Questions? +1 (202) 335-3939 Login
Trusted News Since 1995
A service for researchers · Saturday, November 17, 2018 · 468,653,199 Articles · 3+ Million Readers

Trupanion Reports Third Quarter 2018 Results

SEATTLE, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Trupanion, Inc. (Nasdaq: TRUP), a leading provider of medical insurance for cats and dogs, today announced financial results for the third quarter ended September 30, 2018.

/EIN News/ -- “Performance in the third quarter was particularly strong, led by continued success in growing same store sales, improving conversion rates and scaling fixed expenses.  We also made meaningful strides in claims automation, which improves the overall customer experience and helps grow the volume of organic referrals,” said Darryl Rawlings, CEO of Trupanion.  “These strategic initiatives will remain a long-term focus, as will building greater awareness of Trupanion and the benefits of high-quality medical insurance for pets, through strong relationships with veterinarians across North America.”

Third Quarter 2018 Financial and Business Highlights

  • Total revenue of $78.2 million, an increase of 24% compared to the third quarter of 2017.
  • Total enrolled pets (including pets from our other business segment) was 497,942 at September 30, 2018, an increase of 23% over September 30, 2017.
  • Subscription business revenue of $67.4 million, an increase of 19% compared to the third quarter of 2017.
  • Subscription enrolled pets was 416,527 at September 30, 2018, an increase of 16% over September 30, 2017.
  • Net income of $1.2 million, or $0.04 per basic share and $0.03 per diluted share, compared to net income of $0.4 million, or $0.01 per basic and diluted share, in the third quarter of 2017.
  • Adjusted EBITDA of $3.7 million, compared to adjusted EBITDA of $2.4 million in the third quarter of 2017.
  • Operating cash flow of $4.2 million and free cash flow of $(46.1) million in the third quarter of 2018. Excluding the cash outflow of $49.3 million related to the purchase of our headquarters building, free cash flow was $3.2 million.  This compared to free cash flow in the third quarter of 2017 of $2.0 million, which included operating cash flow of $3.0 million.

Year-to-date 2018 Financial and Business Highlights

  • Total revenue of $221.3 million, an increase of 26% compared to the first nine months of 2017.
  • Subscription business revenue of $192.8 million, an increase of 21% compared to the first nine months of 2017.
  • Net loss of $(0.7) million, or $(0.02) per basic and diluted share, compared to net loss of $(0.7) million, or $(0.02) per basic and diluted share, in the first nine months of 2017.
  • Adjusted EBITDA of $6.1 million, compared to adjusted EBITDA of $4.3 million in the first nine months of 2017.
  • Operating cash flow of $9.0 million and free cash flow of $(46.8) million for the first nine months of 2018. Excluding the cash outflow of $52.5 million related to the purchase of our headquarters building, which closed in the third quarter of 2018, free cash flow was $5.7 million. This compared to free cash flow in the first nine months of 2017 of $4.4 million, which included operating cash flow of $6.7 million.

Revenue by Quarter

http://resource.globenewswire.com/Resource/Download/f9c4d670-1367-4a5a-9760-f1805b8d5188

Conference Call
Trupanion’s management will host a conference call today to review its third quarter 2018 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: 13683609.

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 currency exchange rates; the ability to protect our proprietary and member information; the ability to maintain our culture and team, including key personnel; 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; 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, 2017 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
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017  
  (unaudited)
Revenue:              
Subscription business $ 67,421     $ 56,493     $ 192,805     $ 159,363  
Other business 10,743   6,625   28,511   16,759   
Total revenue 78,164     63,118     221,316     176,122  
Cost of revenue:              
Subscription business(1) 54,753     45,215     158,100     129,052  
Other business 9,667     6,096     26,055     15,757  
  Total cost of revenue(2) 64,420     51,311     184,155     144,809  
Gross profit:              
Subscription business 12,668     11,278     34,705     30,311  
Other business 1,076     529     2,456     1,002  
Total gross profit 13,744     11,807     37,161     31,313  
Operating expenses:              
Technology and development(1) 2,299     2,471     6,761     7,196  
General and administrative(1) 4,174     4,017     13,242     12,274  
Sales and marketing(1) 6,365     4,862     18,005     13,323  
Total operating expenses 12,838     11,350     38,008     32,793  
Operating income (loss) 906     457     (847 )   (1,480 )
Interest expense 336     124     887     370  
Other (income) expense, net (628 )   (99 )   (1,071 )   (1,239 )
Income (loss) before income taxes 1,198     432     (663 )   (611 )
Income tax (benefit) expense (7 )   26     (11 )   54  
Net income (loss) $ 1,205     $ 406     $ (652 )   $ (665 )
               
Net income (loss) per share:              
  Basic $ 0.04     $ 0.01     $ (0.02 )   $ (0.02 )
Diluted $ 0.03     $ 0.01     $ (0.02 )   $ (0.02 )
Weighted average common shares outstanding:              
Basic 33,129,416     30,037,282     31,376,239     29,500,958  
Diluted 36,385,360     33,113,981     31,376,239     29,500,958  
               
(1)Includes stock-based compensation expense as follows: Three Months Ended    Nine Months Ended
September 30,   September 30,
  2018   2017   2018   2017  
Cost of revenue $ 249     $ 170     $ 698     $ 432  
Technology and development 58     57     167     166  
General and administrative 634     503     1,708     1,416  
Sales and marketing 358     165     980     550  
Total stock-based compensation expense $ 1,299     $ 895     $ 3,553     $ 2,564  
               
(2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:
  Three Months Ended
September 30,
  Nine Months Ended 
September 30,
  2018   2017   2018   2017  
Veterinary invoice expense $ 54,303     $ 43,453     $ 156,196     $ 123,649  
Other cost of revenue $ 10,117     $ 7,858     $ 27,959     $ 21,160  
  Total cost of revenue $ 64,420     $ 51,311     $ 184,155     $ 144,809  
                               


 
Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
 
  September 30, 2018   December 31, 2017
  (unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 34,677     $ 25,706  
Short-term investments 39,422     37,590  
Accounts and other receivables 31,985     20,367  
Prepaid expenses and other assets 4,184     2,895  
Total current assets 110,268     86,558  
Restricted cash 1,400     600  
Long-term investments, at fair value 3,545     3,237  
           
Property and equipment, net 69,998     7,868  
Intangible assets, net 8,084     4,972  
Other long-term assets 6,580     2,624  
Total assets $ 199,875     $ 105,859  
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 2,163     $ 2,716  
Accrued liabilities and other current liabilities 12,006     7,660  
Reserve for veterinary invoices 14,216     12,756  
Deferred revenue 32,848     22,734  
Total current liabilities 61,233     45,866  
Long-term debt 8,604     9,324  
Deferred tax liabilities 1,002     1,002  
Other liabilities 1,174     1,233  
Total liabilities 72,013     57,425  
Stockholders’ equity:      
Common stock: $0.00001 par value, 100,000,000 shares authorized; 34,171,653 and 33,415,668 shares issued and outstanding at September 30, 2018; 30,778,796 and 30,121,496 shares issued and outstanding at December 31, 2017      
Preferred stock: $0.00001 par value, 10,000,000 shares authorized; no shares issued and outstanding      
Additional paid-in capital 217,833     134,511  
Accumulated other comprehensive loss (334 )   (92 )
Accumulated deficit (83,436 )   (82,784 )
Treasury stock, at cost: 755,985 shares at June 30, 2018 and 657,300 shares at December 31, 2017 (6,201 )   (3,201 )
Total stockholders’ equity 127,862     48,434  
Total liabilities and stockholders’ equity $ 199,875     $ 105,859  
               


 
Trupanion, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
  (unaudited)
Operating activities              
Net income (loss) $ 1,205     $ 406     $ (652 )   $ (665 )
Adjustments to reconcile net income (loss) to cash provided by operating activities:              
Depreciation and amortization 1,136     1,095     3,027     3,208  
Stock-based compensation expense 1,299     895     3,553     2,564  
Gain on sale of equity method investment             (1,036 )
Other, net (275 )   187     (237 )   243  
Changes in operating assets and liabilities:              
Accounts and other receivables (3,424 )   (3,196 )   (11,592 )   (10,164 )
Prepaid expenses and other assets 269     (114 )   (549 )   (297 )
Accounts payable, accrued liabilities, and other liabilities 1,282     1,209     3,849     2,122  
Reserve for veterinary invoices 191     380     1,484     1,639  
Deferred revenue 2,472     2,146     10,133     9,075  
Net cash provided by operating activities 4,155     3,008     9,016     6,689  
Investing activities              
Purchases of fixed maturity investment securities (9,181 )   (5,809 )   (29,567 )   (20,704 )
Maturities of fixed maturity investment securities 12,390     4,166     27,405     15,878  
Purchases of other investments (3,000 )       (3,000 )    
Acquisition of lease intangibles, related to corporate real estate acquisition (2,959 )       (2,959 )    
Proceeds from sale of equity method investment             1,402  
Purchases of property and equipment (50,236 )   (983 )   (55,856 )   (2,247 )
Other investments (965 )   (9 )   (852 )   (2,762 )
Net cash used in investing activities (53,951 )   (2,635 )   (64,829 )   (8,433 )
Financing activities              
Proceeds from public offering of common stock, net of offering costs (196 )       65,690      
Proceeds from exercise of stock options 1,216     435     2,872     2,082  
Shares withheld to satisfy tax withholding (1,839 )   (1,170 )   (1,839 )   (1,170 )
Proceeds from exercise of warrants         300      
Proceeds from debt financing, net of financing fees (61 )   961     9,189     2,420  
Repayment of debt financing (10,000 )       (10,000 )    
Other financing (179 )   (209 )   (535 )   (412 )
Net cash (used in) provided by financing activities (11,059 )   17     65,677     2,920  
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net 108     255     (93 )   436  
Net change in cash, cash equivalents, and restricted cash (60,747 )   645     9,771     1,612  
Cash, cash equivalents, and restricted cash at beginning of period 96,824     25,204     26,306     24,237  
Cash, cash equivalents, and restricted cash at end of period $ 36,077     $ 25,849     $ 36,077     $ 25,849  
                               


 
The following tables set forth our key operating metrics:
                               
  Nine Months Ended
September 30,
                       
                         
  2018   2017                        
Total pets enrolled (at period end) 497,942     404,069                          
Total subscription pets enrolled (at period end) 416,527     359,102                          
Monthly average revenue per pet $ 54.06     $ 51.67                          
Lifetime value of a pet (LVP) $ 714     $ 701                          
Average pet acquisition cost (PAC) $ 157     $ 141                          
Average monthly retention 98.61 %   98.61 %                        
                               
                               
  Three Months Ended
  Sept. 30, 2018   Jun. 30, 2018   Mar. 31, 2018   Dec. 31, 2017   Sept. 30, 2017   Jun. 30, 2017   Mar. 31, 2017   Dec. 31, 2016
Total pets enrolled (at period end) 497,942     472,480     446,533     423,194     404,069     383,293     364,259     343,649  
Total subscription pets enrolled (at period end) 416,527     401,033     385,640     371,683     359,102     346,409     334,909     323,233  
Monthly average revenue per pet $ 54.55     $ 53.96     $ 53.62     $ 53.17     $ 52.95     $ 51.47     $ 50.50     $ 49.17  
Lifetime value of a pet (LVP) $ 714     $ 732     $ 727     $ 727     $ 701     $ 654     $ 637     $ 631  
Average pet acquisition cost (PAC) $ 155     $ 150     $ 165     $ 184     $ 151     $ 143     $ 128     $ 133  
Average monthly retention 98.61 %   98.64 %   98.63 %   98.63 %   98.61 %   98.57 %   98.58 %   98.6 %
                                               


 
The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):
               
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
Net cash provided by operating activities $ 4,155     $ 3,008     $ 9,016     $ 6,689  
Purchases of property and equipment (50,236 )   (983 )   (55,856 )   (2,247 )
Free cash flow $ (46,081 )   $ 2,025     $ (46,840 )   $ 4,442  
Exclude building purchase, net of acquired lease intangibles 49,284         52,534      
Free cash flow, excluding building purchase, net of acquired lease intangibles $ 3,203     $ 2,025     $ 5,694     $ 4,442  
                               


 
The following table reflects the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
                 
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2018   2017   2018   2017
Veterinary invoice expense   $ 54,303     $ 43,453     $ 156,196     $ 123,649  
Stock-based compensation expense   (153 )   (101 )   (421 )   (260 )
Cost of goods   $ 54,150     $ 43,352     $ 155,775     $ 123,389  
% of revenue   69.3 %   68.7 %   70.4 %   70.1 %
                 
Other cost of revenue   $ 10,117     $ 7,858     $ 27,959     $ 21,160  
Stock-based compensation expense   (96 )   (69 )   (277 )   (172 )
Variable expenses   $ 10,021     $ 7,789     $ 27,682     $ 20,988  
% of revenue   12.8 %   12.3 %   12.5 %   11.9 %
                 
Subscription gross profit   $ 12,668     $ 11,278     $ 34,705     $ 30,311  
Stock-based compensation expense   249     170     698     432  
Non-GAAP subscription gross profit   $ 12,917     $ 11,448     $ 35,403     $ 30,743  
% of subscription revenue   19.2 %   20.3 %   18.4 %   19.3 %
                 
Gross profit   $ 13,744     $ 11,807     $ 37,161     $ 31,313  
Stock-based compensation expense   249     170     698     432  
Non-GAAP gross profit   $ 13,993     $ 11,977     $ 37,859     $ 31,745  
% of revenue   17.9 %   19.0 %   17.1 %   18.0 %
                 
Technology and development expense   $ 2,299     $ 2,471     $ 6,761     $ 7,196  
General and administrative expense   4,174     4,017     13,242     12,274  
Depreciation and amortization expense   (1,136 )   (1,095 )   (3,027 )   (3,208 )
Stock-based compensation expense   (692 )   (560 )   (1,875 )   (1,582 )
Fixed expenses   $ 4,645     $ 4,833     $ 15,101     $ 14,680  
% of revenue   5.9 %   7.7 %   6.8 %   8.3 %
                 
Sales and marketing expense   $ 6,365     $ 4,862     $ 18,005     $ 13,323  
Stock-based compensation expense   (358 )   (165 )   (980 )   (550 )
Acquisition cost   $ 6,007     $ 4,697     $ 17,025     $ 12,773  
% of revenue   7.7 %   7.4 %   7.7 %   7.3 %
                         


 
The following tables reflect the reconciliation of acquisition cost and net acquisition cost to sales and marketing expense (in thousands):
                               
  Nine Months Ended
September 30,
                       
                         
  2018   2017                        
Sales and marketing expenses $ 18,005     $ 13,323                          
Excluding:                              
Stock-based compensation expense (980 )   (550 )                        
Acquisition cost 17,025     12,773                          
Net of:                              
Sign-up fee revenue (1,933 )   (1,061 )                        
Other business segment sales and marketing expense (275 )   (162 )                        
Net acquisition cost $ 14,817     $ 11,550                          
                               
  Three Months Ended
  Sept. 30, 2018   Jun. 30, 2018   Mar. 31, 2018   Dec. 31, 2017   Sept. 30, 2017   Jun. 30, 2017   Mar. 31, 2017   Dec. 31, 2016
Sales and marketing expenses $ 6,365     $ 5,702     $ 5,938     $ 5,781     $ 4,862     $ 4,372     $ 4,089     $ 3,951  
Excluding:                              
Stock-based compensation expense (358 )   (349 )   (273 )   (172 )   (165 )   (198 )   (187 )   (113 )
Acquisition cost 6,007     5,353     5,665     5,609     4,697     4,174     3,902     3,838  
Net of:                              
Sign-up fee revenue (693 )   (624 )   (616 )   (550 )   (558 )   (517 )   (544 )   (526 )
Other business segment sales and marketing expense (99 )   (88 )   (87 )   (56 )   (51 )   (63 )   (48 )   (62 )
Net acquisition cost $ 5,215     $ 4,641     $ 4,962     $ 5,003     $ 4,088     $ 3,594     $ 3,310     $ 3,250  
                                                               


 
The following tables reflect the reconciliation of adjusted EBITDA to net income (loss) (in thousands):
                               
  Nine Months Ended
September 30,
                       
                         
  2018   2017                        
Net loss $ (652 )   $ (665 )                        
Excluding:                              
Stock-based compensation expense 3,553     2,564                          
Depreciation and amortization expense 3,027     3,208                          
Interest income (628 )   (224 )                        
Interest expense 887     370                          
Income tax (benefit) expense (11 )   54                          
Gain from equity method investment (107 )   (1,029 )                        
Adjusted EBITDA $ 6,069     $ 4,278                          
                               
  Three Months Ended
  Sept. 30, 2018   Jun. 30, 2018   Mar. 31, 2018   Dec. 31, 2017   Sept. 30, 2017   Jun. 30, 2017   Mar. 31, 2017   Dec. 31, 2016
Net income (loss) $ 1,205     $ (377 )   $ (1,480 )   $ (838 )   $ 406     $ 411     $ (1,482 )   $ (1,723 )
Excluding:                              
Stock-based compensation expense 1,299     1,286     968     855     895     888     781     731  
Depreciation and amortization expense 1,136     964     927     1,024     1,095     1,077     1,036     1,229  
Interest income (317 )   (179 )   (132 )   (3 )   (97 )   (76 )   (51 )   (41 )
Interest expense 336     332     219     163     124     109     137     81  
Income tax (benefit) expense (7 )   91     (95 )   (482 )   26     4     24     7  
(Gain) loss from equity method investment     (107 )               (1,036 )   7     18  
Adjusted EBITDA $ 3,652     $ 2,010     $ 407     $ 719     $ 2,449     $ 1,377     $ 452     $ 302  
                                                               


 
The following table reflects the reconciliation of net income (loss), excluding gain on equity method investment, to net income (loss):
               
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
   
  2018   2017   2018   2017
Net income (loss) $ 1,205     $ 406     $ (652 )   $ (665 )
Excluding:              
Gain on equity method investment         (107 )   (1,036 )
Net income (loss), excluding gain on equity method investment $ 1,205     $ 406     $ (759 )   $ (1,701 )
                               

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

trupanion_new.jpg

Powered by EIN News