Executive Summary

Q2 delivered one of Trupanion’s strongest quarters: total revenue $353.6M (+12% YoY), GAAP diluted EPS $0.22 (vs $(0.14) LY), subscription adjusted operating margin 13.8% (+280 bps YoY), and free cash flow $12.0M (+203% YoY) .
Raised FY25 guidance: total revenue to $1.417–$1.434B, subscription revenue to $983–$992M, and total AOI to $141–$151M; set Q3 guidance for revenue $359–$365M, subscription revenue $251–$254M, AOI $37–$40M (assumes 73% CAD/USD) .
Subscription value proposition improved (cost of veterinary invoices at 71.1% of subscription revenue vs 74.1% LY) with retention strengthening; CFO noted ~60 bps favorable prior-period development and ~1% inflation abatement in Q2 .
Portfolio manager catalysts: material EPS beat vs S&P consensus, margin expansion; FY guidance raise and cash deployment (extraordinary dividend upstreamed, debt paydown) support compounding AOI and growth investment .

What Went Well and What Went Wrong

What Went Well

Strong execution and margin expansion: “one of the strongest financial quarters” with subscription AOI up 45% YoY to $33.4M and margin to 13.8% (+280 bps) .
Retention and value proposition improved: TTM retention 98.29% and subscription cost of invoices 71.1% of revenue vs 74.1% LY; management highlighted 98.4% 3‑month retention and restored value proposition to target .
Balance sheet and cash flow: $319.6M cash/short-term investments, operating cash flow $15.0M, FCF $12.0M; upstreamed $26M extraordinary dividend from APIC and repaid ~$15M debt, positioning for growth investments .

What Went Wrong

Gross adds remain subdued despite higher PAC; PAC rose to $276 (+19% YoY) while gross adds were stagnant, prompting analyst concerns on conversion efficiency and spend ROI cadence .
Other business deceleration: segment revenue +5% YoY, but growth is expected to slow as the largest partner stops enrolling new pets in most U.S. states; AOI margin only 1.3% .
Reported net income benefited from a non-recurring $7.8M realized gain (preferred stock exchanged for IP); underlying profitability excluding this item is lower, and S&P’s EBITDA “actual” series showed a miss vs consensus (see Estimates Context) .

Financial Results

Consolidated P&L (GAAP)

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$314.8	$342.0	$353.6
Net Income ($USD Millions)	$(5.9)	$(1.5)	$9.4
Diluted EPS ($USD)	$(0.14)	$(0.03)	$0.22

Margins and Profitability (non-GAAP where noted)

Metric	Q2 2024	Q1 2025	Q2 2025
Subscription cost of paying veterinary invoices (% of subscription revenue)	74.1%	71.8%	71.1%
Subscription adjusted operating income margin (%)	11.0%	12.9%	13.8%
Total business AOI margin (%)	7.9%	9.1%	9.8%

Segment Breakdown

Segment	Q2 2024 Revenue ($M)	Q1 2025 Revenue ($M)	Q2 2025 Revenue ($M)	Q2 2024 AOI ($M)	Q1 2025 AOI ($M)	Q2 2025 AOI ($M)
Subscription	$208.6	$233.1	$242.2	$23.0	$30.0	$33.4
Other Business	$106.2	$108.9	$111.4	$1.8	$1.2	$1.4

KPIs (Subscription and Total Business)

KPI	Q2 2024	Q1 2025	Q2 2025
Total pets enrolled (period end)	1,699,643	1,667,637	1,660,455
Subscription pets enrolled (period end)	1,020,934	1,052,845	1,066,354
Monthly average revenue per pet ($)	71.72	77.53	79.93
Average pet acquisition cost (PAC) ($)	231	267	276
Average monthly retention (TTM, %)	98.34%	98.28%	98.29%

Consensus vs Actual (S&P Global; Primary series)

Metric	Q2 2025 Consensus	Q2 2025 Actual	Surprise
Primary EPS Consensus Mean ($)	-0.026*	0.7265*	Beat*
Revenue Consensus Mean ($)	346,665,750*	353,557,000*	+2.0%*
EBITDA Consensus Mean ($)	12,541,330*	6,276,000*	-49.9%*

Values retrieved from S&P Global. Note: Company reported GAAP diluted EPS of $0.22; S&P “Primary EPS” reflects a different definition (normalized), hence the discrepancy .*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($)	FY 2025	$1.39B–$1.425B	$1.417B–$1.434B	Raised
Subscription Revenue ($)	FY 2025	$966M–$989M	$983M–$992M	Raised
Total Adjusted Operating Income (AOI) ($)	FY 2025	$122M–$142M	$141M–$151M	Raised
Total Revenue ($)	Q3 2025	N/A	$359M–$365M	Set
Subscription Revenue ($)	Q3 2025	N/A	$251M–$254M	Set
Total Adjusted Operating Income (AOI) ($)	Q3 2025	N/A	$37M–$40M	Set
FX Assumption (CAD/USD)	FY/Q3 2025	72%	73%	Updated

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
Value proposition / margin	Subscription cost of invoices 70.0% in Q4; improved to 71.8% in Q1	71.1% with ~60 bps favorable dev; subscription AOI margin 13.8%	Improving
Retention	Q4 TTM 98.25%; Q1 TTM 98.28% and focus on >20% rate cohorts	TTM 98.29%; 3‑month 98.4%; softer increases expected in 2026	Improving
Pet acquisition / PAC	PAC $261 in Q4; $267 in Q1 with IRR ~31%	PAC $276; IRR ~30%; plan to scale spend into H2	Scaling
Pricing / inflation	Q1 noted moderating YoY pricing pace; loss ratio expansion	~1% inflation abatement; value proposition at target; less rate needed ahead	Moderating
Canadian underwriting transition	Plan to move to wholly owned entity (GPIC); leverage expected	Continued transition expected to lower frictional costs	Positive
Other business outlook	Deceleration expected; low-margin profile	Growth to decelerate; AOI margin ~1.3%	Headwind
Strategic initiatives (food/IP)	Shareholder letter context; testing	Exchanged preferred for IP; $7.8M gain; early-stage but optimistic	Building
Currency assumptions	72% used in Q1 guidance	73% used for Q3 and FY guidance	Slight tailwind

Management Commentary

“Q2 was one of the strongest financial quarters in the history of Trupanion underscored by consistent top line growth, robust margin expansion and strengthening retention.” — CEO Margi Tooth .
“Subscription adjusted operating income of $33.4M, margin 13.8%, up two eighty basis points versus the prior year period.” — CEO Margi Tooth .
“We saw a little bit of an abatement of inflation down about 1%. Baked into our guidance for second half is an assumption that that 1% continues… about 60 bps of favorable development in Q2.” — CFO Fawwad Qureshi .
“We ended the quarter with $319.6M in cash and short-term investments… paid an extraordinary dividend of $26M from APIC; used ~$15M to pay down debt… remaining $11M for growth investments.” — CFO Fawwad Qureshi .
“Our results today show that we have now caught up with the cost of veterinary care with our value proposition restored to target.” — CEO Margi Tooth .

Q&A Highlights

Gross adds and PAC efficiency: Analysts pressed on stagnant gross adds despite higher PAC; management emphasized prioritizing “quality” pets and gradual PAC ramp with expectations for positive gross adds in H2’25 .
Inflation and value proposition: Management cited ~1% inflation abatement and favorable development, supporting guidance and margin trajectory .
Food initiative/IP: Company exchanged a preferred stake for IP to support nascent food initiative; early-stage but viewed as foundational .
Retention cadence: Team expects continued improvement as rate increases normalize; pricing set for back-half, more granular adjustments by geography/breed/age in 2026 .
Other business deceleration: Growth expected to slow due to partner enrollment changes; subscription segment remains primary AOI driver .

Estimates Context

Q2 2025 results vs S&P Global consensus: Revenue beat (+2.0%), Primary EPS showed a large beat vs negative consensus, while EBITDA “actual” missed vs consensus (S&P series differs from company “Adjusted EBITDA”) .*
Q3 2025 consensus ahead of guidance suggests modest top-line growth sequentially; company’s AOI guidance implies continued expense leverage and reinvestment capacity .*
Expect sell-side models to adjust: raise FY revenue/EPS (normalized definitions notwithstanding), trim GAAP EBITDA if following S&P series, and reflect higher AOI and improved subscription margins.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

The print was clean: revenue/EPS beat, robust non-GAAP margin expansion, and stronger cash flow; FY guidance raised across revenue and AOI, a clear positive setup into H2 .
Margin durability: Subscription value proposition at target (71.1%) with signs of inflation moderation; expect sustained AOI margin in low-to-mid teens as pricing normalizes .
Growth engine re-primed: PAC rising with IRRs ~30% and H2 gross adds targeted to turn positive; watch conversion metrics and cohort quality to gauge scalability .
Mix watch: Other business deceleration keeps consolidated margin anchored to subscription segment; reinforces focus on core product and retained pet quality .
Cash deployment: Upstreamed extraordinary dividend and debt paydown expand strategic flexibility; expect AOI to fund disciplined growth and technology investments .
Model implications: Raise FY25 revenue/AOI, incorporate 73% FX assumption, and reconcile EPS definitions (GAAP diluted $0.22 vs S&P Primary EPS 0.7265) .
Near-term trading: Guidance raise and margin narrative support positive sentiment; Investor Day (Sep 17) is a potential catalyst for deeper strategic detail .

Additional Q2 2025 Materials

Q2 2025 earnings press release and 8‑K with full financials .
Q2 2025 earnings call transcript (full discussion and guidance) .
Other relevant press releases in Q2: Earnings release date announcement (Jul 17), Canaccord Genuity participation (Jul 31), Investor Day set for Sep 17 (Jun 26) .

TRUPANION, INC. (TRUP)·Q2 2025 Earnings Summary