• Trupanion Reports Fourth Quarter and Full Year 2022 Results

    Source: Nasdaq GlobeNewswire / 15 Feb 2023 16:05:21   America/New_York

    SEATTLE, Feb. 15, 2023 (GLOBE NEWSWIRE) -- Trupanion, Inc. (Nasdaq: TRUP), the leading provider of medical insurance for cats and dogs, today announced financial results for the fourth quarter and full year ended December 31, 2022.

    “2022 was another year of consistent revenue growth and we set solid foundations for our long-term growth initiatives, leading to the doubling of our addressable market,” said Darryl Rawlings, founder and chief executive officer of Trupanion. “With our work over the last 24 months and the opportunities ahead of us, 2023 will be an exciting year. We will remain disciplined in our cash deployment and focused on earning strong internal rates of return.”

    Full Year 2022 Financial and Business Highlights

    • Total revenue was $905.2 million, an increase of 29% compared to 2021.
    • Total enrolled pets (including pets from our other business segment) was 1,537,573 at December 31, 2022, an increase of 31% over 2021.
    • Subscription business revenue was $596.6 million, an increase of 21% compared to 2021 (22% on a constant currency basis).
    • Subscription enrolled pets was 869,862 at December 31, 2022, an increase of 24% over 2021.
    • Net loss was $(44.7) million, or $(1.10) per basic and diluted share, compared to net loss of $(35.5) million, or $(0.89) per basic and diluted share, in 2021. Net loss per share is inclusive of stock-based compensation expense of $0.80 and $0.70 for the year ended December 31, 2022 and December 31, 2021, respectively.
    • Adjusted EBITDA was $0.7 million, compared to adjusted EBITDA of $4.7 million in 2021.
    • Operating cash flow was $(8.0) million and free cash flow was $(25.1) million in 2022. This compared to operating cash flow of $7.5 million and free cash flow of $(4.9) million in 2021.

    Fourth Quarter 2022 Financial and Business Highlights

    • Total revenue was $246.0 million, an increase of 27% compared to the fourth quarter of 2021.
    • Subscription business revenue was $158.6 million, an increase of 18% compared to the fourth quarter of 2021 (20% on a constant currency basis).
    • Net loss was $(9.3) million, or $(0.23) per basic and diluted share, compared to net loss of $(7.0) million, or $(0.17) per basic and diluted share, in the fourth quarter of 2021. Net loss per share is inclusive of stock-based compensation expense of $0.21 and $0.17 for the three months ended December 31, 2022 and December 31, 2021, respectively.
    • Adjusted EBITDA was $2.2 million, compared to adjusted EBITDA of $3.5 million in the fourth quarter of 2021.
    • Operating cash flow was $1.0 million and free cash flow was $(4.5) million in the fourth quarter of 2022. This compared to operating cash flow of $5.2 million and free cash flow of $1.3 million in the fourth quarter of 2021.

    PDF available: http://ml.globenewswire.com/Resource/Download/ea9c2878-f3bc-469e-9572-2973c812202f

    Conference Call
    Trupanion’s management will host a conference call today to review its fourth quarter and full year 2022 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 https://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: 13735524.

    About Trupanion
    Trupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada, Europe, Puerto Rico and Australia with over 800,000 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 patented process, Trupanion is the only North American provider with the technology to pay veterinarians directly in seconds 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, 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, 2022 and any subsequently filed reports on Forms 10-Q, 10-K and 8-K. All documents are available through the SEC’s Electronic Data Gathering Analysis and Retrieval system at https://www.sec.gov/ or the Investor Relations section of Trupanion’s website at https://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 new pet acquisition 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 new pet acquisition expense. 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 December 31, Year Ended December 31,
       2022   2021   2022   2021 
      (unaudited)    
    Revenue:        
    Subscription business $158,562  $134,120  $596,610  $494,862 
    Other business  87,447   60,259   308,569   204,129 
    Total revenue  246,009   194,379   905,179   698,991 
    Cost of revenue:        
    Subscription business(1)  131,823   108,627   497,684   407,664 
    Other business  80,537   55,217   285,310   186,981 
    Total cost of revenue(2)  212,360   163,844   782,994   594,645 
    Operating expenses:        
    Technology and development(1)  6,955   4,665   25,133   16,866 
    General and administrative(1)  10,472   8,996   39,379   31,893 
    New pet acquisition expense(1)  22,457   19,845   89,500   78,647 
    Depreciation and amortization  2,897   2,770   10,921   11,965 
    Total operating expenses  42,781   36,276   164,933   139,371 
    Loss from investment in joint venture  (85)  (22)  (253)  (171)
    Operating loss  (9,217)  (5,763)  (43,001)  (35,196)
    Interest expense  1,587   9   4,267   10 
    Other expense (income), net  (1,504)  236   (3,072)  14 
    Loss before income taxes  (9,300)  (6,008)  (44,196)  (35,220)
    Income tax expense  (15)  1,034   476   310 
    Net loss $(9,285) $(7,042) $(44,672) $(35,530)
             
    Net loss per share:        
    Basic and diluted $(0.23) $(0.17) $(1.10) $(0.89)
    Weighted average shares of common stock outstanding:        
    Basic and diluted  40,936,507   40,413,434   40,765,355   40,137,505 
             

    (1)    Includes stock-based compensation expense as follows:
    		  Three Months Ended December 31,
    		 Year Ended December 31,
       2022   2021   2022   2021 
    Cost of revenue $1,346  $1,379  $6,484  $7,148 
    Technology and development  1,549   843   4,742   3,056 
    General and administrative  3,550   2,450   12,831   8,862 
    New pet acquisition expense  2,122   2,136   9,336   9,160 
    Total stock-based compensation expense $8,567  $6,808  $33,393  $28,226 
             
    (2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:
      Three Months Ended December 31, Year Ended December 31,
       2022   2021   2022   2021 
    Veterinary invoice expense $176,083  $132,852  $649,737  $486,062 
    Other cost of revenue  36,277   30,992   133,257   108,583 
    Total cost of revenue $212,360  $163,844  $782,994  $594,645 
             


    Trupanion, Inc.
    Consolidated Balance Sheets
    (in thousands, except share data)
      December 31, 2022 December 31, 2021
         
    Assets    
    Current assets:    
    Cash and cash equivalents $65,605  $87,400 
    Short-term investments  156,804   126,012 
    Accounts and other receivables, net of allowance for doubtful accounts of $540 at December 31, 2022 and $342 at December 31, 2021  232,439   165,217 
    Prepaid expenses and other assets  14,248   12,325 
    Total current assets  469,096   390,954 
    Restricted cash  19,032   13,469 
    Long-term investments  7,841   7,061 
    Property and equipment, net  90,701   77,950 
    Intangible assets, net  24,031   22,663 
    Other long-term assets  18,943   17,776 
    Goodwill  41,983   32,709 
    Total assets $671,627  $562,582 
    Liabilities and stockholders’ equity    
    Current liabilities:    
    Accounts payable $9,471  $8,952 
    Accrued liabilities and other current liabilities  32,616   28,162 
    Reserve for veterinary invoices  43,734   39,671 
    Deferred revenue  202,692   146,911 
    Long-term debt - current portion  1,103   — 
    Total current liabilities  289,616   223,696 
    Long-term debt  68,354   — 
    Deferred tax liabilities  3,392   2,827 
    Other liabilities  4,968   3,859 
    Total liabilities  366,330   230,382 
    Stockholders’ equity:    
    Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 42,041,344 and 41,013,158 shares issued and outstanding at December 31, 2022; 41,408,350 and 40,475,185 shares issued and outstanding at December 31, 2021  —   — 
    Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding  —   — 
    Additional paid-in capital  499,694   466,792 
    Accumulated other comprehensive loss  (6,301)  3,077 
    Accumulated deficit  (171,562)  (126,890)
    Treasury stock, at cost: 1,028,186 and 933,165 shares at December 31, 2022 and 2021  (16,534)  (10,779)
    Total stockholders’ equity  305,297   332,200 
    Total liabilities and stockholders’ equity $671,627  $562,582 


     
    Trupanion, Inc.
    Consolidated Statements of Cash Flows
    (in thousands)
     Three Months Ended December 31, Year Ended December 31,
      2022   2021   2022   2021 
     (unaudited)    
    Operating activities       
    Net loss$(9,285) $(7,042) $(44,672) $(35,530)
    Adjustments to reconcile net loss to cash provided by (used in) operating activities:       
    Depreciation and amortization 2,897   2,770   10,921   11,965 
    Stock-based compensation expense 8,567   6,808   33,393   28,226 
    Other, net 1,023   (996)  1,051   (1,927)
    Changes in operating assets and liabilities:       
    Accounts and other receivables (8,034)  (7,397)  (66,982)  (66,170)
    Prepaid expenses and other assets (807)  (1,133)  (5,227)  (3,055)
    Accounts payable, accrued liabilities, and other liabilities 2,388   4,443   3,136   8,796 
    Reserve for veterinary invoices 4,164   914   4,227   10,768 
    Deferred revenue 106   6,789   56,153   54,385 
    Net cash provided by (used in) operating activities 1,019   5,156   (8,000)  7,458 
    Investing activities       
    Purchases of investment securities (147,346)  (33,384)  (273,006)  (95,672)
    Maturities and sales of investment securities 134,718   18,803   239,210   57,869 
    Cash paid in business acquisition, net of cash acquired (12,279)  —   (15,034)  — 
    Purchases of property and equipment (5,478)  (3,818)  (17,088)  (12,355)
    Other (167)  (1,707)  (1,598)  (1,755)
    Net cash provided by (used in) investing activities (30,552)  (20,106)  (67,516)  (51,913)
    Financing activities       
    Repurchase of common stock —   —   (5,755)  — 
    Proceeds from exercise of stock options 706   551   2,290   3,607 
    Shares withheld to satisfy tax withholding (579)  (1,002)  (4,359)  (4,732)
    Proceeds from debt financing, net of financing fees 14,826   —   69,138   — 
    Repayment of debt financing (271)  —   (571)  — 
    Net cash provided by (used in) financing activities 14,682   (451)  60,743   (1,125)
    Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net 505   305   (1,459)  252 
    Net change in cash, cash equivalents, and restricted cash (14,346)  (15,096)  (16,232)  (45,328)
    Cash, cash equivalents, and restricted cash at beginning of period 98,983   115,965   100,869   146,197 
    Cash, cash equivalents, and restricted cash at end of period$84,637  $100,869  $84,637  $100,869 


    The following tables set forth our key operating metrics:
                     
      Year Ended
    December 31,
    		            
                  
       2022   2021             
    Total Business:                
    Total pets enrolled (at period end)  1,537,573   1,176,778             
    Subscription Business:                
    Total subscription pets enrolled (at period end)  869,862   704,333             
    Monthly average revenue per pet $63.82  $63.56             
    Lifetime value of a pet, including fixed expenses $641  $717             
    Average pet acquisition cost (PAC) $289  $287             
    Average monthly retention  98.69%  98.74%            
                     
                     
      Three Months Ended
      Dec. 31,
    2022    		 Sept. 30,
    2022    		 Jun. 30,
    2022    		 Mar. 31,
    2022    		 Dec. 31,
    2021    		 Sept. 30,
    2021    		 Jun. 30,
    2021    		 Mar. 31,
    2021
    Total Business:                
    Total pets enrolled (at period end)  1,537,573   1,439,605   1,348,145   1,267,253   1,176,778   1,104,376   1,024,226   943,854 
    Subscription Business:                
    Total subscription pets enrolled (at period end)  869,862   808,077   770,318   736,691   704,333   676,463   643,395   609,835 
    Monthly average revenue per pet $63.11  $63.80  $64.26  $64.21  $63.89  $63.60  $63.69  $62.97 
    Lifetime value of a pet, including fixed expenses $641  $673  $713  $730  $717  $697  $681  $684 
    Average pet acquisition cost (PAC) $283  $268  $309  $301  $306  $280  $284  $279 
    Average monthly retention  98.69%  98.71%  98.74%  98.75%  98.74%  98.72%  98.72%  98.73%


    The following table reflects the reconciliation of cash provided by (used in) operating activities to free cash flow (in thousands):
             
      Three Months Ended
    December 31,    		 Year Ended
    December 31,
       2022   2021   2022   2021 
    Net cash provided (used) by operating activities $1,019  $5,156  $(8,000) $7,458 
    Purchases of property and equipment  (5,478)  (3,818)  (17,088)  (12,355)
    Free cash flow $(4,459) $1,338  $(25,088) $(4,897)


    The following table reflects the reconciliation between GAAP and non-GAAP measures (in thousands, except percentages):
      Three Months Ended
    December 31,    		 Year Ended
    December 31,
       2022   2021   2022   2021 
    Veterinary invoice expense $176,083  $132,852  $649,737  $486,062 
    Excluding:        
    Stock-based compensation expense  (899)  (798)  (4,054)  (4,538)
    Other business cost of paying veterinary invoices  (59,946)  (38,009)  (212,857)  (129,614)
    Subscription cost of paying veterinary invoices $115,238  $94,045  $432,826  $351,910 
    % of subscription revenue  72.7%  70.1%  72.5%  71.1%
             
    Other cost of revenue $36,277  $30,992  $133,257  $108,583 
    Excluding:        
    Stock-based compensation expense  (414)  (581)  (2,232)  (2,610)
    Other business variable expenses  (20,591)  (17,208)  (72,453)  (57,367)
    Subscription variable expenses $15,272  $13,203  $58,572  $48,606 
    % of subscription revenue  9.6%  9.8%  9.8%  9.8%
             
    Technology and development expense $6,955  $4,665  $25,133  $16,866 
    General and administrative expense  10,472   8,996   39,379   31,893 
    Excluding:        
    Stock-based compensation expense  (5,019)  (3,293)  (17,135)  (11,918)
    Development expenses1  (2,084)  (858)  (7,789)  (3,719)
    Business combination transaction costs  (193)  —   (372)  (82)
    Fixed expenses $10,131  $9,510  $39,216  $33,040 
    % of total revenue  4.1%  4.9%  4.3%  4.7%
             
    New pet acquisition expense $22,457  $19,845  $89,500  $78,647 
    Excluding:        
    Stock-based compensation expense  (2,079)  (2,136)  (9,116)  (9,160)
    Other business pet acquisition expense  (65)  (76)  (541)  (499)
    Subscription acquisition cost $20,313  $17,633  $79,843  $68,988 
    % of subscription revenue  12.8%  13.1%  13.4%  13.9%
             
    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.


    The following tables reflect the reconciliation of new pet acquisition expense, previously called “sales and marketing”, to acquisition cost and net acquisition cost (in thousands):
                     
      Year Ended
    December 31,
    		            
                  
       2022   2021             
    New pet acquisition expense $89,500  $78,647             
    Excluding:                
    Stock-based compensation expense  (9,116)  (9,160)            
    Acquisition cost  80,384   69,487             
    Net of:                
    Sign-up fee revenue  (4,984)  (4,954)            
    Other business segment pet acquisition expense  (541)  (499)            
    Pet acquisition expense for managing general agent policies  (443)  —             
    Net acquisition cost $74,416  $64,034             
                     
      Three Months Ended
      Dec. 31,
    2022    		 Sept. 30,
    2022    		 Jun. 30,
    2022    		 Mar. 31,
    2022    		 Dec. 31,
    2021    		 Sept. 30,
    2021    		 Jun. 30,
    2021    		 Mar. 31,
    2021
    New pet acquisition expense $22,457  $22,434  $22,982  $21,627  $19,845  $19,708  $19,390  $19,704 
    Excluding:                
    Stock-based compensation expense  (2,079)  (2,108)  (2,601)  (2,328)  (2,136)  (2,112)  (2,181)  (2,731)
    Acquisition cost  20,378   20,326   20,381   19,299   17,709   17,596   17,209   16,973 
    Net of:                
    Sign-up fee revenue  (1,191)  (1,339)  (1,252)  (1,202)  (1,162)  (1,268)  (1,260)  (1,264)
    Other business segment pet acquisition expense  (65)  (181)  (186)  (109)  (76)  (134)  (118)  (171)
    Pet acquisition expense for managing general agent policies  (443)  —   —   —   —   —   —   — 
    Net acquisition cost $18,679  $18,806  $18,943  $17,988  $16,471  $16,194  $15,831  $15,538 
                     


    The following tables reflect the reconciliation of adjusted EBITDA to net loss (in thousands):
                     
      Year Ended
    December 31,
    		            
                  
       2022   2021             
    Net loss $(44,672) $(35,530)            
    Excluding:                
    Stock-based compensation expense  32,537   28,226             
    Depreciation and amortization expense  10,921   11,965             
    Interest income  (3,026)  (337)            
    Interest expense  4,267   10             
    Other non-operating expenses  (1)  2             
    Income tax expense  476   310             
    Business combination transaction costs  372   82             
    (Gain) loss from equity method investment  (131)  6             
    Adjusted EBITDA $743  $4,734             
                     
      Three Months Ended
      Dec. 31,
    2022    		 Sept. 30,
    2022    		 Jun. 30,
    2022    		 Mar. 31,
    2022    		 Dec. 31,
    2021    		 Sept. 30,
    2021    		 Jun. 30,
    2021    		 Mar. 31,
    2021
    Net loss $(9,285) $(12,914) $(13,618) $(8,855) $(7,042) $(6,819) $(9,221) $(12,448)
    Excluding:                
    Stock-based compensation expense  8,412   8,306   8,462   7,358   6,808   6,443   6,527   8,448 
    Depreciation and amortization expense  2,897   2,600   2,707   2,717   2,770   2,944   3,158   3,093 
    Interest income  (1,614)  (1,018)  (297)  (97)  (80)  (85)  (84)  (88)
    Interest expense  1,587   1,408   1,193   79   9   —   3   (2)
    Other non-operating expenses  —   —   (1)  —   —   (1)  3   — 
    Income tax expense (benefit)  (15)  496   19   (24)  1,034   (312)  (195)  (217)
    Business combination transaction costs  193   179   —   —   —   —   —   82 
    (Gain) loss from equity method investment  —   —   (131)  —   —   —   6   — 
    Adjusted EBITDA $2,175  $(943) $(1,666) $1,178  $3,499  $2,170  $197  $(1,132)
                     

    Contacts:

    Investors:
    Laura Bainbridge, Vice President, Corporate Communications
    Investor.Relations@trupanion.com

     


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