Trupanion NASDAQ: TRUP reported higher second-quarter revenue and adjusted operating income as the pet insurer benefited from increased subscription revenue, improved enrollment conversion and stable retention. The company also announced a $100 million share repurchase authorization and narrowed its full-year adjusted operating income outlook.
Total revenue rose 11% year over year to $392.9 million in the second quarter of 2026. Subscription revenue increased 14% to $276.7 million, while revenue from the company’s other business segment rose 4% to $116.2 million.
Chief Financial Officer Fawwad Qureshi said total monthly average revenue per pet was $87.44, up 9% from the prior-year period. Total subscription pets increased 5% to 1.125 million as of June 30, including about 66,000 pets in Europe. Trailing 12-month average monthly retention improved to 98.37%, compared with 98.29% a year earlier.
Profitability and cash flow improve
Subscription adjusted operating income rose 24% year over year to $41.4 million, representing 96% of Trupanion’s total adjusted operating income for the quarter. The subscription adjusted operating margin expanded to 15% from 13.8% in the prior-year quarter.
The subscription business reported a value proposition, or the cost of paying veterinary invoices as a percentage of subscription revenue, of 70.2%, compared with 71.1% a year earlier. The quarter included $1.2 million of favorable prior-period development, equivalent to about 40 basis points of subscription revenue.
Variable expenses declined to 9% of subscription revenue from 9.1%, while fixed expenses fell to 5.8% from 6%. Combined fixed and variable expenses totaled 14.8% of subscription revenue, improving from 15.1% in the prior-year period.
Total adjusted operating income was $43.3 million, up 24% and ahead of the company’s expectations, Qureshi said. Trupanion deployed $21.6 million of that amount toward acquiring approximately 68,100 new subscription pets. Excluding pets underwritten through a managing general agency structure, average pet acquisition cost was $299, compared with $276 a year ago.
Net income was $6.8 million, or $0.16 per basic and diluted share, compared with $9.4 million, or $0.22 per share, in the prior-year quarter. Qureshi noted that the prior-year result included a one-time $7.8 million gain from the exchange of preferred stock related to the company’s pet food initiative. The second quarter marked Trupanion’s fifth consecutive quarter of positive net income.
Operating cash flow rose to $21 million from $15 million a year earlier. With capital expenditures of $1.8 million, down from $3 million, free cash flow increased to $19.2 million from $12 million. Free cash flow over the past four quarters totaled $82.2 million.
Enrollment initiatives drive pet additions
Chief Executive Officer and President Margi Tooth said gross pet additions increased 9% year over year, while net subscription pet additions reached approximately 18,800, a 39% increase from the prior-year period.
Tooth attributed the growth to investments in the customer enrollment journey, including improvements to the company’s website that helped raise web conversion. Phone conversion remained near record levels, she said.
Trupanion has also been rolling out expanded deductible and co-insurance options for its core product. Tooth said the offerings provide more affordable monthly choices and are helping the company reach customer segments it previously could not serve as effectively. The rollout was about halfway complete and is expected to extend across North America by the end of 2026.
The company said lifetime value for an enrolled pet increased 25% during the quarter, which management said reflected pricing that is better aligned with the value of its coverage. Tooth said core products accounted for the strength in gross additions, with core gross adds rising about 10% year over year.
On veterinary inflation, Tooth said costs remained at double-digit levels, though they have declined from prior levels and are expected to normalize over time. The company said its pricing assumptions reflect those trends. Tooth added that wellness visits have declined across the veterinary industry while veterinary providers have raised prices to maintain revenue.
Capital allocation and strategic initiatives
Trupanion ended the quarter with $398.5 million in cash and short-term investments and $106.9 million in total debt, down $7.6 million from a year earlier. Subsequent to quarter-end, the company received approval from the New York State Department of Financial Services to dividend $44 million of capital from its largest insurance entity, APIC, to the operating company.
Qureshi said Trupanion has unlocked approximately $130 million of excess capital from its insurance entities over the past three years through dividends and efficiencies. Alongside the $44 million dividend, the company authorized a $100 million share repurchase program, with repurchases expected to occur opportunistically.
Management said it intends to continue prioritizing investments in pet acquisition, technology, artificial intelligence and automation, while evaluating share repurchases and other financial investments based on expected returns. The company also said it has agreed with Pets Best to conclude their relationship following the third quarter of 2028.
Trupanion remains on track to introduce a new digital offering by the midpoint of its current strategic plan, which Tooth identified as mid-2027. The company said the offering is intended to expand access to medical insurance for cats and dogs and reach new customer segments. Its pet food initiative is progressing through manufacturing development and testing, though management does not expect a meaningful revenue contribution during the current strategic plan.
Outlook narrowed for 2026
For the full year, Trupanion now expects total revenue of $1.584 billion to $1.601 billion. Subscription revenue is projected at $1.124 billion to $1.133 billion, with the midpoint representing roughly 14% year-over-year growth.
The company narrowed its total adjusted operating income outlook to $176 million to $184 million, representing 19% growth at the midpoint. For the third quarter, Trupanion expects total revenue of $399 million to $405 million, subscription revenue of $284 million to $287 million, and total adjusted operating income of $44 million to $47 million.
About Trupanion (NASDAQ:TRUP)
Trupanion, Inc is a pet medical insurance company that provides comprehensive insurance coverage for cats and dogs. The company's core offering is a single, customizable medical policy designed to cover veterinary diagnostic tests, surgeries, hospital stays and congenital or hereditary conditions. Trupanion seeks to streamline the claims process by offering direct payment options to participating veterinarians, reducing the need for upfront payments by pet owners.
Founded in 1999 by Darryl Rawlings and headquartered in Seattle, Washington, Trupanion began operations in the early 2000s and has grown its presence through both digital channels and partnerships with veterinary hospitals.
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