Trupanion (TRUP, Financial) has seen significant gains since reporting strong Q2 results a few weeks ago. As a provider of medical insurance for pets, it was expected that consumers might cut back on such spending due to tight budgets. However, Trupanion surprised the market with a positive Q2 report, leading the stock to surge by 33% to a new 52-week high.
The company reported a loss, but it was narrower than analysts had anticipated. Revenue increased by 16% year-over-year to $314.8 million, surpassing expectations. Subscription revenue, which Trupanion considers its financial engine, jumped 20% year-over-year to $208.6 million.
- ARPU (Average Revenue Per User) grew by 11% year-over-year, the fastest pace since TRUP went public 10 years ago. Pet count increased by 8%. Within the core Trupanion brand, ARPU expanded by 13%. Balancing growth and pricing remains a key focus for TRUP.
- To combat rising veterinary prices, TRUP aims to balance its prices with vet inflation. For Q2, TRUP had about 24% pricing rolling through its book, while veterinary inflation was consistent at 15%. Retention was strong, with pets staying over 60 months on average. Notably, within its core product, around half of Trupanion members received a price increase of 20% or more over the past year.
- As an insurance provider, TRUP is more regulated and limited in how quickly it can adjust pricing. Recently, TRUP received significant rate approvals in two of its largest states, which are now taking effect. These new rates should help TRUP increase acquisition spending and pet growth in these regions.
Overall, Trupanion's recent performance indicates that U.S. consumers are still willing to spend on their pets despite macroeconomic pressures. The rising cost of veterinary care seems to be driving demand for pet health insurance. Sentiment around TRUP stock appears to be improving, thanks to the durability of its subscription base and favorable rate increases from state regulators.
