Trupanion Reports Third Quarter 2014 Results
Trupanion, Inc. (NYSE:TRUP), a direct-to-consumer, monthly subscription business that provides medical plans for cats and dogs through its affiliated entities, announced financial results for the third quarter of 2014.
"The third quarter was a strong showing for our team," said Darryl Rawlings, CEO of Trupanion. "Our award-winning contact center continues to innovate with cutting edge technology and customer focused initiatives that are driving up our overall member satisfaction, retention and referral rates. We received a record 133,569 calls in our contact center and we serviced 99,495 veterinary invoices during the third quarter. These are two examples of the scale and expertise we have built in customer facing areas of our business. This strong focus on our customer experience drove a 98.67% monthly retention in the quarter which implies a subscriber life of 75 months. We are pleased with our consistent growth and strong cohort metrics."
Third Quarter 2014 Financial Highlights
- Total revenue for the third quarter of 2014 was $30 million, an increase of 37% from the third quarter of 2013.
- Adjusted revenue (for our subscription business) for the third quarter of 2014 was $27 million, an increase of 38% from the third quarter of 2013.
- Adjusted EBITDA for the third quarter of 2014 was $(2.9) million, compared to $(0.4) million for the third quarter of 2013.
- Net Loss for the third quarter of 2014 was $(8.5) million, compared to $(1.2) million for the third quarter of 2013. Non-cash charges comprised $(4.3) million of the net loss in the third quarter of 2014 and were attributed to expensing of debt discounts related to debt repayments, the revaluation of warrants related to certain adjustments contingent upon our initial public offering, and stock-based compensation awards.
- Total enrolled pets for the third quarter of 2014 was 207,843, an increase of 30% from the third quarter of 2013.
- Average monthly adjusted revenue per pet for the third quarter of 2014 was $44.98, an increase of 5.6% from the third quarter of 2013.
- The ratio of lifetime value of a pet (LVP) to average pet acquisition cost (PAC) or LVP to PAC ratio was 5.2 to 1.
Full Year 2014
- Total revenue is expected to be between $115 million and $117 million for 2014, representing a slight increase from previously stated expectations.
- Adjusted EBITDA is still expected to be between $(11.8) million and $(9.8) million for 2014.
Fourth Quarter 2014
- Total revenue is expected to be between $31 million and $33 million for the fourth quarter of 2014.
- Adjusted EBITDA is still expected to be between $(4.4) million and $(2.4) million for the fourth quarter of 2014.
Trupanion plans to continue to invest heavily in business initiatives, which it believes will continue to drive up overall member satisfaction, retention and referral rates.
Trupanion's management will host a conference call today to review its third quarter 2014 results and to discuss its financial outlook for the fourth quarter and full year 2014. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 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 60 days upon completion of the conference call. Participants can access the conference call by dialing 1-866-311-7654 (United States), 1-855-669-9657 (Canada), or 1-412-902-4113 (International). A telephonic replay of the call will also be available, one hour after the completion of the call, by dialing 1-877-344-7529 (United States), 1-855-669-9658 (Canada), or 1-412-317-0088 (International) and entering the replay pin number: 10053693.
Founded in 2000, Trupanion (NYSE: TRUP) offers medical insurance for cats and dogs in the United States, Canada and Puerto Rico through its affiliated entities. With over 218,000 total enrolled pets as of 12/31/2014, Trupanion is one of the largest pet medical insurance companies in North America with the mission to help the pets we all love receive the best veterinary care. The Trupanion pet medical insurance plan is simple, fair and comprehensive that pays 90% of the actual veterinary costs for illness and injury claims with no payout limits per incident, per year, or over the lifetime of the pet and with few exclusions. Trupanion policies are underwritten by the American Pet Insurance Company in the U.S. and the Omega General Insurance Company in Canada. For more information please visit Trupanion.com.
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 future operating results and expenditures. 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 in the future; 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 our ability to institute, or our decision to otherwise delay, pricing modifications in response to changes in actual or estimated claims expense; the effectiveness of Territory Partners, veterinarians and other third parties in recommending medical plan subscriptions to potential members; the ability to maintain the requisite amount of risk-based capital; the ability to recognize benefits from investments in new solutions and enhancements to Trupanion's technology platform and website; and compliance with laws and regulations that apply to sale of a pet medical plan.
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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 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 relation section of Trupanion's website at http://investors.trupanion.com.
Non-GAAP Financial Measures
Trupanion's stated results include certain non-GAAP financial measures, including adjusted revenue, contribution margin, acquisition cost and adjusted EBITDA. Monthly adjusted revenue per pet is calculated in part based on adjusted revenue, a non-GAAP financial measure, that Trupanion defines as revenue from our subscription business segment excluding sign-up fee revenue and the change in deferred revenue between periods. Lifetime value of a pet is calculated in part based on contribution margin, a non-GAAP financial measure, that Trupanion defines as gross profit from its subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from its subscription business segment, sign-up fee revenue and the change in deferred revenue between periods. Average pet acquisition cost is calculated in part based on acquisition cost, a non-GAAP financial measure, that Trupanion defines as sales and marketing expenses, excluding stock-based compensation expense, net of sign-up fee revenue. 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, change in fair value of warrant liabilities and income tax expense (benefit).
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 adjusted EBITDA 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.
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 non-GAAP financial measures such as contribution margin, acquisition cost and adjusted EBITDA that exclude stock-based compensation expense and, in the case of adjusted EBITDA, the change in fair value of warrant liabilities allows for more meaningful comparisons between its operating results from period to period. Trupanion excludes sign-up fee revenue from the calculation of both adjusted revenue and contribution margin because it collects sign-up fee revenue from new members at the time of enrollment and consider it to be an offset to a portion of Trupanion's sales and marketing expenses. For this reason, Trupanion also nets sign-up fees with sales and marketing expenses in its calculation of acquisition cost. Trupanion excludes changes in deferred revenue from the calculation of both adjusted revenue and contribution margin in order to eliminate fluctuations caused by the timing of pet enrollment during the last month of any particular period in which such measures are being presented or utilized. Trupanion excludes the change in fair value of warrant liabilities from its calculation of adjusted EBITDA in order to eliminate fluctuations caused by changes in its stock price. Trupanion believes this allows it to calculate and present adjusted revenue, contribution margin and acquisition cost and the related financial measures it derives from them, as well as adjusted EBITDA, in a consistent manner across periods. Trupanion's non-GAAP financial measures and the related financial measures it derives from them are important tools for financial and operational decision-making and for evaluating its own operating results over different periods of time.
Trupanion has not reconciled adjusted EBITDA guidance to net income (loss) guidance because it does not provide guidance for stock-based compensation expense, depreciation and amortization, interest income, interest expense, change in fair value of warrant liabilities or income tax expense (benefit), which are reconciling items between net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of Trupanion's control and cannot be reasonably predicted, Trupanion is unable to provide such guidance. Accordingly, reconciliation to net income (loss) is not available without unreasonable effort. For a reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see the reconciliation tables included in this press release.
Please visit Investors.Trupanion.com for the company's full Condensed Consolidated Balance Sheets.
Founded in 2000, Trupanion (NYSE: TRUP) offers medical insurance for cats and dogs in the United States, Canada and Puerto Rico through its affiliated entities. With over 218,000 total enrolled pets as of 12/31/2014, Trupanion is one of the largest pet medical insurance companies in North America with the mission to help the pets we all love receive the best veterinary care. The Trupanion pet medical insurance plan is simple, fair and comprehensive that pays 90% of the actual veterinary costs for illness and injury claims with no payout limits per incident, per year, or over the lifetime of the pet and with few exclusions. Trupanion policies are underwritten by the American Pet Insurance Company in the U.S. and the Omega General Insurance Company in Canada. For more information please visit Trupanion.com