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CST: 08/12/2019 06:34:47   

Trupanion Reports First Quarter 2019 Results

219 Days ago

SEATTLE, May 02, 2019 (GLOBE NEWSWIRE) -- Trupanion, Inc. (Nasdaq: TRUP), a leading provider of medical insurance for cats and dogs, today announced financial results for the first quarter ended March 31, 2019.

“We executed consistently across our business in the first quarter,” said Darryl Rawlings, Founder and CEO of Trupanion. “We invested more capital at strong estimated internal rates of return and advanced several initiatives that are expected to position us well over the long term.”

First Quarter 2019 Financial and Business Highlights

  • Total revenue was $87.0 million, an increase of 25% compared to the first quarter of 2018.
  • Total enrolled pets (including pets from our other business segment) was 548,002 at March 31, 2019, an increase of 23% over March 31, 2018.
  • Subscription business revenue was $74.2 million, an increase of 21% compared to the first quarter of 2018.
  • Subscription enrolled pets was 445,148 at March 31, 2019, an increase of 15% over March 31, 2018.
  • Net loss was $(1.3) million, or $(0.04) per basic and diluted share, compared to a net loss of $(1.5) million, or $(0.05) per basic and diluted share, in the first quarter of 2018.
  • Adjusted EBITDA was $1.7 million, compared to adjusted EBITDA of $0.4 million in the first quarter of 2018.
  • Operating cash flow was $4.0 million and free cash flow was $3.1 million for the first quarter of 2019. This compared to operating cash flow of $2.1 million and free cash flow of $1.1 million in the first quarter of 2018.

Revenue by Quarter
http://www.globenewswire.com/NewsRoom/AttachmentNg/3587d2dd-1d71-4968-bbec-ce2da9ce29eb

Conference Call
Trupanion’s management will host a conference call today to review its first quarter 2019 results. The call is scheduled to begin shortly after 1:30 p.m. PT/ 4:30 p.m. ET. A live webcast will be accessible through the Investor Relations section of Trupanion’s website at http://investors.trupanion.com and will be archived online for 3 months upon completion of the conference call. Participants can access the conference call by dialing 1-877-407-0784 (United States) or 1-201-689-8560 (International). A telephonic replay of the call will also be available, one hour after the completion of the call, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13689741.

About Trupanion
Trupanion is a leader in medical insurance for cats and dogs throughout the United States and Canada. For almost two decades, Trupanion has given pet owners peace of mind so they can focus on their pet's recovery, not financial stress. Trupanion is committed to providing pet owners with the highest value in pet medical insurance with unlimited payouts for the life of their pets. Trupanion is listed on NASDAQ under the symbol "TRUP". The company was founded in 2000 and is headquartered in Seattle, WA. Trupanion policies are issued, in the United States, by its wholly-owned insurance entity American Pet Insurance Company and, in Canada, by Omega General Insurance Company. For more information, please visit trupanion.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to, among other things, expectations, plans, prospects and financial results for Trupanion, including, but not limited to, its expectations regarding its ability to execute its business plans. These forward-looking statements are based upon the current expectations and beliefs of Trupanion’s management as of the date of this press release, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. All forward-looking statements made in this press release are based on information available to Trupanion as of the date hereof, and Trupanion has no obligation to update these forward-looking statements.

In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the ability to achieve or maintain profitability and/or appropriate levels of cash flow in future periods; the ability to keep growing our membership base and revenue; the accuracy of assumptions used in determining appropriate member acquisition expenditures; the severity and frequency of claims; the ability to maintain high retention rates; the accuracy of assumptions used in pricing medical plan subscriptions and the ability to accurately estimate the impact of new products or offerings on claims frequency; actual claims expense exceeding estimates; regulatory and other constraints on the ability to institute, or the decision to otherwise delay, pricing modifications in response to changes in actual or estimated claims expense; the effectiveness and statutory or regulatory compliance of our Territory Partner model and of our Territory Partners, veterinarians and other third parties in recommending medical plan subscriptions to potential members; the ability to retain existing Territory Partners and increase the number of Territory Partners and active hospitals; compliance by us and those referring us members with laws and regulations that apply to our business, including the sale of a pet medical plan; the ability to maintain the security of our data; fluctuations in the Canadian currency exchange rate; the ability to protect our proprietary and member information; the ability to maintain our culture and team; the ability to maintain the requisite amount of risk-based capital; our ability to implement and maintain effective controls, including over financial reporting; the ability to protect and enforce Trupanion’s intellectual property rights; the ability to continue key contractual relationships with third parties; third-party claims including litigation and regulatory actions; the ability to recognize benefits from investments in new solutions and enhancements to Trupanion’s technology platform and website; and our ability to retain key personnel.

For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the Securities and Exchange Commission (SEC), including but not limited to, Trupanion’s Annual Report on Form 10-K for the year ended December 31, 2018 and any subsequently filed reports on Forms 10-Q and 8-K. All documents are available through the SEC’s Electronic Data Gathering Analysis and Retrieval system at www.sec.gov or the Investor Relations section of Trupanion’s website at http://investors.trupanion.com.

Non-GAAP Financial Measures
Trupanion’s stated results may include certain non-GAAP financial measures. These non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry as other companies in its industry may calculate or use non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Trupanion’s reported financial results. The presentation and utilization of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Trupanion urges its investors to review the reconciliation of its non-GAAP financial measures to the most directly comparable GAAP financial measures in its consolidated financial statements, and not to rely on any single financial or operating measure to evaluate its business. These reconciliations are included below and on Trupanion’s Investor Relations website.

Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash expenses, Trupanion believes that providing various non-GAAP financial measures that exclude stock-based compensation expense and depreciation and amortization expense allows for more meaningful comparisons between its operating results from period to period. Trupanion offsets sales and marketing expense with sign-up fee revenue in the calculation of net acquisition cost because it collects sign-up fee revenue from new members at the time of enrollment and considers it to be an offset to a portion of Trupanion’s sales and marketing expenses. Trupanion believes this allows it to calculate and present financial measures in a consistent manner across periods. Trupanion’s management believes that the non-GAAP financial measures and the related financial measures derived from them are important tools for financial and operational decision-making and for evaluating operating results over different periods of time.

Trupanion, Inc.
Consolidated Statements of Operations
(in thousands, except share data)
 
  Three Months Ended March 31,  
  2019   2018  
  (unaudited)  
Revenue:        
Subscription business $ 74,222     $ 61,517    
Other business 12,756     8,243    
Total revenue 86,978     69,760    
Cost of revenue:        
Subscription business(1) 60,387     51,014    
Other business 11,559     7,682    
  Total cost of revenue(2) 71,946     58,696    
Gross profit:        
Subscription business 13,835     10,503    
Other business 1,197     561    
Total gross profit 15,032     11,064    
Operating expenses:        
Technology and development(1) 2,669     2,164    
General and administrative(1) 5,419     4,458    
Sales and marketing(1) 8,227     5,938    
Total operating expenses 16,315     12,560    
Operating loss (1,283 )   (1,496 )  
Interest expense 317     219    
Other income, net (344 )   (140 )  
Loss before income taxes (1,256 )   (1,575 )  
Income tax expense (benefit) 40     (95 )  
Net loss $ (1,296 )   $ (1,480 )  
         
Net loss per share:        
  Basic and Diluted $ (0.04 )   $ (0.05 )  
Weighted average common shares outstanding:        
Basic and Diluted 34,292,367     30,246,585    
         
(1)Includes stock-based compensation expense as follows: Three Months Ended March 31,  
 
  2019   2018  
Cost of revenue $ 247     $ 197    
Technology and development 63     49    
General and administrative 618     449    
Sales and marketing 429     273    
Total stock-based compensation expense $ 1,357     $ 968    
         
(2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:  
  Three Months Ended March 31,  
  2019   2018  
Veterinary invoice expense $ 61,282     $ 50,113    
Other cost of revenue 10,664     8,583    
  Total cost of revenue $ 71,946     $ 58,696    


Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
  March 31, 2019   December 31, 2018
  (unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 26,622     $ 26,552  
Short-term investments 61,648     54,559  
Accounts and other receivables 37,568     31,565  
Prepaid expenses and other assets 4,847     5,300  
Total current assets 130,685     117,976  
Restricted cash 1,400     1,400  
Long-term investments, at fair value 3,701     3,554  
Property and equipment, net 69,365     69,803  
Intangible assets, net 7,839     8,071  
Other long-term assets 8,315     6,706  
Total assets $ 221,305     $ 207,510  
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 2,897     $ 2,767  
Accrued liabilities and other current liabilities 12,059     11,347  
Reserve for veterinary invoices 17,175     16,062  
Deferred revenue 38,594     33,027  
Total current liabilities 70,725     63,203  
Long-term debt 18,078     12,862  
Deferred tax liabilities 1,002     1,002  
Other liabilities 1,491     1,270  
Total liabilities 91,296     78,337  
Stockholders’ equity:      
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 35,397,330 and 34,467,465 shares
issued and outstanding at March 31, 2019; 34,781,121 and 34,025,136 shares issued and outstanding at December 31, 2018
     
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding      
Additional paid-in capital 226,262     219,838  
Accumulated other comprehensive loss (545 )   (753 )
Accumulated deficit (85,007 )   (83,711 )
Treasury stock, at cost: 929,865 shares at March 31, 2019 and 755,985 shares at December 31, 2018 (10,701 )   (6,201 )
Total stockholders’ equity 130,009     129,173  
Total liabilities and stockholders’ equity $ 221,305     $ 207,510  


Trupanion, Inc.
Consolidated Statements of Cash Flows
(in thousands)
  Three Months Ended March 31,
  2019   2018
  (unaudited)
Operating activities      
Net loss $ (1,296 )   $ (1,480 )
Adjustments to reconcile net loss to cash provided by operating activities:      
Depreciation and amortization 1,613     927  
Stock-based compensation expense 1,357     968  
Other, net (3 )   23  
Changes in operating assets and liabilities:      
Accounts and other receivables (5,894 )   (3,926 )
Prepaid expenses and other assets 325     (129 )
Accounts payable, accrued liabilities, and other liabilities 1,256     910  
Reserve for veterinary invoices 1,078     743  
Deferred revenue 5,523     4,041  
Net cash provided by operating activities 3,959     2,077  
Investing activities      
Purchases of investment securities (17,350 )   (7,140 )
Maturities of investment securities 10,205     5,300  
Purchases of property, equipment and intangible assets (878 )   (992 )
Other (1,479 )    
Net cash used in investing activities (9,502 )   (2,832 )
Financing activities      
Proceeds from exercise of stock options 661     481  
Shares withheld to satisfy tax withholding (197 )    
Proceeds from debt financing, net of financing fees 5,200     5,500  
Other financing (271 )   (216 )
Net cash provided by financing activities 5,393     5,765  
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net 220     70  
Net change in cash, cash equivalents, and restricted cash 70     5,080  
Cash, cash equivalents, and restricted cash at beginning of period 27,952     26,306  
Cash, cash equivalents, and restricted cash at end of period $ 28,022     $ 31,386  


The following table sets forth our key operating metrics:
                               
  Three Months Ended
  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  Jun. 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
  Sept. 30,
2017
  Jun. 30,
2017
Total pets enrolled (at period end) 548,002     521,326     497,942     472,480     446,533     423,194     404,069     383,293  
Total subscription pets enrolled (at period end) 445,148     430,770     416,527     401,033     385,640     371,683     359,102     346,409  
Monthly average revenue per pet $ 56.13     $ 55.15     $ 54.55     $ 53.96     $ 53.62     $ 53.17     $ 52.95     $ 51.47  
Lifetime value of a pet (LVP) $ 724     $ 710     $ 714     $ 732     $ 727     $ 727     $ 701     $ 654  
Average pet acquisition cost (PAC) $ 205     $ 186     $ 155     $ 150     $ 165     $ 184     $ 151     $ 143  
Average monthly retention 98.58 %   98.60 %   98.61 %   98.64 %   98.63 %   98.63 %   98.61 %   98.57 %
                               


The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):
       
  Three Months Ended March 31,
  2019   2018
Net cash provided by operating activities $ 3,959     $ 2,077  
Purchases of property and equipment (878 )   (992 )
Free cash flow $ 3,081     $ 1,085  


The following table reflects the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
         
    Three Months Ended March 31,
    2019   2018
Veterinary invoice expense   $ 61,282     $ 50,113  
Stock-based compensation expense   (161 )   (120 )
Cost of goods   $ 61,121     $ 49,993  
% of revenue   70.3 %   71.7 %
         
Other cost of revenue   $ 10,664     $ 8,583  
Stock-based compensation expense   (86 )   (77 )
Variable expenses   $ 10,578     $ 8,506  
% of revenue   12.2 %   12.2 %
         
Subscription gross profit   $ 13,835     $ 10,503  
Stock-based compensation expense   247     197  
Non-GAAP subscription gross profit   $ 14,082     $ 10,700  
% of subscription revenue   19.0 %   17.4 %
         
Gross profit   $ 15,032     $ 11,064  
Stock-based compensation expense   247     197  
Non-GAAP gross profit   $ 15,279     $ 11,261  
% of revenue   17.6 %   16.1 %
         
Technology and development expense   $ 2,669     $ 2,164  
General and administrative expense   5,419     4,458  
Depreciation and amortization expense   (1,613 )   (927 )
Stock-based compensation expense   (681 )   (498 )
Fixed expenses   $ 5,794     $ 5,197  
% of revenue   6.7 %   7.4 %
         
Sales and marketing expense   $ 8,227     $ 5,938  
Stock-based compensation expense   (429 )   (273 )
Acquisition cost   $ 7,798     $ 5,665  
% of revenue   9.0 %   8.1 %


The following table reflects the reconciliation of acquisition cost and net acquisition cost to sales and marketing expense (in thousands):
                               
  Three Months Ended
  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  Jun. 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
  Sept. 30,
2017
  Jun. 30,
2017
Sales and marketing expenses $ 8,227     $ 6,994     $ 6,365     $ 5,702     $ 5,938     $ 5,781     $ 4,862     $ 4,372  
Excluding:                              
Stock-based compensation expense (429 )   (355 )   (358 )   (349 )   (273 )   (172 )   (165 )   (198 )
Acquisition cost 7,798     6,639     6,007     5,353     5,665     5,609     4,697     4,174  
Net of:                              
Sign-up fee revenue (703 )   (655 )   (693 )   (624 )   (616 )   (550 )   (558 )   (517 )
Other business segment sales and marketing expense (130 )   (102 )   (99 )   (88 )   (87 )   (56 )   (51 )   (63 )
Net acquisition cost $ 6,965     $ 5,882     $ 5,215     $ 4,641     $ 4,962     $ 5,003     $ 4,088     $ 3,594  
                               


The following table reflects the reconciliation of adjusted EBITDA to net income (loss) (in thousands):
                               
  Three Months Ended
  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  Jun. 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
  Sept. 30,
2017
  Jun. 30,
2017
Net (loss) income $ (1,296 )   $ (275 )   $ 1,205     $ (377 )   $ (1,480 )   $ (838 )   $ 406     $ 411  
Excluding:                              
Stock-based compensation expense 1,357     1,222     1,299     1,286     968     855     895     888  
Depreciation and amortization expense 1,613     1,485     1,136     964     927     1,024     1,095     1,077  
Interest income (342 )   (234 )   (317 )   (179 )   (132 )   (3 )   (97 )   (76 )
Interest expense 317     311     336     332     219     163     124     109  
Income tax expense (benefit) expense 40     4     (7 )   91     (95 )   (482 )   26     4  
(Gain) loss from equity method investment             (107 )               (1,036 )
Adjusted EBITDA $ 1,689     $ 2,513     $ 3,652     $ 2,010     $ 407     $ 719     $ 2,449     $ 1,377  
                               

Contacts :

Investors:
Laura Bainbridge, Head of Investor Relations
206.607.1929
InvestorRelations@trupanion.com

 

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