Trupanion Reports Second Quarter 2014 Results
Trupanion, Inc. (NYSE: TRUP), a direct-to-consumer, monthly subscription business that provides medical plans to cats and dogs, today announced financial results for the second quarter of 2014.
"We had a solid second quarter; and yet, we have significant runway ahead of us because we are operating in what we believe is a massive, underpenetrated market," said Darryl Rawlings, CEO of Trupanion. "Our goal is to become the category leader in this market. Propelled by a superior product and a powerful, veterinarian-focused sales strategy, we believe we are well positioned to take advantage of this opportunity and assume a leading role in building the category."
Second Quarter 2014 Financial Highlights
- Total revenue for the second quarter of 2014 was $28.1 million, an increase of 42% from the second quarter of 2013.
- Subscription business revenue for the second quarter of 2014 was $25.4 million, an increase of 38% from the second quarter of 2013.
- Net Loss for the second quarter of 2014 was $3.5 million, compared to a net loss of $1.8 million for the second quarter of 2013. Adjusted EBITDA loss for the second quarter of 2014 was $2.5 million, compared to an adjusted EBITDA loss of $1.0 million for the second quarter of 2013. This loss is attributable primarily to spending related to continued expansion of Trupanion Express, public company preparedness, and a non-recurring severance charge. During the second quarter of 2014 we continued to invest in Trupanion Express, a software solution for veterinarians that enables direct-to-veterinarian claims payments and more efficient claims handling. We anticipate continuing to invest in initiatives such as Trupanion Express for the foreseeable future.
- As of June 30, 2014, Trupanion had $29.6 million in outstanding debt, which decreased to $14.9 million in July 2014.
- Total enrolled pets for the second quarter of 2014 was 194,617, an increase of 32% from the second quarter of 2013.
- Average monthly adjusted revenue per pet for the second quarter of 2014 was $43.90, an increase of 4% from the second quarter of 2013.
- The ratio of lifetime value of a pet (LVP) to average pet acquisition cost (PAC) or LVP:PAC ratio was 5.4 to 1.
In July 2014, Trupanion sold 8,193,750 shares of common stock at a price of $10.00 per share in its initial public offering. The net proceeds, after deducting underwriting discounts and commissions and offering expenses, were approximately $73 million.
- Total revenue is expected to be between $29 million and $30.2 million for the third quarter of 2014.
- Adjusted EBITDA is expected to be between $(4.3) million and $(3.1) million for the third quarter of 2014.
- Total revenue is expected to be between $114 million and $116 million for the full year 2014.
- Adjusted EBITDA is expected to be between $(11.8) million and $(9.8) million for the full year 2014.
Trupanion's management will host a conference call today to review its second quarter 2014 results and to discuss its financial outlook for the third 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 Trupanion.com and will be archived online for 60 days upon completion of the conference call. Participants can access the conference call by dialing 1-888-317-6016 (United States), 1-855-669-9657 (Canada), or 1-412-317-6016 (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: 10051103.
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 ability to maintain high retention rates; the accuracy of assumptions used in pricing medical plan subscriptions; actual claims expense not exceeding reserves; 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 our technology platform; 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 Prospectus filed with the SEC pursuant to Rule 424(b)(4) on July 18, 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, and non-GAAP expenses (General & Administrative, Sales & Marketing and Technology). 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 our subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from our 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 its 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.
Adjusted EBITDA excludes provision for income taxes, interest expense, interest income, amortization of acquired intangible asset, depreciation and other amortization expense, and expenses related to stock-based compensation. Non-GAAP expenses exclude expenses related to stock-based compensation. Adjusted EBITDA excludes these expenses as they are often excluded by other companies to help investors understand the operational performance of their business, and in the case of stock-based compensation, can be difficult to predict. Trupanion believes these adjustments provide useful comparative information to investors.
Trupanion considers these non-GAAP financial measures to be important because they provide useful measures of its operating performance and are used by its management for that purpose. In addition, investors often use measures such as these to evaluate the operating performance of a company. Non-GAAP results are presented for supplemental informational purposes only for understanding Trupanion's operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.
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.