Trupanion (NASDAQ:TRUP) reported third-quarter revenue growth of 11% and record free cash flow, as the pet insurer added customers while reducing its acquisition cost per pet.
Revenue rose to $405.6 million, while net income increased to $9.3 million, or $0.21 per diluted share, from $5.9 million, or $0.13 per diluted share, a year earlier. The company recorded its sixth consecutive quarter of positive net income.
Adjusted operating income, a non-GAAP measure, rose 15% to $47 million, and free cash flow reached $28.5 million, up from $23.9 million. Chief Executive Officer and President Margi Tooth said both measures reached quarterly highs for the company.
Pet Growth and Retention Improve
Subscription revenue increased 14% to $287.9 million. Trupanion ended September with 1.145 million subscription pets, up 6% from a year earlier, including approximately 66,000 in Europe. Monthly average revenue per pet increased 8% to $88.95.
The company added more than 20,500 net new pets during the quarter, an increase of more than 28% year over year. It spent $23.3 million to acquire approximately 77,500 new subscription pets. Excluding pets underwritten through a managing general agent structure, acquisition cost averaged $279 per pet, down from $290 a year earlier.
Tooth attributed much of the improvement in acquisition efficiency to stronger conversion. She said expanded deductible and coinsurance choices helped prospective customers understand their options and find coverage that fit their budgets. Improvements to the online enrollment experience also contributed, she said.
Average monthly retention over the trailing 12 months was 98.38%, up five basis points from a year earlier. It was the seventh consecutive quarter of year-over-year retention improvement. Tooth said early signs suggest the expanded product options are helping first-year retention.
Pricing and Veterinary Costs
Chief Financial Officer Fawwad Qureshi said pricing remained the largest contributor to revenue growth, but customer additions were becoming a more significant factor. Gross additions rose 13.8% year over year, the highest increase since 2023, while the pricing increase was the lowest since that year, he said.
Tooth said the company expects double-digit veterinary cost inflation to continue through 2027 and has priced for that assumption. Even so, she expects the average increase for existing members to continue easing next year as the company has largely caught up with higher costs. More stable rate increases could support retention, she said.
In the subscription business, the cost of paying veterinary invoices was $200.6 million, or 69.7% of subscription revenue, compared with 70.1% a year earlier. The latest quarter included $0.6 million of adverse prior-period development.
Outlook and Capital Allocation
For full-year 2026, Trupanion expects revenue of $1.59 billion to $1.597 billion and adjusted operating income of $179 million to $182 million. Subscription revenue is projected at $1.131 billion to $1.133 billion, representing 14% growth at the midpoint.
For the fourth quarter, the company forecast revenue of $407 million to $414 million and adjusted operating income of $48 million to $51 million. Qureshi said Trupanion would provide 2027 guidance on its next earnings call.
Trupanion repurchased approximately 830,000 shares for about $25 million during the third quarter under its $100 million repurchase authorization. After quarter-end, it repaid $15 million of borrowings, leaving $18.5 million available under its credit facility. Qureshi said the company had no pressing need to draw on the facility.
The company’s agreement to end its relationship with Pets Best after the third quarter of 2028 is also moving forward. Qureshi said the existing book of business would begin moving to a new underwriting partner in the fourth quarter of 2026.
New Products in Development
Trupanion remains on track to launch a new digital insurance offering by the middle of next summer, Tooth said. The company has also begun limited trials of Landspath, its planned pet food offering sold through veterinarians.
Tooth said Landspath could reach the market around the middle of 2027 if testing goes well, but she expects very limited revenue from the initiative over the next 18 months. The initial focus is on making sure the product fits veterinary workflows and that logistics work, she said.
Trupanion plans to hold its next investor day on March 1 in New York, where management expects to share more about its progress and plans.
About Trupanion (NASDAQ:TRUP)
Trupanion, Inc is a pet insurance company that provides medical insurance coverage for cats and dogs. Its products are designed to help pet owners manage the cost of veterinary care, including coverage for eligible illnesses, injuries and other qualifying medical conditions, subject to the terms of each policy.
The company offers subscription-based pet insurance through the Trupanion brand, with coverage generally intended for ongoing veterinary expenses rather than routine or preventive care.
