Greetings, and welcome to the Trupanion, Inc. Second Quarter 2020 Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Bainbridge, Head of Corporate Communications. Thank you. You may begin.

Good afternoon, and welcome to Trupanion's second quarter 2020 financial results conference call. Participating on today's call are Darryl Rawlings, Chief Executive Officer; and Tricia Plouf, Chief Financial Officer. Margi Tooth, Trupanion's Chief Revenue Officer will also be available for the Q&A portion of today's call. Before we begin, I would like to remind everyone that during today's conference call, we will make certain forward-looking statements regarding the future operations, opportunities and financial performance of Trupanion within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed. A detailed discussion of these and other risks and uncertainties are included in our earnings release, which can be found on our Investor Relations website as well as the company's most recent reports on forms 10-K and 8-K filed with the Securities and Exchange Commission. Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation, fixed expenses, variable expenses, adjusted operating income, acquisition costs, internal rate of return, adjusted EBITDA, and free cash flow. When we use the term adjusted operating income or margin, it is intended to refer to our non-GAAP operating income or margin before new pet acquisition. Unless otherwise noted, margins and expenses will be presented on a non-GAAP basis, which excludes stock-based compensation expense and depreciation expense. These non-GAAP measures are in addition to, and not a substitute for, measures of financial performance prepared in accordance with US GAAP. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release or on Trupanion's Investor Relations website under the Quarterly Earnings tab. Lastly, I would like to remind everyone that today's call is also available via webcast on Trupanion's Investor Relations website. A replay will also be available on the site. And with that, I will hand the call over to Darryl.

Thanks Laura. It was a strong quarter for Trupanion. Normally, I start with the review of our key financial metrics. This quarter, the metrics speak for themselves. So I'll start with some context around our business performance. Just a few months ago, we moved our entire workforce remote, against the backdrop of a steep and unprecedented economic downturn. Throughout this period of change, the team stepped up in support of our members and delivered on our promise to be there 24/7/365. In times of uncertainty, the need to help pet owners budget for the unexpected is even greater. Across the business, we delivered record-breaking service levels, from the speed we answer the phones to how quickly we are able to pay veterinary invoices. These efforts manifested in record monthly retention in the quarter and a record number of pet owners adding pets or referring their friends. Improvement in these metrics paved the way for nirvana, which we define as a state in which existing member referrals equal or exceed the number of members who cancel. I first coined this term in our 2015 Annual Shareholder Letter. And those of you who followed the story closely know the significance of this metric on our ability to deliver self-sustaining growth in the future. At our Annual Shareholder meeting in June, we highlighted Boston as our first US territory to enter a state of nirvana. Since then, we've made progress in additional US and Canadian territories, bringing our total count of territories in nirvana to six. Churn for the trailing 12-month period averaged 1.34% per month. Our highly efficient refer-a-friend and add-a-pet channel comprised 0.75% of pets during the same period. The difference between the two, the gap to nirvana was 0.58%, a 16 basis point improvement over the prior year period. For the standalone months of May and June, the gap to nirvana was only 0.43%, maintaining service levels will be critical to continuing to drive nirvana across the business. At the same time, our field sales team found new and creative ways of interacting with veterinarians and their staff. Relative to the prior period, we believe the total number of touchpoints actually improved in the quarter. Strategic changes in how we support our field sales team and additional engagement from our account managers strengthen the performance within this core channel. We ended the quarter with over 11,500 active hospitals, a number that has continued to grow in the third quarter. We saw good success outside the veterinarian and refer-a-friend, add-a-pet channels as a team was able to dynamically adjust our pet acquisition spend in relation to market opportunities. This is not a new skill for Trupanion. The net result was stronger than anticipated performance in our subscription business. While we saw some benefit within our quarterly financial results, the nature of recurring revenue means the impact will be more meaningfully felt in the quarters and years ahead. So with that, I'll review our key financial measures for the quarter. Total revenue grew 28% year-over-year, and we ended the quarter with over 744,000 total enrolled pets. Adjusted operating income grew 44% year-over-year to $14.1 million, $13.4 million of which was from our subscription business. Growth in our adjusted operating income sets us up well to deploy capital at attractive internal rates of return. During the quarter, we were able to deploy $8.4 million of our adjusted operating income in pet acquisition spend related to our subscription business at an estimated internal rate of return of 45%, above our 30% to 40% target. Our internal rate of return benefited from our record high retention rates in the period, growth in our highly efficient refer-a-friend, add-a-pet channel and expansion in our adjusted operating margin. The combination of margin expansion and improved monthly retention increases the lifetime value of a pet and our allowable acquisition spend as a result, and we intend to be more aggressive in the second half of 2020. In the quarter, we saw expansion across key metrics; net pet growth, retention, lifetime value of a pet, growth in active hospitals and adjusted operating margin, all while being disciplined with our internal rates of return on invested capital. These results will positively impact the intrinsic value of our company. For a more detailed discussion of intrinsic value and how our business metrics influence it, please look to my 2019 annual shareholder letter, which we published in April. In summary, it was a very good quarter for Trupanion. Across nearly every metric, the team knocked it out of the park, all while navigating through a period of unprecedented change to the team that came together in support of our members and their pets while raising the bar on our service levels. Well done. And on behalf of all shareholders, we thank you. With that, I'll hand it over to Trish.

Thanks, Darryl, and good afternoon, everyone. We are pleased with our strong financial results for the second quarter, which exceeded our expectations. Our overall performance was led by record monthly retention and solid gross additions in our subscription business and continued growth in our other business. Before I get into the results, I will provide high level context for how our performance compared to our expectations. In late April, when we last provided guidance, our lead volume from veterinarians was down as much as 20% compared to the prior year. We've since seen wellness visits at the veterinarian rebound. Also in April, retention was consistent with historical levels after a slight decline at the end of Q1. We also have seen a slight reduction in the number of veterinary invoices, though it remains unclear how quickly volumes would begin to increase. In light of market uncertainties, we had pulled back our pet acquisition spending early in the second quarter, particularly our test spend. With that as a backdrop, I'll review our second quarter performance in more detail. Total revenue for the quarter was $117.9 million, up 28% year-over-year. Subscription revenue was $92.5 million in the quarter, up 19% year-over-year or 20% on a constant currency basis. Total enrolled subscription pets increased 15% year-over-year to over 529,000 pets as of June 30th. Average monthly retention, which is calculated on a trailing 12-month basis, was 98.66% compared to 98.57% in the prior year period. We note that approximately 1,600 failed payment cancellations were deferred from Q2 into Q3 as a result of a change in process due to COVID. Adjusting for these cancellations, our retention rate would still be excellent at 98.64%. For additional context, retention for Q2 on a standalone basis and adjusted for those failed payments was 98.78%, our highest quarter on record. As a reminder, nearly 96% of our subscription revenue for a given quarter is from our existing book of business, demonstrating the impact of strong retention rates on our business model. Monthly average revenue per pet for the quarter was $59.40, an increase of 4% year-over-year or 5% on a constant currency basis. In local currency, US ARPU increased 5% and Canadian ARPU increased 3% over the prior year period. Our other business revenue, which is comprised of revenue from our other product offerings that generally have a B2B component, totaled $25.5 million for the quarter, an increase of 76% year-over-year. Year-over-year growth in our other business segment reflects an increase in the number of pets enrolled. Subscription gross margin was 20% of revenue in the quarter, compared to 18% in the prior year period and within our annual target of 18% to 21%. Our subscription gross margin was comprised of 71.2% paying veterinary invoices and 9.2% variable expenses as a percentage of subscription revenue. During the quarter, we saw a reduction in veterinary invoice volume that increased our subscription gross margin by about 1% of revenue. Early in Q3, we have seen veterinary invoice volumes trending back in line with pre-COVID levels. Total gross margin was 17%, which includes our lower margin other business segment. Total fixed expenses in the quarter scaled to 5.2% of total revenue, down from 5.6% in the prior year period. I also want to note that during the quarter, we were able to resolve the majority of our known regulatory matters, including our recent matter with New York in the amount of $90,000. We generated $14.1 million of total adjusted operating income during the quarter, an increase of 44% over the prior year period. Net income in the quarter was $1.4 million. Adjusted operating income from our subscription business segment during the quarter was $13.4 million or 14.5% of subscription revenue. This margin expanded 250 basis points over the prior year period benefiting from a reduction in veterinary invoice expense and scale in fixed expenses. As a reminder, our target margin profile for our subscription business is to generate 15% adjusted operating margin before new pet acquisition spend. We continue to close the gap on fixed expenses, nearing our targeted scale of 5% of revenue. We also continue to make progress on initiatives aimed at pricing as accurately as possible to our 71% value proposition. But we do expect to be closer to 72% for the full year of 2020. During the quarter, we deployed $8.4 million of our adjusted operating income to acquire over 38,000 new subscription pets, resulting in a pet acquisition cost of $199 in the quarter, an estimated 45% internal rate of return on a single average pet. This compared to $8.2 million in the prior year to acquire approximately 35,000 new subscription pets, resulting in a PAC of $213, an estimated 42% internal rate of return on a single average pet. I'll take a moment to reiterate that we are continuously evaluating our PAC spend, ensuring we operate within our internal rate of return guardrails and reflect current market opportunities. At 45% estimated internal rates of return, we left some opportunity to be more aggressive. Free cash flow was $3.1 million during the quarter, and operating cash flow in the quarter was $4.9 million, compared to $2.9 million in the prior year period. Adjusted EBITDA was $5.5 million in the quarter, up from $1.3 million in the prior year period. Net income was $1.4 million, or $0.04 per basic and diluted share compared to a net loss of $1.9 million or $0.06 loss per basic and diluted share in the prior year period. These results demonstrate that we have the levers to control our bottom line profitability and cash flow while continuing to grow during uncertain times. Trupanion's balance sheet remains strong, with over $105 million of cash and investments and ample availability on our existing line of credit. At June 30th, we had approximately $27.3 million of long-term debt. I will now turn to our outlook for the third quarter and an update for the full year of 2020. I'll once again highlight that while we are not immune to economic challenges, the recurring nature of our business model provides us with a higher degree of visibility into our future performance than most. Quarter-to-date, we've seen a continued improvement in lead volume and strong conversion and retention rates. That said, we're monitoring the pace of the market recovery, and what impact the virus may continue to have, if any, on activity at North American veterinary hospitals. With that as a backdrop, we are updating our full-year guidance to reflect our overall performance in the quarter while maintaining a slightly wider range to account for some market uncertainty. We now expect revenue for the full year to be in the range of $487 million to $491 million, or 27% year-over-year growth at the midpoint. For the third quarter, we are expecting total revenue in the range of $126 million to $127 million, representing 27% growth at the midpoint. Our full year subscription revenue is now expected to be in the range of $382 million to $386 million, 20% growth at the midpoint. For the third quarter, we are expecting subscription revenue in the range of $98 million to $99 million, representing 19% growth at the midpoint. Our other business segment, which continues to perform well, but has less visibility, is now expected to be around $105 million for the year. At these updated revenue levels, we expect total adjusted operating income for the year to be around $56 million, with approximately $53 million coming from our subscription business. Our total pet acquisition spend will flex up or down as needed in response to market opportunities. With this in mind, we estimate our allowable acquisition spend per pet within our 30% to 40% internal rate of return guardrails will be between $240 and $270 for the full year. At the midpoint, this would equate to total pet acquisition spend for the year of around $43 million. Also, please keep in mind that our revenue projections are subject to conversion rate fluctuations between the US and Canadian currencies. For our guidance, we used a 73% conversion rate in our projections, which was the approximate rate at the end of June. In summary, we're very pleased with our Q2 financial performance and our ability to navigate through the current market landscape. Our financial position is strong, and we will continue to be disciplined in the allocation of our capital. Thank you for your time today and I will now turn the call back over to Darryl.

Thanks Trish. We'll open it up for Q&A momentarily. Joining us for today's Q&A session is Margi Tooth, our Chief Revenue Officer, who can help provide some additional context on our performance in the quarter. I also want to point your attention to a few upcoming investor events, both Trish and I will be participating in the upcoming Virtual Canaccord Conference next week. We'll also be hosting a series of virtual non-deal roadshows over the course of August and September. We hope to speak to many of you then. With that, Trisha, Margi and myself are now available for your questions.

Our first question comes from Shweta Khajuria with RBC Capital Markets. Please go ahead with your question.

I have two questions, please. First, regarding the retention rate. What gives you confidence in its sustainability? At the shareholder event, you mentioned growth in retention in May, and I would like to hear your thoughts on this. The second question is about any specific trends from July that you can highlight. Thank you.

Thanks, Shweta. Well, you're right that we first started to see an increase in our retention rates and spoke about it at our Shareholder meeting in June. The main area that gives us confidence is that at least we have a roadmap, we'll still have to execute. In the beginning of Q2, knowing that there was a lot of uncertainty with COVID and looking at the end of March, we went back to the team and said this is a time to really focus on our existing members without knowing what the opportunities are going to be like outside of our control, but let's really focus on taking care of the customer. And we did that by paying our employees faster than ever, and answering the phones quicker, and the team really rallied and I cannot say enough about what the team did. What we saw on the backside of that was record level NPS scores, record level retention and pretty much across the board on every way that we measure it. We saw improvements in our retention rates in April and May and June, and we have seen also improvements in July to date. So, we think we have the formula. It's not overly complicated. When you partner with veterinary hospitals, when you have the ability to pay hospitals directly in seconds or minutes, and when you're able to answer the phones and service the client even faster and better than we've done historically, we think not only are our retention rates going to be able to be sustained at higher levels than historical averages, but we will see higher referral and add-a-pet, because happy clients mean they're telling their friends and adding pets. So confidence that we have in the roadmap, and it's up to the team to execute. I'm sure in over the next three years to come, there'll be bumps along the way, but we're feeling pretty positive. And then you asked about any trends in July. And as I mentioned just previously, we've had seen the retention trends continue. We're seeing really strong results everywhere in July, and the veterinarians are really running off their feet right now. We're seeing a lot of wellness visits. There are some challenges for us at curbside check in to learn how to best access that. So I think there's some opportunities to learn, but July has trended similar to Q2.

Our next question comes from the line of Maria Ripps with Canaccord Genuity. Please proceed with your question.

Thanks for taking my questions and congrats on strong results. Anymore color maybe you could share with us on higher gross additions from the quarter in light of lower PAC? And any particular channels maybe that were very productive for you this quarter, I know you highlighted higher referrals. But is there anything else that you could highlight? And, Darryl, I think you mentioned being a little bit more aggressive in the second half with spending. Can you maybe give us a little bit more color on that?

Sure. I think I will hand this over to Margi, who can give us a lot more answer to the question better than I can.

Yes. Thanks, Darryl. Hi, Maria. So, I would say that in terms of gross addition, the vet channel continuing to outperform the channels that we operate within. And in doing so, allowed us to have the really efficient lower PAC there, it's always very productive for us and so it's something that we work hard to maintain efficiencies. We made some adjustments part way through the quarter, having spent a number of quarters and years looking at what's the right thing to do in terms of continuing to get growth and efficiency. And those changes certainly led to a more effective lead generation and conversion across the board, which is very positive for us moving forward. And so we not only have to be neutral in messaging adoptions there. We've also looked at the refer-a-friend and add-a-pet channels to Darryl's earlier point, when you look at the improvements we made across the business. Those channels significantly help not only with our new pets coming into the market. So you have great experience. You also sign invoices quickly. You are paid very quickly. The software massively helped there. We've also a breed channel that continues to perform strongly for us; it's a channel as far as large as the vet channel. But it's a great talent of team that worked very hard and pushing forward. And it’s really across the board, if you look across all of the channels we operate within positively that have been performing well. In terms of getting more aggressive with PAC in the second half of the year, we always look at trying to call into three different areas: the core channels, which is the vet channel predominantly for us. And then looking at where are the areas that we're less confident in what they can deliver. They will be doing more in the lines of maybe sort of a more direct-to-consumer and focus on the conversion side of things, it could be anything from outdoor to more online activity. Just being more aggressive testing and the hope that we can take the learnings from Q2, Q3 and Q4 to put into more of our core spend ultimately, which is how we continue to grow both from a PAC perspective and also from the PAC account point of view.

One thing I'd like to kind of add is, the record retention rates that we've seen in Q2, even based on a 12-month average, so not getting full credit for what we accomplished in Q2. It increases the lifetime value of a pet and increases from an average of 71 months to 75 months amidst the stream of cash flow that we're going to have is larger, which means we can spend more money to have the same internal rates of return, we can be more aggressive in the marketplace. So it is the fact of our expanding adjusted operating margin and the big improvements we've made on retention, which will allow us to have the capital to be more aggressive, and Margi and her team will figure out how to best utilize that money.

And maybe another question if I could. Can you maybe talk about how your territory partners and inside account managers' roles and responsibilities may have changed since the start of the pandemic and whether there are any changes to how you view your sort of sales structure post-COVID that could potentially result in cost savings going forward?

Yes, I'll hand this to Margi. I will say that what we've done in the field pre-COVID, we even started to make some changes. If you look over the last couple of years at a few areas that we weren't growing as quickly as we wanted or getting the results we wanted, we made some changes with the teams. As I mentioned in my opening remarks, that led to more touchpoints to the vet hospital. Now we're having to learn how to do that differently on curbside versus regular check in. But we've got new teams of people working on the tools and the tactics. And we're super encouraged by the results we've seen. And if I still your thunder there, Margi, if you have anything else to add.

One of the things that has really helped us improve the relationship between the territory partners and account managers is their ability to work well together. They each bring different skills to the hospital, and their outreach efforts are crucial. It's important to recognize that veterinarians are navigating some challenging situations, and the support they receive can make a significant difference. The role of the territory partner has evolved into a supportive function, which has proven to be effective. A key takeaway from the end of Q2 was our intention to leverage our data and industry expertise while fostering partnerships across the global animal health industry, not just in North America, to support pet owners during crises created by COVID-19. Dr. Steve Weinrauch, our Chief Veterinary Officer, highlighted the COVID initiatives that resulted in extensive social media outreach. This not only attracted new pet owners and raised brand awareness for Trupanion but also reinforced to our collaborating hospitals how we can assist them. We are helping them with messaging about COVID and safe practices for pets. The shift to curbside pickup is a new operational approach for the industry, and there is a significant demand for practical assistance in times of need. We've observed a marked improvement in efficiency from both the territory partners and account managers. We are actively exploring ways to better utilize curbside services and enhance our messaging for continued improvement.

Your next question comes from the line of Mark Argento with Lake Street Capital Markets. Please proceed with your question.

I would like to hear your thoughts on how the pandemic has influenced pet ownership, particularly with more people adopting puppies and kittens. Can you quantify that trend and its effects, or do you believe there are broader positive outcomes from this? Additionally, I'd like to ask about any direct-to-consumer channels you are exploring in the current environment. Thank you.

Well Mark, we've heard a lot about both the increase in new pet ownership, and I knew I had to do a little science for people here. There is no doubt that the demand for pets has been increasing. We've seen this in other recessions when people have a lot of uncertainty, when people are at home more, and people lose their jobs. Often, people are saying this is a good time to bring a pet home to train them. You layer that on top of with COVID, with quarantining, and people are saying this is a great time to get a new pet. Now there is no doubt that in March and April, the shelters got cleared out. It was great humanity came to the rescue of our four-legged friends and made sure that they were taken care of, but there is a supply issue and everybody has talked about this wave of pet ownership. I think people are following stories on social media more than math. No doubt that demand is up, but in March and April breeders were not able to produce more pets. It takes on average about four to five months to increase the supply of pets from the time a pet is conceived until it goes home. So we've really started to see just in the months of July and hearing reports from veterinary and so they're seeing a lot of new pets in the month of July. We didn’t see a lot of it in Q2. No doubt there is a lot of demand. I would expect that we're going to see more of it in the back half of this year and we'll see how we fare in those areas. And now I'll over the B2C channels, is there anything that you're seeing that you're seeing that was exciting in Q2 or in Q3.

It's an interesting course for us for B2C, so as a reminder, we think of anything that we can see more as conversion. Part of our strategy so the pet channel in core to the generation really helps to see it but it's an infringement of what we're seeing and continues to be, but we can see a lot of things. We were very quiet in April again as a result of coming out of the early signs of COVID. As we started to get more aggressive with our spend, we did a little bit more testing. We were able to take advantage of some of the media that was a little bit cheaper than it may otherwise have been and drove some good results of pockets is residence to provide. I think we continue to learn and test and continue to try all sorts of different direct to consumer channels, but nothing right now is going to blow us out of the water, but it helps to just drive back conversion a little bit quicker and we're supportive of that channel.

Thank you. Our next question comes from the line of Jon Block with Stifel. Please proceed with your question.

Couple of pretty quick questions. Just the first one for you just looking at the balance sheet, the AR think it was maybe 85% or 90% year-over-year. Given there might be a full time other division which I think is somewhat tied to it but it even seems to be outstripping the impressive growth in the other divisions. So can you just talk about the AR being up 85% to 90% year-over-year, and I think there is a trend line that demand accelerated over the past couple of quarters?

Yeah Jon and you're right that the majority of our accounts receivable balance is related to our other business segment, a very small amount of AR which grows in line with subscription revenue growth is related to subscription business, is related to kind of month-end deposits in transit that haven’t settled yet. A good portion of our other business segment unlike the Trupanion product which is monthly and renews monthly, the majority of the other business segment is an annual product and the accounting for an annual product is to record the receivable upfront if you allow collection on a monthly basis. So it trends relatively in line with growth, with overall revenue growth in that segment. If you look down in the liability, nearly an equal and offsetting deferred revenue amount puts effectively kind of the balance sheet growth that occurred related to accounting for an annual product with quarterly payment or sorry monthly payment because you're recording the revenue and then deferring nearly all of it until it's recognized over the course of the year and then recording our receivable and then that receivable comes down as the payments are made monthly by the customer. So it's just a function of the type of product being monthly and quarterly and being an area of balance sheet accounting gross up.

Okay. Got it. Very helpful. Maybe I can follow-up a little bit with you offline there. The other one Darryl I think is for you is just sort of a big picture question. I mean a lot clearly was right in the quarter, but you don't the same extent that something seems somewhat temporary and that's why I brought some color from you, in other words, pet was 199 very low, but you talked about it still being 240 to 270 for the year, which implies a big pickup in Q3, pricing the subscription gross margin was really good in the quarter, but I think Tricia you’ve talked about it moving maybe even outside the guard. So Darryl just sort of an all-encompassing question, can you talk about what was really good in the quarter that you view as sustainable going forward in coming quarters or years versus what might've been advantageous for the three-month period? Thanks guys.

Jon, what you’re referring to are the dynamics we can leverage in our business. We don’t need to use our tax dollars to achieve growth from year to year. Shareholders, who often read our letters, discuss the significance of Nirvana and how it could positively impact our profits while maintaining a normalized growth rate. Our pet acquisition spending is influenced by the capital we generate and how much we choose to spend at any given time. This spending consists of a mix of regular, efficient, and repeatable actions, along with some test expenditures. This quarter, we showed that we don’t necessarily need to spend as much, and we reduced our PAC spending temporarily. This should demonstrate to investors our ability to control our business and future. As noted earlier, when we evaluate investment capital, we focus on the internal rate of return on invested capital. A key takeaway is improving our retention rate from a historical average of 70 months to closer to 75 months or more in the coming years, provided our team continues to perform well. Increasing this retention period will enhance our cash flow over time, allowing for greater pet acquisition spending while still achieving high internal rates of return. Earlier, Tricia pointed out that we’re achieving around a 35% internal rate of return, which enables us to spend between $240 and $270 to acquire a pet. This flexibility allows us to expand and learn in the veterinary sector over the next five to ten years. In response to your question about what was significant in the quarter, March and April represented considerable changes due to lower traffic and marketplace impacts. However, from May to July, we have observed consistent performance, giving us confidence moving forward.

Thank you. Your next question comes from the line of David Westenberg with Guggenheim Securities. Please proceed with your question.

Marty you said you were taking the questions. So I want to continue a little bit with Mark's question in terms of teaching out, I get that the biology argument but I am trying to figure out what COVID might have done in the quarter that might be different. So can you talk about if you know whether or not like through industry data whether or not you're gaining or losing market share or how you're doing relative to competitors maybe in the quarter? And then as a continuation of that, are you seeing any differences in the marketing strategy of these competitors? I'm just trying to figure out how much of a COVID bump there is to help kind of hope normalized the long-term with what the business looks like?

We have the best information available, and if we look at the revenue growth in 2018 and 2019, and even going back to 2017, we have consistently led the category. We anticipate this trend will continue into 2020, and we expect similar performance in the second quarter compared to other areas. Our strong growth is largely due to our relationships with veterinarians, direct payments to pet owners, and our quick payment process, which are challenging for competitors to replicate. This is driving our net pet growth, as lower churn allows us to accelerate net test growth. To generate revenue, you need to multiply net tests by monthly revenue or costs. I believe we're gaining momentum compared to the overall market because I am confident we lead in retention. Additionally, I think that demand for pets and the need for people to budget for pet care increase during downturns, which will positively impact the overall categories, including Trupanion.

I appreciate that and I realize that the need for insurance during a recession is higher, and you've historically shown very strong growth in a recession, but I'm curious if maybe this situation is different because we're having maybe unemployment be a precursor to a recession as opposed to a normal recession and with that, with setting it up like that, I'm just curious if you anticipate any impacts from this higher employment rate. Maybe should we see any impact on needing to extend terms to consumer customers and maybe future impact on receivables from that? Again I appreciate that your business is fairly recession resistant. I'm just curious if this time it's different, the proverbial this time is different?

Yeah, well, we're not going to be extending terms to our members like car insurance companies. The reason that they were able to in a different situation thus is people stop driving, which means the likelihood of getting in a car accident are lower. Well guess what, the likelihood of a packing sick or injured are not lowered in a world of COVID it's been in the world that without COVID, and in fact, many could say that with more pets at home and more people at home to notice issues, we could actually see an uptick in the level of frequency and veterinary, and they're certainly seeing in the month of July, they're running off their feet. So I don't think there's anything particularly unique so far. March and April was the shock and low volume, and then after that time, it acted like other recessions. I will tell you through other recessions, our retention rates have always held. We've not seen historically retention raised the way that they have. We're at 20-year highs in this company quarterly and monthly on retention rates, and we put that directly to the efforts that the team has put together to servicing our client and certainly our software and paying with automation of overall health.

Thank you. Our next question comes from the line of Greg Gibas with Northland Securities. Please proceed with your question.

First of all, just quickly revisit the vet leads; could you provide just a little bit more color on how those, I guess, lead volumes under that channel trended throughout the quarter? I know it was back in April you mentioned that being down about 20% but maybe how did those improve in Q2 on a monthly basis, and then how is that maybe trending into July just relative to that down 20% level at the beginning of Q2?

Yeah in Q2 we were up about 8% year-over-year kind of that leads the way that we track it. So we typically would expect the leads to be up 10% to 20% by channel year-over-year to hit our growth rate. So they were a little bit down at 8% but definitely trending up as we saw the quarter go on.

And then the second one for me would just be regarding that newly implemented, I guess, or recently implemented retention team that you kind of directed at improving the so-called 'say' rates, how much of an improvement I guess have you seen since forming that team, and where I guess are you seeing those say rates level out, or are they continuing to improve since implementing that team?

Well I'll hand it over to Margi and I'm not sure how much secret sauce she will give you but the teams performed really well.

Greg, I am not going to give you secret sauce but I will say that in terms of races definitely helped. We've taken a team of very dedicated and skilled having conversations. One of the things that is not just about the team other people taking the call and having the conversation, it's also around how quickly you respond to that person. So whether or not someone is calling because they understand why the invoice wasn’t paid, they want to check up on something you haven’t got the volume of people going to a level where they need to be antagonized and optical because we communicated with them quickly. So the retention is part of it and across the board, if you look at the attention buckets that you’ve seen increases which is positive and tells that this isn’t just a COVID related asset.

That sounds good. That appears to be very beneficial. My last question is if you could provide any updates about the partnership, specifically when we might expect to see those products in the market and if there have been any discussions about the marketing strategy for that product line. Thank you.

Yes, the question you're asking is about a pet food initiative that we've made some investments in. Our hypothesis is that pets that eat high quality food over their life will have better outcomes and we've made some investments to figure out how to test that. We're looking at in the next several months and quarters doing some testing to figure out how we can learn about that hypothesis, but it is going to be a very long-term project.

Thank you. We've reached the end of our question-and-answer session and the conclusion of today's call. Thank you for your participation. You may now disconnect your lines and have a wonderful day.