Trupanion Inc (NASDAQ:TRUP) Q3 2019 Earnings Conference Call - Final Transcript
Nov 05, 2019 • 04:30 pm ET
Greetings, and welcome to the Trupanion Inc's Third Quarter 2019 Results Call. [Operator Instructions]
It is now my pleasure to introduce your host, Ms. Laura Bainbridge, Head of Investor Relations. Thank you. You may begin.
Good afternoon, and welcome to the Trupanion's third quarter 2019 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, internal rate of return, 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 in 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 will hand the call over to Darryl.
Thanks, Laura, good afternoon. We delivered strong results in the third quarter, revenue grew 27% year-over-year, the highest rate of growth since Q1 of 2018. Subscription revenue grew 23% over the prior year, led by double-digit increase in lead volume. In addition to solid growth in our leads from our core Veterinary Channel, we saw an increase in referrals from existing members adding pets or referring friends. Our conversion rate also continue to improve for the quarter. In the third quarter, we saw marked progress towards Nirvana led by improved 90-day retention and strong refer a friend and at a pet growth.
As a reminder Nirvana is our ambitious long-term goal of offsetting monthly cancellations with the addition of new pets by existing members or friends they've referred. Adjusted operating income increased 35% to