SEATTLE, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Trupanion, Inc. (Nasdaq: TRUP), the leading provider of medical insurance for cats and dogs, today announced financial results for the second quarter ended June 30, 2021.

“Q2 was another great quarter with net pet growth up 60% year-over-year, led by exceptionally strong retention rates,” said Darryl Rawlings, founder and chief executive officer of Trupanion.

Second Quarter 2021 Financial and Business Highlights

  • Total revenue was $168.3 million, an increase of 43% compared to the second quarter of 2020.
  • Total enrolled pets (including pets from our other business segment) was 1,024,226 at June 30, 2021, an increase of 38% over the second quarter of 2020.
  • Subscription business revenue was $120.4 million, an increase of 30% compared to the second quarter of 2020 (27% on a constant currency basis).
  • Subscription enrolled pets was 643,395 at June 30, 2021, an increase of 22% over the second quarter of 2020.
  • Net loss was $(9.2) million, or $(0.23) per basic and diluted share, compared to net income of $1.4 million, or $0.04 per basic and diluted share, in the second quarter of 2020. Net loss per share was impacted by $0.11 due to an increase in stock-based compensation and by $0.04 due to an increase in depreciation and amortization when compared to the prior year period. The remaining year-over-year change in earnings per share primarily reflects our accelerated growth and associated acquisition spend in the second quarter of 2021.
  • Adjusted EBITDA was $0.2 million, compared to adjusted EBITDA of $5.5 million in the second quarter of 2020.
  • Operating cash flow was $(2.2) million and free cash flow was $(5.1) million in the second quarter of 2021. This compared to operating cash flow of $4.9 million and free cash flow of $3.1 million in the second quarter of 2020.

First Half 2021 Financial and Business Highlights

  • Total revenue was $322.9 million, an increase of 41% compared to the first half of 2020.
  • Subscription business revenue was $233.7 million, an increase of 28% compared to the first half of 2020.
  • Net loss was $(21.7) million, or $(0.54) per basic and diluted share, compared to net income of $0.2 million, or $0.01 per basic and diluted share, in the first half of 2020. Net loss per share was impacted by $0.28 due to an increase in stock-based compensation and by $0.08 due to an increase in depreciation and amortization when compared to the prior year period. The remaining year-over-year change in earnings per share primarily reflects our accelerated growth and associated acquisition spend in the first half of 2021.
  • Adjusted EBITDA was $(0.9) million, compared to adjusted EBITDA of $7.5 million in the first half of 2020.
  • Operating cash flow was $(3.9) million and free cash flow was $(9.7) million in the first half of 2021. This compared to operating cash flow of $7.8 million and free cash flow of $4.5 million in the first half of 2020.

Revenue by Quarter

A chart accompanying this announcement is available at: http://ml.globenewswire.com/Resource/Download/8ab25510-5602-42d8-9f42-2c75ecf13846

Conference Call
Trupanion’s management will host a conference call today to review its second quarter 2021 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 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: 13720129.

About Trupanion
Trupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada and Australia with over 600,000 pets enrolled. For over 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. With its proprietary software, Trupanion is the only provider with the technology to pay veterinarians directly in minutes at the time of checkout. 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. Trupanion Australia is a partnership between Trupanion and Hollard 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 continue to grow its enrollments and revenue, implement its alliance with Aflac and otherwise execute its business plan. 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 successfully implement our alliance with Aflac; 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, 2020 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 June 30, Six Months Ended June 30,
 2021 2020 2021 2020
 (unaudited)
Revenue:       
Subscription business$120,373   $92,453   $233,665   $181,937  
Other business47,887   25,467   89,280   47,284  
Total revenue168,260   117,920   322,945   229,221  
Cost of revenue:       
Subscription business(1)99,746   74,594   195,283   148,016  
Other business43,969   23,459   82,017   43,486  
Total cost of revenue(2)143,715   98,053   277,300   191,502  
Operating expenses:       
Technology and development(1)4,079   2,293   7,810   4,413  
General and administrative(1)7,435   5,073   14,651   9,933  
Sales and marketing(1)19,390   9,242   39,094   19,684  
Depreciation and amortization(3)3,158   1,723   6,251   3,104  
Total operating expenses34,062   18,331   67,806   37,134  
Gain (loss) from investment in joint venture5   (27)  (80)  (86) 
Operating income (loss)(9,512)  1,509   (22,241)  499  
Interest expense3   341   1   720  
Other income, net(99)  (202)  (161)  (484) 
Gain (loss) before income taxes(9,416)  1,370   (22,081)  263  
Income tax expense (benefit)(195)  17   (412)  43  
Net income (loss)$(9,221)  $1,353   $(21,669)  $220  
        
Net income (loss) per share:       
Basic$(0.23)  $0.04   $(0.54)  $0.01  
Diluted$(0.23)  $0.04   $(0.54)  $0.01  
Weighted average shares of common stock outstanding:       
Basic40,142,872   35,143,592   39,922,885   35,075,322  
Diluted40,142,872   36,688,167   39,922,885   36,601,927  
        
(1)Includes stock-based compensation expense as follows:       
 Three Months Ended June 30,
 Six Months Ended June 30,
 
 2021 2020 2021 2020
Cost of revenue$1,224   $344   $4,458   $612  
Technology and development800   133   1,464   233  
General and administrative2,322   1,075   4,141   1,804  
Sales and marketing2,181   675   4,912   1,231  
Total stock-based compensation expense$6,527   $2,227   $14,975   $3,880  
        
(2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:
 Three Months Ended June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Veterinary invoice expense$118,282   $82,049   $228,152   $161,689  
Other cost of revenue25,433   16,004   49,148   29,813  
Total cost of revenue$143,715   $98,053   $277,300   $191,502  
        
(3)Depreciation and amortization expenses have been reclassified as a separate line item and prior period amounts have been reclassified from their original presentation to conform to the current period presentation. The Company has elected to present depreciation and amortization expenses as a separate line to better align with management's view of the Company's operating results.

 

Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
 June 30, 2021 December 31, 2020
 (unaudited)  
Assets   
Current assets:   
Cash and cash equivalents$117,332   $139,878  
Short-term investments102,089   89,862  
Accounts and other receivables139,966   99,065  
Prepaid expenses and other assets10,535   8,222  
Total current assets369,922   337,027  
Restricted cash6,322   6,319  
Long-term investments, at fair value6,226   5,566  
Property and equipment, net74,405   72,602  
Intangible assets, net25,120   27,134  
Other long-term assets16,476   16,557  
Goodwill33,495   33,045  
Total assets$531,966   $498,250  
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$4,863   $6,059  
Accrued liabilities and other current liabilities22,530   22,864  
Reserve for veterinary invoices35,856   28,929  
Deferred revenue126,614   92,547  
Total current liabilities189,863   150,399  
Deferred tax liabilities4,259   4,705  
Other liabilities3,639   3,207  
Total liabilities197,761   158,311  
Stockholders’ equity:   
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 41,164,220 and 40,231,055 issued and outstanding at June 30, 2021; 40,383,972 and 39,450,807 shares issued and outstanding at December 31, 2020—   —  
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding—   —  
Additional paid-in capital453,950   439,007  
Accumulated other comprehensive loss4,063   3,071  
Accumulated deficit(113,029)  (91,360) 
Treasury stock, at cost: 933,165 shares at June 30, 2021 and 933,165 shares at December 31, 2020(10,779)  (10,779) 
Total stockholders’ equity334,205   339,939  
Total liabilities and stockholders’ equity$531,966   $498,250  

 

Trupanion, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 Three Months Ended June 30, Six Months Ended June 30,
 2021 2020 2021 2020
 (unaudited)
Operating activities       
Net (loss) income$(9,221)  $1,353   $(21,669)  $220  
Adjustments to reconcile net (loss) income to cash provided by operating activities:       
Depreciation and amortization3,158   1,723   6,251   3,104  
Stock-based compensation expense6,527   2,227   14,975   3,880  
Other, net(315)  29   (545)  102  
Changes in operating assets and liabilities:       
Accounts and other receivables(21,991)  (14,405)  (40,796)  (26,102) 
Prepaid expenses and other assets(761)  (249)  (2,092)  (444) 
Accounts payable, accrued liabilities, and other liabilities(907)  (806)  (872)  516  
Reserve for veterinary invoices5,691   1,439   6,870   3,264  
Deferred revenue15,632   13,539   33,956   23,234  
Net cash (used in) provided by operating activities(2,187)  4,850   (3,922)  7,774  
Investing activities       
Purchases of investment securities(31,216)  (14,971)  (43,373)  (26,550) 
Maturities of investment securities20,102   15,704   30,580   20,804  
Purchases of property, equipment and intangible assets(2,887)  (1,743)  (5,770)  (3,239) 
Other(33)  98   (73)  107  
Net cash used in investing activities(14,034)  (912)  (18,636)  (8,878) 
Financing activities       
Proceeds from exercise of stock options1,120   1,108   2,358   1,667  
Shares withheld to satisfy tax withholding(870)  (120)  (2,751)  (441) 
Borrowings from line of credit, net of financing fees—   (9)  —   3,735  
Repayments to line of credit—   (2,500)  —   (2,500) 
Other financing—   —   —   (78) 
Net cash provided by (used in) financing activities250   (1,521)  (393)  2,383  
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net178   375   408   (434) 
Net change in cash, cash equivalents, and restricted cash(15,793)  2,792   (22,543)  845  
Cash, cash equivalents, and restricted cash at beginning of period139,447   28,621   146,197   30,568  
Cash, cash equivalents, and restricted cash at end of period$123,654   $31,413   $123,654   $31,413  

 

The following tables set forth our key operating metrics:
                
 Six Months Ended
June 30,
            
             
 2021 2020            
Total Business:               
Total pets enrolled (at period end)1,024,226  744,727             
Subscription Business:               
Total subscription pets enrolled (at period end)643,395  529,400             
Monthly average revenue per pet$63.34  $59.19             
Lifetime value of a pet, including fixed expenses$681  $597             
Average pet acquisition cost (PAC)$281  $222             
Average monthly retention98.72% 98.66%            
                
                
 Three Months Ended
 June. 30,
2021		 Mar. 31,
2021		 Dec. 31,
2020		 Sept. 30,
2020		 Jun. 30,
2020		 Mar. 31,
2020		 Dec. 31,
2019		 Sept. 30,
2019
Total Business:               
Total pets enrolled (at period end)1,024,226  943,854  862,928  804,251  744,727  687,435  646,728  613,694 
Subscription Business:               
Total subscription pets enrolled (at period end)643,395  609,835  577,957  552,909  529,400  508,480  494,026  479,427 
Monthly average revenue per pet$63.69  $62.97  $62.03  $60.87  $59.40  $58.96  $58.58  $58.12 
Lifetime value of a pet, including fixed expenses$681  $684  $653  $615  $597  $535  $523  $511 
Average pet acquisition cost (PAC)$284  $279  $272  $261  $199  $247  $222  $208 
Average monthly retention98.72% 98.73% 98.71% 98.69% 98.66% 98.59% 98.58% 98.59%

 

The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):
        
 Three Months Ended June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Net cash (used in) provided by operating activities$(2,187)  $4,850   $(3,922)  $7,774  
Purchases of property and equipment(2,887)  (1,743)  (5,770)  (3,239) 
Free cash flow$(5,074)  $3,107   $(9,692)  $4,535  

 

The following table reflects the reconciliation between GAAP and non-GAAP measures (in thousands except percentages):
  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
Veterinary invoice expense $118,282   $82,049   $228,152   $161,689  
Excluding:        
Stock-based compensation expense (672)  (245)  (2,971)  (423) 
Other business cost of paying veterinary invoices (31,029)  (16,019)  (57,173)  (30,471) 
Subscription cost of paying veterinary invoices $86,581   $65,785   $168,008   $130,795  
% of subscription revenue 71.9%   71.2%   71.9%   71.9%  
         
Other cost of revenue $25,433   $16,004   $49,148   $29,813  
Excluding:        
Stock-based compensation expense (552)  (99)  (1,487)  (189) 
Other business variable expenses (12,940)  (7,440)  (24,844)  (13,015) 
Subscription variable expenses $11,941   $8,465   $22,817   $16,609  
% of subscription revenue 9.9%   9.2%   9.8%   9.1%  
         
Technology and development expense $4,079   $2,293   $7,810   $4,413  
General and administrative expense 7,435   5,073   14,651   9,933  
Excluding:        
Stock-based compensation expense (3,122)  (1,208)  (5,605)  (2,037) 
Development expenses1 (1,121)  —   (1,942)  —  
Business combination transaction costs2 —   —   (82)  —  
Fixed expenses $7,271   $6,158   $14,832   $12,309  
% of total revenue 4.3%   5.2%   4.6%   5.4%  
         
Sales and marketing expense $19,390   $9,242   $39,094   $19,684  
Excluding:        
Stock-based compensation expense (2,181)  (675)  (4,912)  (1,231) 
Other business acquisition cost (118)  (191)  (289)  (354) 
Subscription acquisition cost $17,091   $8,376   $33,893   $18,099  
% of subscription revenue 14.2%   9.1%   14.5%   10.0%  
         
Technology and development $4,079   $2,293   $7,810   $4,413  
Excluding:        
Stock-based compensation expense (800)  (133)  (1,464)  (233) 
Technology expenses (2,158)  (2,160)  (4,404)  (4,180) 
Development expenses1 $1,121   $—   $1,942   $—  
% of total revenue 0.7%   —%  0.6%   —% 
         
1As we enter the next phase of our growth, we expect to invest in initiatives that are pre-revenue, including adding new products and international expansion. These development expenses are costs related to product exploration and development that are pre-revenue and historically have been insignificant. We view these activities as uses of our adjusted operating income separate from pet acquisition spend.
2These one-time expenses related to our acquisition of a software business, primarily related to legal and transaction costs incurred.

 

The following tables reflect the reconciliation of acquisition cost and net acquisition cost to sales and marketing expense (in thousands):
                
 Six Months Ended
June 30,
            
             
 2021 2020            
Sales and marketing expenses$39,094   $19,684              
Excluding:               
Stock-based compensation expense(4,912)  (1,231)             
Acquisition cost34,182   18,453              
Net of:               
Sign-up fee revenue(2,524)  (1,546)             
Other business segment sales and marketing expense(289)  (354)             
Net acquisition cost$31,369   $16,553              
                
 Three Months Ended
 June. 30,
2021		 Mar. 31,
2021		 Dec. 31,
2020		 Sept. 30,
2020		 Jun. 30,
2020		 Mar. 31,
2020		 Dec. 31,
2019		 Sept. 30,
2019
Sales and marketing expenses$19,390   $19,704   $14,809   $13,344   $9,242   $10,442   $9,212   $9,255  
Excluding:               
Stock-based compensation expense(2,181)  (2,731)  (801)  (741)  (675)  (556)  (547)  (577) 
Acquisition cost17,209   16,973   14,008   12,603   8,567   9,886   8,665   8,678  
Net of:               
Sign-up fee revenue(1,260)  (1,264)  (919)  (827)  (781)  (765)  (730)  (790) 
Other business segment sales and marketing expense(118)  (171)  (201)  (265)  (191)  (163)  (152)  (94) 
Net acquisition cost$15,831   $15,538   $12,888   $11,511   $7,595   $8,958   $7,783   $7,794  

 

The following tables reflect the reconciliation of adjusted EBITDA to net income (loss) (in thousands):
                
 Six Months Ended June 30,

            
             
 2021 2020            
Net (loss) income$(21,669)  $220              
Excluding:               
Stock-based compensation expense14,975   3,880              
Depreciation and amortization expense6,251   3,104              
Interest income(172)  (471)             
Interest expense1   720              
Other non-operating expenses3   96              
Income tax (benefit) expense(412)  43              
Business combination transaction costs82   —              
Loss (gain) from equity method investment6   (117)             
Adjusted EBITDA$(935)  $7,475              
                
 Three Months Ended
 June. 30,
2021		 Mar. 31,
2021		 Dec. 31,
2020		 Sept. 30,
2020		 Jun. 30,
2020		 Mar. 31,
2020		 Dec. 31,
2019		 Sept. 30,
2019
Net (loss) income$(9,221)  $(12,448)  $(3,502)  $(2,558)  $1,353   $(1,133)  $636   $782  
Excluding:               
Stock-based compensation expense6,527   8,448   2,602   2,430   2,227   1,653   1,771   1,845  
Depreciation and amortization expense3,158   3,093   2,301   1,666   1,723   1,381   1,274   1,181  
Interest income(84)  (88)  (83)  (74)  (134)  (337)  (516)  (411) 
Interest expense3   (2)  337   324   341   379   375   340  
Other non-operating expenses3   —   1   2   44   52   (22)  122  
Income tax (benefit) expense(195)  (217)  44   26   17   26   157   18  
Business combination transaction costs—   82   522   —   —   —   —   —  
Loss (gain) from equity method investment6   —   —   —   (117)  —   —   —  
Adjusted EBITDA$197   $(1,132)  $2,222   $1,816   $5,454   $2,021   $3,675   $3,877  
                

Contacts:

Investors:
Laura Bainbridge, Vice President, Corporate Communications
206.607.1929
InvestorRelations@trupanion.com


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Source: Trupanion, Inc.

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