so left. Is there anything that we didn't talk about that you'd like to highlight for our audience? I think you touched on it perfectly at the beginning. We were really pleased with our Q2 results, a combination of some very solid execution, very happy that we've proven now we have a very durable compounding model. We've shown that we have several growth levers in retention, acquisition, and margin expansion. I think we're very well poised for the next few years, excited to be able to grow the business and see that net pet growth continue. Perfect. Margaret, thank you so much. That was a great discussion, and thank you all for joining us. Thank you.