Executive Summary

Q3 2025 delivered record profitability and ongoing margin expansion: total revenue $366.9M (+12% y/y), net income $5.9M (diluted EPS $0.13), adjusted EBITDA $19.6M, subscription AOI margin 15.5% (record) .
Subscription revenue grew 15% y/y to $252.7M with subscription pets +5% y/y to 1,082,412 and retention 98.33%; subscription cost of paying invoices improved to 70.1% of revenue vs 71.0% LY, driving AOI $39.1M (+27% y/y) .
Guidance raised on FY 2025 revenue ($1.433B–$1.439B) and AOI ($148M–$151M); Q4 2025 guidance: revenue $371M–$377M, subscription revenue $258M–$261M, AOI $41M–$44M. New $120M credit facility with PNC reduces interest margin by ~240 bps, enhancing cash flow and financial flexibility .
Against S&P Global consensus, revenue modestly beat and EPS materially beat; adjusted EBITDA outperformed internal trajectory. Catalysts: margin expansion, sustained retention, accelerated net pet additions, and interest savings from refinancing .
Consensus values marked with “*” (S&P Global).

What Went Well and What Went Wrong

What Went Well

Record subscription AOI $39.1M and 15.5% margin, reflecting disciplined execution and lower variable expense intensity (8.9% of revenue vs 9.4% LY) .
Net pet growth inflected: gross pet adds +4% y/y and net subscription pets +16,000 in Q3; retention remained strong at 98.33%, supporting LTV and PAC capacity .
Balance sheet strengthened and cost of capital lowered via new $120M PNC Bank facility; CFO: “SOFR + 2.75% vs prior SOFR + 5.15%,” implying ~$8–$9M annual interest savings on ~$115M debt .
- CEO: “We delivered record quarterly profitability while accelerating subscription pet growth…” .

What Went Wrong

Other business segment growth decelerating, with management no longer enrolling new pets in most US states for the largest partner; AOI margin remains low (~1.5%) .
PAC increased to $290 (from $243 LY), reflecting higher acquisition costs amid deliberate quality of adds; near term pressure on pet acquisition efficiency vs prior year .
EPS normalization and EBITDA definitions can create confusion versus non-GAAP metrics; adjusted EBITDA and AOI are non-GAAP and exclude recurring SBC and D&A, requiring careful reconciliation .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Total Revenue ($USD Millions)	$327.5	$353.6	$366.9
Subscription Revenue ($USD Millions)	$219.0	$242.2	$252.7
Other Business Revenue ($USD Millions)	$108.5	$111.4	$114.2
Net Income ($USD Millions)	$1.4	$9.4	$5.9
Diluted EPS ($)	$0.03	$0.22	$0.13
Adjusted EBITDA ($USD Millions, non-GAAP)	$14.5	$16.6	$19.6
Operating Cash Flow ($USD Millions)	$15.3	$15.0	$29.2
Free Cash Flow ($USD Millions)	$13.4	$12.0	$23.9

Segment breakdown (Revenue and Adjusted Operating Income):

Segment	Q3 2024 Revenue ($M)	Q2 2025 Revenue ($M)	Q3 2025 Revenue ($M)	Q3 2024 AOI ($M)	Q2 2025 AOI ($M)	Q3 2025 AOI ($M)
Subscription	$219.0	$242.2	$252.7	$30.8	$33.4	$39.1
Other Business	$108.5	$111.4	$114.2	$1.8	$1.4	$1.8
Total Adjusted Operating Income	—	—	—	$32.6	$34.8	$40.9

Key KPIs (Subscription):

KPI	Mar 31, 2025	Jun 30, 2025	Sep 30, 2025
Subscription Pets (period end)	1,052,845	1,066,354	1,082,412
Monthly Avg Revenue per Pet (ARPU, $)	77.53	79.93	82.01
Average PAC ($)	267	276	290
Average Monthly Retention (%)	98.28%	98.29%	98.33%

Guidance Changes

Metric	Period	Previous Guidance (as of Q2 call)	Current Guidance (Q3 call)	Change
Total Revenue ($B)	FY 2025	$1.417–$1.434	$1.433–$1.439	Raised low end; tightened range
Subscription Revenue ($B)	FY 2025	$0.983–$0.992	$0.986–$0.989	Narrowed range
Total Adjusted Operating Income ($M)	FY 2025	$141–$151	$148–$151	Raised low end
Total Revenue ($M)	Q4 2025	N/A	$371–$377	New
Subscription Revenue ($M)	Q4 2025	N/A	$258–$261	New
Total Adjusted Operating Income ($M)	Q4 2025	N/A	$41–$44	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Margin/Value Proposition	Subscription value proposition restored; cost of invoices 71.1% in Q2; margin expansion 13.8% AOI	Subscription invoices at 70.1%; AOI margin 15.5% (record)	Improving margin trajectory
Retention	Trailing 3-month retention 98.4% in Q2; strong member durability	TTM retention 98.33%; continued gains via communications/support	Stable to improving
Pet Growth vs Pricing Mix	Q2: ~11% ARPU, ~5% pets contribution to growth; intent to shift mix towards pets	Gross adds +4% y/y; net adds +16k; plan to increase investment to drive pet-led growth	Pivot toward volume contribution
Inflation/Rate Environment	Noted deceleration (~1 pt) and stabilization; monitoring	Q3 stable vs Q2; balanced US/Canada movements; 2026 pricing to reflect moderated inflation	Moderating
Credit Facility/Capital	Extraordinary dividend ($26M) and $15M debt paydown in Q2	Refinanced to SOFR + 2.75%; ~240 bps lower margin; enhanced flexibility	Lower cost of capital
Partnerships/Channels	Continued Aflac alliance; PHI/Perkin learnings in Canada	New BMO Insurance partnership; Seattle Reign brand activation; Aflac near-term contribution minimal	Expanding brand/channel presence
Europe Expansion	~56–60k pets in Europe; MGA structure	~60k Europe pets; limited current investment; future opportunity	Build for later

Management Commentary

CEO: “We delivered record quarterly profitability while accelerating subscription pet growth for the third consecutive quarter… Our disciplined model continues to generate meaningful cash flow” .
CFO: “Subscription adjusted operating margin was 15.5%, up from 14%… a new company record” and “We deployed $20.4M of AOI to acquire ~68,100 new subscription pets” .
CFO on refinancing: “Current debt is SOFR + 5.15; new debt will be SOFR + 2.75… ~240 bps benefit… interest savings ~$8–$9M” .
CEO on brand/channel: “Partnership with BMO… broadening access in Canada; expanding presence to connect with pet parents earlier” .

Q&A Highlights

Growth inflection and shift from defense to offense: management intends higher PAC and broader brand investments to accelerate pet-led growth into 2026 .
Pricing/inflation outlook: inflation broadly stable QoQ; 2026 pricing to reflect moderated cost trends; retention expected to benefit from softer increases .
Europe: limited current capital deployment; future opportunity with stabilized cohorts and expansion .
Credit facility economics: ~240 bps margin reduction; ~$8–$9M annual interest savings; broader treasury services from PNC .
Aflac/group channel: near-term contributions minimal; product refinement underway before scaling .

Estimates Context

Results vs S&P Global consensus:

Metric	Period	Actual	Consensus Mean	Beat/Miss
Revenue ($USD)	Q3 2025	$366,920,000	$361,575,400*	Bold beat
Diluted EPS ($)	Q3 2025	$0.13	$0.06833*	Bold beat
EBITDA ($USD)	Q3 2025	Adjusted EBITDA $19,562,000	$15,314,250* (EBITDA)	Beat (non-GAAP vs consensus definition differs)

Forward consensus:

Metric	Period	Consensus Mean
Revenue ($USD)	Q4 2025	$374,213,400*
Primary EPS ($)	Q4 2025	$0.13667*
EBITDA ($USD)	Q4 2025	$21,680,330*

Values retrieved from S&P Global*. Where consensus uses “EBITDA,” definitions may differ from company “Adjusted EBITDA.”

Key Takeaways for Investors

Margin-led profitability is durable: subscription cost of invoices improved to 70.1%, AOI margin reached 15.5%—providing fuel to reinvest in pet growth and brand activation; expect continued mix shift toward volume over price in 2026 .
Cash flow strength and lower interest costs from PNC refinancing expand strategic optionality; ~$8–$9M annual interest savings bolster FCF while funding growth .
Net pet adds and retention momentum are critical catalysts; strong retention (98.33%) increases LTV and permissible PAC, supporting sustained higher acquisition spending .
Other business headwinds are contained; management prioritizes core subscription quality over quantity, which should support margin resilience amid higher PAC .
Guidance raised on FY revenue and AOI; Q4 guide indicates continued double-digit growth and strong AOI—estimate revisions likely upward for EPS and revenue .
Near-term trading: positive setup from beats and raised guidance; watch for interest savings quantification and net pet adds trajectory in Q4 print .
Medium-term thesis: moderated veterinary inflation, retention-led LTV, and expanded partnerships (BMO, sports/community) should enable pet-led growth with disciplined unit economics .

Appendix: Additional Press Releases and Context

Canadian Kennel Club partnership renewed; >30k claims and >$7.4M paid since 2022—supporting breeder and early coverage funnel .
Board addition (Bradley Powell, former CFO of Expeditors) strengthens financial oversight and scaling experience .
CEO recognized as Woman of Influence—mission-aligned initiatives and community engagement (e.g., Seattle Reign partnership) broaden brand reach .

TRUPANION, INC. (TRUP)·Q3 2025 Earnings Summary