SEATTLE, May 02, 2017 (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, 2017.

“It was a solid first quarter financially, with 28% revenue year-over-year growth and continued scale in our fixed expenses,” said Darryl Rawlings, CEO of Trupanion.  “It also was our fourth consecutive quarter of positive operating cash flow.  Operationally, we built momentum in the quarter, particularly around the key initiatives aimed at deepening the competitive moats around our business.”

First Quarter 2017 Financial and Business Highlights

  • Total revenue was $54.7 million, an increase of 28% compared to the first quarter of 2016.
  • Total enrolled pets (including pets from our other business segment) was 364,259 at March 31, 2017, up 19% over the prior year period.
  • Subscription business revenue was $50.2 million, an increase of 28% compared to the first quarter of 2016.
  • Subscription enrolled pets was 334,909 at March 31, 2017, up 17% over the prior year period.
  • Net loss was $(1.5) million, compared to a net loss of $(2.6) million in the first quarter of 2016.
  • Adjusted EBITDA was $0.5 million, compared to a loss of $(1.1) million in the first quarter of 2016.
  • Generated operating cash flow of $1.9 million and free cash flow of $1.4 million, compared to negative operating cash flow of $(1.3) million and negative free cash flow of $(2.0) million in the first quarter of 2016.
  • As of March 31, 2017, there were 29.8 million shares outstanding and 33.4 million shares outstanding on a fully diluted basis.

Revenue by Quarter
A chart accompanying this release is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/32d067d4-cc77-4d91-b46c-4d008ac36469

Conference Call
Trupanion’s management will host a conference call today to review its first quarter 2017 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: 13658405.

About Trupanion
Trupanion is a leading provider of 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. Trupanion is listed on the Nasdaq Stock Exchange 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 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 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; 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; the ability to protect and enforce Trupanion’s intellectual property rights; third-party claims including litigation and regulatory actions; and the ability to recognize benefits from investments in new solutions and enhancements to Trupanion’s technology platform and website.

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, 2016 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, including, without limitation, free cash flow, acquisition cost, net acquisition cost, cost of goods, variable expenses, fixed expenses, non-GAAP subscription gross profit, non-GAAP gross profit, and adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that Trupanion defines as net loss excluding stock-based compensation expense, depreciation and amortization expense, interest income, interest expense, income tax expense (benefit), and loss (income) from equity method investment.

Trupanion’s 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. Further, stock-based compensation expense and other items used in the calculation of various metrics have been and will continue to be for the foreseeable future significant recurring expenses in Trupanion’s business. 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 allows for more meaningful comparisons between its operating results from period to period. Trupanion calculates non-GAAP gross profit by subtracting cost of goods and variable expenses from revenue. Cost of goods and variable expenses used in this calculation are non-GAAP measures which exclude stock-based compensation expense. Fixed expenses is a non-GAAP measure which excludes stock-based compensation expense and depreciation and amortization expense. Trupanion excludes sign-up fee revenue from 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 acquisition cost, net acquisition cost and the related financial measures it derives from them, as well as adjusted EBITDA, 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 for share and per share data)
           
  Three Months Ended
  March 31,
  2017     2016  
               
  (unaudited)
Revenue:          
Subscription business $ 50,229     $ 39,143  
Other business   4,500       3,556  
Total revenue   54,729       42,699  
Cost of revenue:          
Subscription business (1)   41,246       32,203  
Other business   4,328       3,192  
Total cost of revenue (2)   45,574       35,395  
Gross profit:          
Subscription business   8,983       6,940  
Other business   172       364  
Total gross profit   9,155       7,304  
Operating expenses:          
Sales and marketing (1)   4,089       3,840  
Technology and development (1)   2,403       2,287  
General and administrative (1)   4,012       3,722  
Total operating expenses   10,504       9,849  
Operating loss   (1,349 )     (2,545 )
Interest expense   137       30  
Other income, net   (28 )     (17 )
Loss before income taxes   (1,458 )     (2,558 )
Income tax expense   24       14  
Net loss $ (1,482 )   $ (2,572 )
           
Net loss per share:          
Basic and diluted $ (0.05 )   $ (0.09 )
Weighted-average shares used to compute net loss per share:          
Basic and diluted   29,254,681       27,999,248  
           
(1) Includes stock-based compensation expense as follows:          
  Three Months Ended
  March 31,
  2017     2016  
Cost of revenue $ 113     $ 66  
Sales and marketing   187       82  
Technology and development   50       55  
General and administrative   431       493  
Total stock-based compensation expense $ 781     $ 696  
           
(2)The breakout of cost of revenue between claims and other cost of revenue is as follows:
           
  Three Months Ended
  March 31,
  2017     2016  
Claims expense $ 39,187     $ 30,604  
Other cost of revenue   6,387       4,791  
Total cost of revenue $ 45,574     $ 35,395  
           

 

 

Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
       
       
       
  March 31,
2017
  December 31,
2016
  (unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 21,937     $ 23,637  
Short-term investments   30,793       29,570  
Accounts and other receivables   13,513       10,118  
Prepaid expenses and other assets   2,243       2,062  
Total current assets   68,486       65,387  
Restricted cash   600       600  
Long-term investments, at fair value   2,656       2,579  
Equity method investment   265       271  
Property and equipment, net   7,990       8,464  
Intangible assets, net   4,946       4,910  
Other long-term assets   2,790       134  
Total assets $ 87,733     $ 82,345  
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 2,020     $ 2,006  
Accrued liabilities   3,791       4,322  
Claims reserve   10,621       9,521  
Deferred revenue   17,690       13,463  
Other payables   1,278       1,094  
Total current liabilities   35,400       30,406  
Long-term debt   4,788       4,767  
Deferred tax liabilities   1,623       1,623  
Other liabilities   837       834  
Total liabilities   42,648       37,630  
Stockholders’ equity:      
Common stock, $0.00001 par value per share, 100,000,000 shares authorized at March 31, 2017 and December 31, 2016, 30,414,926 and 29,757,626 shares
issued and outstanding at March 31, 2017; 30,156,247 and 29,498,947 shares issued and outstanding at December 31, 2016
         
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized at March 31, 2017 and December 31, 2016, and 0 shares issued and outstanding
at March 31, 2017 and December 31, 2016
         
Additional paid-in capital   131,421       129,574  
Accumulated other comprehensive loss   (372 )     (377 )
Accumulated deficit   (82,763 )     (81,281 )
Treasury stock, at cost: 657,300 shares at March 31, 2017 and December 31, 2016   (3,201 )     (3,201 )
Total stockholders’ equity   45,085       44,715  
Total liabilities and stockholders’ equity $ 87,733     $ 82,345  
       

 

 

Trupanion, Inc.  
Consolidated Statements of Cash Flows  
(in thousands)  
  Three Months Ended  
  March 31,  
    2017       2016    
                 
  (unaudited)  
Operating activities        
Net loss $ (1,482 )   $ (2,572 )  
Adjustments to reconcile net loss to cash provided by (used in) operating activities:        
Depreciation and amortization   1,036       785    
Stock-based compensation expense   781       696    
Other, net   97       9    
Changes in operating assets and liabilities:        
Accounts and other receivables   (3,372 )     (234 )  
Prepaid expenses and other assets   (219 )     153    
Accounts payable   64       (200 )  
Accrued liabilities   (598 )     (1,267 )  
Claims reserve   1,093       521    
Deferred revenue   4,218       676    
Other payables   239       135    
Net cash provided by (used in) operating activities   1,857       (1,298 )  
Investing activities        
Purchases of investment securities   (5,172 )     (3,959 )  
Maturities of investment securities   3,871       3,700    
Purchases of property and equipment   (462 )     (653 )  
Other investments   (2,710 )     (34 )  
Net cash used in investing activities   (4,473 )     (946 )  
Financing activities        
Proceeds from stock option exercises   1,037       486    
(Repayment of) proceeds from debt financing and debt financing fees   (40 )     987    
Payments on capital lease obligations   (102 )        
Net cash provided by financing activities   895       1,473    
Effect of foreign exchange rates on cash, net   21       341    
Net change in cash, cash equivalents, and restricted cash   (1,700 )     (430 )  
Cash, cash equivalents, and restricted cash at beginning of period   24,237       17,956    
Cash, cash equivalents, and restricted cash at end of period $ 22,537     $ 17,526    
         

 

The following table sets forth our key financial and operating metrics:                          
                                 
  Three Months Ended  
  Mar. 31,
2017
  Dec. 31,
2016
  Sep. 30,
2016
  Jun. 30,
2016
  Mar. 31,
2016
  Dec. 31,
2015
  Sept. 30,
2015
  Jun. 30,
2015
 
Total pets enrolled (at period end)   364,259       343,649       334,070       320,896       307,298       291,818       276,988       259,948    
Total subscription pets enrolled (at period end)   334,909       323,233       312,282       299,856       287,123       272,636       258,546       241,808    
Monthly average revenue per pet $ 50.50     $ 49.17     $ 48.37     $ 47.39     $ 46.12     $ 45.48     $ 45.15     $ 45.10    
Lifetime value of a pet (LVP) $ 637     $ 631     $ 624     $ 622     $ 603     $ 591     $ 591     $ 570    
Average pet acquisition cost (PAC) $ 128     $ 133     $ 120     $ 118     $ 123     $ 132     $ 129     $ 133    
Average monthly retention   98.58 %     98.60 %     98.61 %     98.64 %     98.65 %     98.64 %     98.66 %     98.67 %  
Adjusted EBITDA (in thousands) $ 452     $ 302     $ 304     $ 522     $ (1,066 )   $ (1,588 )   $ (3,211 )   $ (3,165 )  
                                 

 

The following table reflects the reconciliation of cash provided by (used in) operating activities to free cash flow (in thousands):
       
  Three Months Ended
  March 31,
    2017       2016  
Net cash provided by (used in) operating activities $ 1,857     $ (1,298 )
Purchases of property and equipment   (462 )     (653 )
Free cash flow $ 1,395     $ (1,951 )

 

The following table reflects the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
             
    Three Months Ended
March 31,
    2017   2016
Claims expense   $ 39,187     $ 30,604  
Stock-based compensation expense     (70 )     (58 )
Cost of goods   $ 39,117     $ 30,546  
% of revenue     71.5 %     71.5 %
             
Other cost of revenue   $ 6,387     $ 4,791  
Stock-based compensation expense     (43 )     (8 )
Variable expenses   $ 6,344     $ 4,783  
% of revenue     11.6 %     11.2 %
             
Subscription business gross profit   $ 8,983     $ 6,940  
Stock-based compensation expense     113       66  
Non-GAAP subscription business gross profit   $ 9,096     $ 7,006  
% of subscription revenue     18.1 %     17.9 %
             
Gross profit   $ 9,155     $ 7,304  
Stock-based compensation expense     113       66  
Non-GAAP gross profit   $ 9,268     $ 7,370  
% of revenue     16.9 %     17.3 %
             
General and administrative expense   $ 4,012     $ 3,722  
Technology and development expense     2,403       2,287  
Depreciation and amortization expense     (1,036 )     (785 )
Stock-based compensation expense     (481 )     (548 )
Fixed expenses   $ 4,898     $ 4,676  
% of revenue     8.9 %     11.0 %
             
Sales and marketing expense   $ 4,089     $ 3,840  
Stock-based compensation expense     (187 )     (82 )
Acquisition cost   $ 3,902     $ 3,758  
% of revenue     7.1 %     8.8 %
             

 

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,
2017
  Dec. 31,
2016
  Sep. 30,
2016
  Jun. 30,
2016
  Mar. 31,
2016
  Dec. 31,
2015
  Sept. 30,
2015
  Jun. 30,
2015
 
Sales and marketing expenses   $ 4,089     $ 3,951     $ 3,892     $ 3,564     $ 3,840     $ 3,919     $ 4,128     $ 3,533    
Excluding:                                  
Stock-based compensation expense     (187 )     (113 )     (172 )     (165 )     (82 )     (104 )     (102 )     (110 )  
Acquisition cost     3,902       3,838       3,720       3,399       3,758       3,815       4,026       3,423    
Net of:                                  
Sign-up fee revenue     (544 )     (526 )     (525 )     (495 )     (527 )     (506 )     (542 )     (451 )  
Other business segment sales and marketing expense     (48 )     (62 )     (63 )     (55 )     (38 )     (8 )     (16 )     (30 )  
Net acquisition cost   $ 3,310     $ 3,250     $ 3,132     $ 2,849     $ 3,193     $ 3,301     $ 3,468     $ 2,942    
                                   

 

The following table reflects the reconciliation of adjusted EBITDA to net loss (in thousands):                  
                                   
    Three Months Ended  
    Mar. 31,
2017
  Dec. 31,
2016
  Sep. 30,
2016
  Jun. 30,
2016
  Mar. 31,
2016
  Dec. 31,
2015
  Sept. 30,
2015
  Jun. 30,
2015
 
Net loss   $ (1,482 )   $ (1,723 )   $ (1,637 )   $ (964 )   $ (2,572 )   $ (3,001 )   $ (4,643 )   $ (4,625 )  
Excluding:                                  
Stock-based compensation expense     781       731       776       743       696       653       749       897    
Depreciation and amortization expense     1,036       1,229       1,093       739       785       741       672       563    
Interest income     (51 )     (41 )     (29 )     (26 )     (23 )     (19 )     (19 )     (18 )  
Interest expense     137       81       66       41       30       26       14       40    
Income tax expense (benefit)     24       7       13       4       14       12       16       (22 )  
Loss (income) from equity method investment     7       18       22       (15 )     4                      
Adjusted EBITDA   $ 452     $ 302     $ 304     $ 522     $ (1,066 )   $ (1,588 )   $ (3,211 )   $ (3,165 )  
                                   

CONTACT: Contacts: 

Investors: 
Laura Bainbridge, Addo Investor Relations
310.829.5400
InvestorRelations@trupanion.com

Media:
Scott Janzen, Trupanion Director of Communications
888.612.1138 ext 3450
scott.janzen@trupanion.com
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