Trupanion, Inc. (NYSE:TRUP) Q4 2018 Earnings Conference Call Transcript

Feb 13, 2019 • 04:30 pm ET


Trupanion, Inc. (NYSE:TRUP) Q4 2018 Earnings Conference Call Transcript


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Greetings and welcome (inaudible) Fourth Quarter and 2018 (inaudible) this time all (inaudible) (Operator Instructions) This conference (inaudible). I would now like to turn to your host Laura Bainbridge, (inaudible) Relations.

Laura Bainbridge

Good afternoon, and welcome to the Trupanion Fourth Quarter 2018 Financial Results Conference Call. Participating on today's call are Darryl Rawlings, Chief Executive Officer; and Tricia Plouf, Chief Financial Officer.

Before we begin, I would like to remind everyone that during today's conference call we will make certain forward-looking statements regarding the future operations, opportunities and financial performance of Trupanion within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed. A detailed discussion of these and other risks and uncertainties are included in our earnings release, which can be found on our Investor Relations website, as well as the company's most recent reports on forms 10-K and 8-K filed with the Securities and Exchange Commission.

Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation, fixed expenses, variable expenses, adjusted operating income, acquisition cost, adjusted EBITDA and free cash flow. When we use the term adjusted operating income or margin, it is intended to refer to our non-GAAP operating income or margin before new pet acquisition. Unless otherwise noted, margins and expenses will be presented on a non-GAAP basis, which excludes stock-based compensation expense and depreciation expense.

These non-GAAP measures are an addition to, and not a substitute for, measures of financial performance prepared in accordance with the U.S. GAAP. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release or on Trupanion's Investor Relations website under the Quarterly Earnings tab.

Lastly, I would like to remind everyone that today's call is also available via webcast on Trupanion's Investor Relations website. A replay will also be available on the site.

And with that, I'll hand the call over to Darryl.

Darryl Rawlings

Thanks, Laura. Good afternoon, everyone. 2018 was another consistent year at Trupanion. Revenue was up 25%, adjusted operating income grew 36% and we calculated our internal rates of return on our pet acquisition spend to be on the high end of our 30% to 40% target for an average pet.

Every year and for the foreseeable future, our goals are to grow revenue 20% to 30% year-over-year, expand our adjusted operating income and reinvest as much of it as possible within our target internal rates of return of 30% to 40%.

Achieving these three measures, we'll continuing to build the moats around our business and maintaining our culture of the markers of a successful year. And by these counts, 2018 was another good year. In 2018, we also moved the ball forward on our five key strategic initiatives, setting us up well for