Trupanion, Inc. (Nasdaq: TRUP), the leading provider of medical
insurance for cats and dogs, today announced financial results for
the first quarter ended March 31, 2024.
“It was a solid start to the year, with performance across our
key financial metrics as expected,” said Margi Tooth, President of
Trupanion. “Subscription revenue increased by 22% year-over-year.
Moreover, discretionary profit from our core subscription business
increased 55% while acquisition spend decreased 23% year-over-year.
We continue to prioritize cash flow generation with the intention
of gradually increasing our spending on growth as our margins
expand.”
First Quarter 2024 Financial and Business
Highlights
- Total revenue was $306.1 million, an increase of 19% compared
to the first quarter of 2023.
- Total enrolled pets (including pets from our other business
segment) was 1,708,017 at March 31, 2024, an increase of 6% over
March 31, 2023.
- Subscription business revenue was $201.1 million, an increase
of 22% compared to the first quarter of 2023.
- Subscription enrolled pets was 1,006,168 at March 31, 2024, an
increase of 11% over March 31, 2023.
- Net loss was $(6.9) million, or $(0.16) per basic and diluted
share, compared to net loss of $(24.8) million, or $(0.60) per
basic and diluted share, in the first quarter of 2023.
- Adjusted EBITDA was $4.8 million, compared to adjusted EBITDA
of $(4.9) million in the first quarter of 2023.
- Operating cash flow was $2.4 million and free cash flow was
$(0.6) million in the first quarter of 2024. This compared to
operating cash flow of $(6.9) million and free cash flow of $(12.0)
million in the first quarter of 2023.
- At March 31, 2024, the Company held $275.2 million in cash and
short-term investments, including $38.1 million held outside the
insurance entities, with an additional $15 million available under
its credit facility.
- The Company maintained $256.7 million of capital surplus at its
insurance subsidiaries. This was $103.4 million more than the
estimated risk-based capital requirement of $153.3 million.
Margi Tooth CEO AppointmentToday, in a separate
release, the Company announced that its board of directors has
unanimously approved the appointment of Margi Tooth to the position
of Chief Executive Officer, effective August 1, 2024. Tooth’s
appointment to CEO marks the culmination of a multi-year, board-led
process. Tooth will also continue as President and is anticipated
to be appointed to Trupanion’s Board of Directors during the
board’s July meeting. Trupanion’s founder and outgoing CEO Darryl
Rawlings will continue to serve in the role of Chairman of the
Board, and will also enter into a consulting agreement to provide
services related to the development of the Company’s food
initiative under the direction of Ms. Tooth.
Conference CallTrupanion’s management will host
a conference call today to review its first quarter 2024 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 1-877-300-8521 (United
States) or 1-412-317-6026 (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: 10187795.
About TrupanionTrupanion is the leading
provider of medical insurance for over 1,000,000 cats and dogs
throughout the United States, Canada, Europe, Puerto Rico and
Australia. 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
Accelerant Insurance Company of Canada. Trupanion Australia is a
partnership between Trupanion and Hollard Insurance Company. For
more information, please visit trupanion.com.
Forward-Looking StatementsThis 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, its ability to
remediate the material weaknesses in internal control over
financial reporting and the timing thereof, and otherwise execute
its business plan; and the Company’s announced CEO succession
efforts. 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
to remediate material weaknesses in internal controls 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; our ability to retain
key personnel; deliberations and determinations by the Trupanion
board based on the future performance of the company or otherwise;
or earlier changes in the employment status or role of Ms. Tooth or
Mr. Rawlings in advance of the anticipated August 1, 2024 effective
date of changes described herein.
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, 2023 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 MeasuresTrupanion’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.Condensed Consolidated
Statements of Operations(in thousands, except
share data) |
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
|
(unaudited) |
Revenue: |
|
|
|
|
Subscription business |
|
$ |
201,134 |
|
|
$ |
165,210 |
|
Other business |
|
|
104,987 |
|
|
|
91,119 |
|
Total revenue |
|
|
306,121 |
|
|
|
256,329 |
|
Cost of revenue: |
|
|
|
|
Subscription business(1) |
|
|
172,132 |
|
|
|
146,091 |
|
Other business |
|
|
97,762 |
|
|
|
83,892 |
|
Total cost of revenue(2) |
|
|
269,894 |
|
|
|
229,983 |
|
Operating expenses: |
|
|
|
|
Technology and development(1) |
|
|
6,960 |
|
|
|
4,900 |
|
General and administrative(1) |
|
|
14,673 |
|
|
|
21,017 |
|
New pet acquisition expense(1) |
|
|
16,843 |
|
|
|
21,642 |
|
Depreciation and amortization |
|
|
3,785 |
|
|
|
3,202 |
|
Total operating expenses |
|
|
42,261 |
|
|
|
50,761 |
|
Loss from investment in joint
venture |
|
|
(103 |
) |
|
|
(71 |
) |
Operating loss |
|
|
(6,137 |
) |
|
|
(24,486 |
) |
Interest expense |
|
|
3,596 |
|
|
|
2,387 |
|
Other income, net |
|
|
(2,843 |
) |
|
|
(1,902 |
) |
Loss before income taxes |
|
|
(6,890 |
) |
|
|
(24,971 |
) |
Income tax benefit |
|
|
(38 |
) |
|
|
(191 |
) |
Net loss |
|
$ |
(6,852 |
) |
|
$ |
(24,780 |
) |
|
|
|
|
|
Net loss per share: |
|
|
|
|
Basic and diluted |
|
$ |
(0.16 |
) |
|
$ |
(0.60 |
) |
Weighted average shares of
common stock outstanding: |
|
|
|
|
Basic and diluted |
|
|
41,917,094 |
|
|
|
41,107,889 |
|
|
|
|
|
|
(1)Includes stock-based
compensation expense as follows: |
|
Three Months Ended March 31, |
|
|
|
|
2024 |
|
|
|
2023 |
|
Cost of revenue |
|
$ |
1,390 |
|
|
$ |
1,318 |
|
Technology and
development |
|
|
1,254 |
|
|
|
708 |
|
General and
administrative |
|
|
3,449 |
|
|
|
8,219 |
|
New pet acquisition
expense |
|
|
2,059 |
|
|
|
2,086 |
|
Total stock-based compensation expense |
|
$ |
8,152 |
|
|
$ |
12,331 |
|
|
|
|
|
|
(2)The breakout of
cost of revenue between veterinary invoice expense and other cost
of revenue is as follows: |
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Veterinary invoice expense |
|
$ |
233,569 |
|
|
$ |
194,137 |
|
Other cost of revenue |
|
|
36,325 |
|
|
|
35,846 |
|
Total cost of revenue |
|
$ |
269,894 |
|
|
$ |
229,983 |
|
|
Trupanion, Inc.Condensed Consolidated
Balance Sheets(in thousands, except share
data) |
|
|
March 31, 2024 |
|
December 31, 2023 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
146,455 |
|
|
$ |
147,501 |
|
Short-term investments |
|
|
128,734 |
|
|
|
129,667 |
|
Accounts and other receivables, net of allowance for doubtful
accounts of $1,093 at March 31, 2024 and $1,085 at December 31,
2023 |
|
|
278,492 |
|
|
|
267,899 |
|
Prepaid expenses and other assets |
|
|
17,084 |
|
|
|
17,022 |
|
Total current assets |
|
|
570,765 |
|
|
|
562,089 |
|
Restricted cash |
|
|
23,106 |
|
|
|
22,963 |
|
Long-term investments |
|
|
13,007 |
|
|
|
12,866 |
|
Property, equipment and
internal-use software, net |
|
|
104,365 |
|
|
|
103,650 |
|
Intangible assets, net |
|
|
17,221 |
|
|
|
18,745 |
|
Other long-term assets |
|
|
18,013 |
|
|
|
18,922 |
|
Goodwill |
|
|
42,983 |
|
|
|
43,713 |
|
Total assets |
|
$ |
789,460 |
|
|
$ |
782,948 |
|
Liabilities and
stockholders’ equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
8,348 |
|
|
$ |
10,505 |
|
Accrued liabilities and other current liabilities |
|
|
30,473 |
|
|
|
34,052 |
|
Reserve for veterinary invoices |
|
|
62,275 |
|
|
|
63,238 |
|
Deferred revenue |
|
|
249,135 |
|
|
|
235,329 |
|
Long-term debt - current portion |
|
|
1,350 |
|
|
|
1,350 |
|
Total current liabilities |
|
|
351,581 |
|
|
|
344,474 |
|
Long-term debt |
|
|
127,482 |
|
|
|
127,580 |
|
Deferred tax liabilities |
|
|
2,399 |
|
|
|
2,685 |
|
Other liabilities |
|
|
4,627 |
|
|
|
4,487 |
|
Total liabilities |
|
|
486,089 |
|
|
|
479,226 |
|
Stockholders’ equity: |
|
|
|
|
Common stock: $0.00001 par
value per share, 100,000,000 shares authorized; 43,032,805 and
42,004,619 issued and outstanding at March 31, 2024; 42,887,052 and
41,858,866 shares issued and outstanding at December 31, 2023 |
|
|
— |
|
|
|
— |
|
Preferred stock: $0.00001 par
value per share, 10,000,000 shares authorized; no shares issued and
outstanding |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
544,593 |
|
|
|
536,108 |
|
Accumulated other comprehensive loss |
|
|
(1,581 |
) |
|
|
403 |
|
Accumulated deficit |
|
|
(223,107 |
) |
|
|
(216,255 |
) |
Treasury stock, at cost:
1,028,186 shares at March 31, 2024 and December 31, 2023 |
|
|
(16,534 |
) |
|
|
(16,534 |
) |
Total stockholders’ equity |
|
|
303,371 |
|
|
|
303,722 |
|
Total liabilities and stockholders’ equity |
|
$ |
789,460 |
|
|
$ |
782,948 |
|
|
Trupanion, Inc.Condensed Consolidated
Statements of Cash Flows(in
thousands) |
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
(unaudited) |
Operating
activities |
|
|
|
|
Net loss |
|
$ |
(6,852 |
) |
|
$ |
(24,780 |
) |
Adjustments to reconcile net
loss to cash provided by (used in) operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
3,785 |
|
|
|
3,202 |
|
Stock-based compensation expense |
|
|
8,152 |
|
|
|
12,331 |
|
Other, net |
|
|
(202 |
) |
|
|
(397 |
) |
Changes in operating assets
and liabilities: |
|
|
|
|
Accounts and other receivables |
|
|
(10,718 |
) |
|
|
(15,847 |
) |
Prepaid expenses and other assets |
|
|
287 |
|
|
|
(3,765 |
) |
Accounts payable, accrued liabilities, and other liabilities |
|
|
(5,131 |
) |
|
|
(5,148 |
) |
Reserve for veterinary invoices |
|
|
(885 |
) |
|
|
4,606 |
|
Deferred revenue |
|
|
13,998 |
|
|
|
22,936 |
|
Net cash provided by (used in) operating activities |
|
|
2,434 |
|
|
|
(6,862 |
) |
Investing
activities |
|
|
|
|
Purchases of investment
securities |
|
|
(19,193 |
) |
|
|
(34,795 |
) |
Maturities and sales of
investment securities |
|
|
19,005 |
|
|
|
73,793 |
|
Purchases of property,
equipment, and internal-use software |
|
|
(3,065 |
) |
|
|
(5,184 |
) |
Other |
|
|
516 |
|
|
|
100 |
|
Net cash provided by (used in) investing activities |
|
|
(2,737 |
) |
|
|
33,914 |
|
Financing
activities |
|
|
|
|
Proceeds from debt financing,
net of financing fees |
|
|
— |
|
|
|
35,130 |
|
Repayment of debt
financing |
|
|
(338 |
) |
|
|
(607 |
) |
Repurchases of common
stock |
|
|
— |
|
|
|
— |
|
Proceeds from exercise of
stock options |
|
|
372 |
|
|
|
140 |
|
Shares withheld to satisfy tax
withholding |
|
|
(245 |
) |
|
|
(853 |
) |
Other |
|
|
(75 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
(286 |
) |
|
|
33,810 |
|
Effect of foreign exchange
rate changes on cash, cash equivalents, and restricted cash,
net |
|
|
(313 |
) |
|
|
260 |
|
Net change in cash, cash
equivalents, and restricted cash |
|
|
(902 |
) |
|
|
61,122 |
|
Cash, cash equivalents, and
restricted cash at beginning of period |
|
|
170,464 |
|
|
|
84,637 |
|
Cash, cash equivalents, and
restricted cash at end of period |
|
$ |
169,562 |
|
|
$ |
145,759 |
|
|
The following
table sets forth our key operating metrics. |
|
Three Months Ended |
|
Mar. 31, 2024 |
|
Dec. 31, 2023 |
|
Sept. 30, 2023 |
|
Jun. 30, 2023 |
|
Mar. 31, 2023 |
|
Dec. 31, 2022 |
|
Sep. 30, 2022 |
|
Jun. 30, 2022 |
Total Business: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pets enrolled (at period end) |
|
1,708,017 |
|
|
|
1,714,473 |
|
|
|
1,712,177 |
|
|
|
1,679,659 |
|
|
|
1,616,865 |
|
|
|
1,537,573 |
|
|
|
1,439,605 |
|
|
|
1,348,145 |
|
Subscription Business: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscription pets enrolled (at period end) |
|
1,006,168 |
|
|
|
991,426 |
|
|
|
969,322 |
|
|
|
943,958 |
|
|
|
906,369 |
|
|
|
869,862 |
|
|
|
808,077 |
|
|
|
770,318 |
|
Monthly average revenue per pet |
$ |
69.79 |
|
|
$ |
67.07 |
|
|
$ |
65.82 |
|
|
$ |
64.41 |
|
|
$ |
63.58 |
|
|
$ |
63.11 |
|
|
$ |
63.80 |
|
|
$ |
64.26 |
|
Lifetime value of a pet, including fixed expenses |
$ |
428 |
|
|
$ |
419 |
|
|
$ |
428 |
|
|
$ |
470 |
|
|
$ |
541 |
|
|
$ |
641 |
|
|
$ |
673 |
|
|
$ |
713 |
|
Average pet acquisition cost (PAC) |
$ |
207 |
|
|
$ |
217 |
|
|
$ |
212 |
|
|
$ |
236 |
|
|
$ |
247 |
|
|
$ |
283 |
|
|
$ |
268 |
|
|
$ |
309 |
|
Average monthly retention |
|
98.41 |
% |
|
|
98.49 |
% |
|
|
98.55 |
% |
|
|
98.61 |
% |
|
|
98.65 |
% |
|
|
98.69 |
% |
|
|
98.71 |
% |
|
|
98.74 |
% |
The following
table reflects the reconciliation of cash provided by operating
activities to free cash flow (in thousands): |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Net cash provided by (used in)
operating activities |
|
$ |
2,434 |
|
|
$ |
(6,862 |
) |
Purchases of property,
equipment, and internal-use software |
|
|
(3,065 |
) |
|
|
(5,184 |
) |
Free cash flow |
|
$ |
(631 |
) |
|
$ |
(12,046 |
) |
|
|
|
|
|
|
|
|
|
The following
tables reflect the reconciliation between GAAP and non-GAAP
measures (in thousands except percentages): |
|
|
Three Months ended March 31, |
|
|
2024 |
|
2023 |
Veterinary invoice expense |
|
$ |
233,569 |
|
|
$ |
194,137 |
|
Less: |
|
|
|
|
|
|
Stock-based compensation expense(1) |
|
|
(862 |
) |
|
|
(839 |
) |
Other business cost of paying veterinary invoices(4) |
|
|
(81,213 |
) |
|
|
(65,149 |
) |
Subscription cost of paying veterinary invoices
(non-GAAP) |
|
$ |
151,494 |
|
|
$ |
128,149 |
|
% of subscription revenue |
|
|
75.3 |
% |
|
|
77.6 |
% |
|
|
|
|
|
|
|
Other cost of revenue |
|
$ |
36,325 |
|
|
$ |
35,846 |
|
Less: |
|
|
|
|
|
|
Stock-based compensation expense(1) |
|
|
(420 |
) |
|
|
(448 |
) |
Other business variable expenses(4) |
|
|
(16,498 |
) |
|
|
(18,743 |
) |
Subscription variable expenses (non-GAAP) |
|
$ |
19,407 |
|
|
$ |
16,655 |
|
% of subscription revenue |
|
|
9.6 |
% |
|
|
10.1 |
% |
|
|
|
|
|
|
|
Technology and development
expense |
|
$ |
6,960 |
|
|
$ |
4,900 |
|
General and administrative
expense |
|
|
14,673 |
|
|
|
21,017 |
|
Less: |
|
|
|
|
|
|
Stock-based compensation expense(1) |
|
|
(4,258 |
) |
|
|
(8,821 |
) |
Non-recurring transaction or restructuring expenses(2) |
|
|
— |
|
|
|
(4,102 |
) |
Development expenses(3) |
|
|
(1,178 |
) |
|
|
(898 |
) |
Fixed expenses (non-GAAP) |
|
$ |
16,197 |
|
|
$ |
12,096 |
|
% of total revenue |
|
|
5.3 |
% |
|
|
4.7 |
% |
|
|
|
|
|
|
|
New pet acquisition
expense |
|
$ |
16,843 |
|
|
$ |
21,642 |
|
Less: |
|
|
|
|
|
|
Stock-based compensation expense(1) |
|
|
(1,857 |
) |
|
|
(2,032 |
) |
Other business pet acquisition expense(4) |
|
|
(13 |
) |
|
|
(51 |
) |
Subscription acquisition cost (non-GAAP) |
|
$ |
14,973 |
|
|
$ |
19,559 |
|
% of subscription revenue |
|
|
7.4 |
% |
|
|
11.8 |
% |
|
|
|
|
|
|
|
1 Trupanion
employees may elect to take restricted stock units in lieu of cash
payment for their bonuses. We account for such expense as
stock-based compensation according to GAAP, but we do not include
it in any non-GAAP adjustments. Stock-based compensation associated
with bonuses was approximately $0.8 million for the three ended
March 31, 2024, respectively. |
2 Consists of
business acquisition transaction expenses, severance and legal
costs due to certain officers' departures, and a $3.8 million
non-recurring settlement of accounts receivable in the first
quarter of 2023 related to uncollected premiums in connection with
the transition of underwriting a third-party business to other
insurers. |
3 Consists of
costs related to product exploration and development that are
pre-revenue and historically have been insignificant. |
4 Excluding the
portion of stock-based compensation expense attributable to the
other business segment. |
|
The following
tables reflect the reconciliation of GAAP measures to non-GAAP
measures (in thousands, except percentages): |
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Operating
Income |
|
$ |
(6,138 |
) |
|
$ |
(24,485 |
) |
Non-GAAP expense
adjustments |
|
|
|
|
Acquisition cost |
|
|
14,985 |
|
|
|
19,611 |
|
Stock-based compensation expense(1) |
|
|
7,398 |
|
|
|
12,140 |
|
Development expenses(3) |
|
|
1,179 |
|
|
|
898 |
|
Depreciation and amortization |
|
|
3,785 |
|
|
|
3,202 |
|
Non-recurring transaction or restructuring expenses(2) |
|
|
— |
|
|
|
4,102 |
|
Gain (loss) from investment in joint venture |
|
|
(103 |
) |
|
|
(71 |
) |
Total adjusted
operating income (non-GAAP) |
|
$ |
21,312 |
|
|
$ |
15,538 |
|
|
|
|
|
|
Subscription
Business: |
|
|
|
|
Subscription operating
income |
|
$ |
(4,525 |
) |
|
$ |
(21,240 |
) |
Non-GAAP expense
adjustments |
|
|
|
|
Acquisition cost |
|
|
14,973 |
|
|
|
19,560 |
|
Stock-based compensation expense(1) |
|
|
5,882 |
|
|
|
9,004 |
|
Development expenses(3) |
|
|
774 |
|
|
|
579 |
|
Depreciation and amortization |
|
|
2,487 |
|
|
|
2,064 |
|
Non-recurring transaction or restructuring expenses(2) |
|
|
— |
|
|
|
2,644 |
|
Subscription adjusted
operating income (non-GAAP) |
|
$ |
19,591 |
|
|
$ |
12,610 |
|
|
|
|
|
|
Other
Business: |
|
|
Other business
operating income |
|
$ |
(1,510 |
) |
|
$ |
(3,174 |
) |
Non-GAAP expense
adjustments |
|
|
|
|
Acquisition cost |
|
|
12 |
|
|
|
51 |
|
Stock-based compensation expense(1) |
|
|
1,516 |
|
|
|
3,136 |
|
Development expenses(3) |
|
|
404 |
|
|
|
319 |
|
Depreciation and amortization |
|
|
1,298 |
|
|
|
1,138 |
|
Non-recurring transaction or restructuring expenses(2) |
|
|
— |
|
|
|
1,458 |
|
Other business
adjusted operating income (non-GAAP) |
|
$ |
1,721 |
|
|
$ |
2,928 |
|
|
|
|
|
|
(1) Trupanion
employees may elect to take restricted stock units in lieu of cash
payment for their bonuses. We account for such expense as
stock-based compensation in accordance with GAAP, but we do not
include it in any non-GAAP adjustments. Stock-based compensation
associated with bonuses was approximately $0.8 million for the
three months ended March 31, 2024. |
(2) Consists of
business acquisition transaction expenses, severance and legal
costs due to certain executive departures, and a $3.8 million
non-recurring settlement of accounts receivable in the first
quarter of 2023 related to uncollected premiums in connection with
the transition of underwriting a third-party business to other
insurers. |
(3) As 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 GAAP measures to non-GAAP
measures (in thousands, except percentages): |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
2023 |
Subscription revenue |
|
$ |
201,134 |
|
|
$ |
165,210 |
|
Subscription cost of paying
veterinary invoices |
|
|
151,493 |
|
|
|
128,149 |
|
Subscription variable
expenses |
|
|
19,407 |
|
|
|
16,655 |
|
Subscription fixed
expenses* |
|
|
10,642 |
|
|
|
7,795 |
|
Subscription adjusted operating income
(non-GAAP) |
|
$ |
19,591 |
|
|
$ |
12,610 |
|
Other business revenue |
|
$ |
104,987 |
|
|
$ |
91,119 |
|
Other business cost of paying
veterinary invoices |
|
|
81,213 |
|
|
|
65,148 |
|
Other business variable
expenses |
|
|
16,498 |
|
|
|
18,743 |
|
Other business fixed
expenses* |
|
|
5,555 |
|
|
|
4,299 |
|
Other business
adjusted operating income (non-GAAP) |
|
$ |
1,721 |
|
|
$ |
2,928 |
|
Revenue |
|
$ |
306,121 |
|
|
$ |
256,329 |
|
Cost of paying veterinary
invoices |
|
|
232,707 |
|
|
|
193,297 |
|
Variable expenses |
|
|
35,905 |
|
|
|
35,399 |
|
Fixed expenses* |
|
|
16,197 |
|
|
|
12,095 |
|
Total business
adjusted operating income (non-GAAP) |
|
$ |
21,312 |
|
|
$ |
15,538 |
|
|
|
|
|
|
As a percentage of
revenue: |
|
Three Months Ended March 31, |
|
|
2024 |
|
2023 |
Subscription revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Subscription cost of paying
veterinary invoices |
|
|
75.3 |
% |
|
|
77.6 |
% |
Subscription variable
expenses |
|
|
9.6 |
% |
|
|
10.1 |
% |
Subscription fixed
expenses* |
|
|
5.3 |
% |
|
|
4.7 |
% |
Subscription adjusted
operating income (non-GAAP) |
|
|
9.7 |
% |
|
|
7.6 |
% |
|
|
|
|
|
Other business revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Other business cost of paying
veterinary invoices |
|
|
77.4 |
% |
|
|
71.5 |
% |
Other business variable
expenses |
|
|
15.7 |
% |
|
|
20.6 |
% |
Other business fixed
expenses* |
|
|
5.3 |
% |
|
|
4.7 |
% |
Other business
adjusted operating income (non-GAAP) |
|
|
1.6 |
% |
|
|
3.2 |
% |
|
|
|
|
|
Revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of paying veterinary
invoices |
|
|
76.0 |
% |
|
|
75.4 |
% |
Variable expenses |
|
|
11.7 |
% |
|
|
13.8 |
% |
Fixed expenses* |
|
|
5.3 |
% |
|
|
4.7 |
% |
Total business
adjusted operating income (non-GAAP) |
|
|
7.0 |
% |
|
|
6.1 |
% |
|
|
|
|
|
*Fixed expenses represent shared services that support both our
subscription and other business segments and, as such, are
generally allocated to each segment pro-rata based on
revenues. |
|
Adjusted operating income is a non-GAAP financial measure that
adjusts operating income (loss) to remove the effect of acquisition
cost, development expenses, non-recurring transaction or
restructuring expenses, and gain (loss) from investment in joint
venture. Non-cash items, such as stock-based compensation expense
and depreciation and amortization, are also excluded. Acquisition
cost, development expenses, gain (loss) from investment in joint
venture, stock-based compensation expense, and depreciation and
amortization are expected to remain recurring expenses for the
foreseeable future, but are excluded from this metric to measure
scale in other areas of the business. Management believes
acquisition costs primarily represent the cost to acquire new
subscribers and are driven by the amount of growth we choose to
pursue based primarily on the amount of our adjusted operating
income period over period. Accordingly, this measure is not
indicative of our core operating income performance. We also
exclude development expenses, gain (loss) from investment in joint
venture, stock-based compensation expense, and depreciation and
amortization because some investors may not view those items as
reflective of our core operating income performance.
Management uses adjusted operating income and the margin on
adjusted operating income to understand the effects of scale in its
non-acquisition cost and development expenses and to plan future
advertising expenditures, which are designed to acquire new pets.
Management uses this measure as a principal way of understanding
the operating performance of its business exclusive of acquisition
cost and new product exploration and development initiatives.
Management believes disclosure of this metric provides investors
with the same data that the Company employs in assessing its
overall operations and that disclosure of this measure may provide
useful information regarding the efficiency of our utilization of
revenues, return on advertising dollars in the form of new
subscribers and future use of available cash to support the
continued growth of our business.
The following
table reflects the reconciliation of adjusted EBITDA to net loss
(in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Mar. 31, 2024 |
|
Dec. 31, 2023 |
|
Sept. 30, 2023 |
|
Jun. 30, 2023 |
|
Mar. 31, 2023 |
|
Dec. 31, 2022 |
|
Sep. 30, 2022 |
|
Jun. 30, 2022 |
Net loss |
$ |
(6,852 |
) |
|
$ |
(2,163 |
) |
|
$ |
(4,036 |
) |
|
$ |
(13,714 |
) |
|
$ |
(24,780 |
) |
|
$ |
(9,285 |
) |
|
$ |
(12,914 |
) |
|
$ |
(13,618 |
) |
Excluding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
7,398 |
|
|
|
6,636 |
|
|
|
6,585 |
|
|
|
6,503 |
|
|
|
12,140 |
|
|
|
8,412 |
|
|
|
8,306 |
|
|
|
8,462 |
|
Depreciation and amortization expense |
|
3,785 |
|
|
|
3,029 |
|
|
|
2,990 |
|
|
|
3,253 |
|
|
|
3,202 |
|
|
|
2,897 |
|
|
|
2,600 |
|
|
|
2,707 |
|
Interest income |
|
(3,045 |
) |
|
|
(2,842 |
) |
|
|
(2,389 |
) |
|
|
(2,051 |
) |
|
|
(1,729 |
) |
|
|
(1,614 |
) |
|
|
(1,018 |
) |
|
|
(297 |
) |
Interest expense |
|
3,596 |
|
|
|
3,697 |
|
|
|
3,053 |
|
|
|
2,940 |
|
|
|
2,387 |
|
|
|
1,587 |
|
|
|
1,408 |
|
|
|
1,193 |
|
Other non-operating expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Income tax expense (benefit) |
|
(38 |
) |
|
|
130 |
|
|
|
(43 |
) |
|
|
(238 |
) |
|
|
(191 |
) |
|
|
(15 |
) |
|
|
496 |
|
|
|
19 |
|
Non-recurring transaction or restructuring expenses |
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
65 |
|
|
|
4,102 |
|
|
|
193 |
|
|
|
179 |
|
|
|
— |
|
(Gain) loss from equity method investment |
|
— |
|
|
|
— |
|
|
|
(110 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(131 |
) |
Adjusted EBITDA |
$ |
4,844 |
|
|
$ |
8,487 |
|
|
$ |
6,058 |
|
|
$ |
(3,242 |
) |
|
$ |
(4,869 |
) |
|
$ |
2,175 |
|
|
$ |
(943 |
) |
|
$ |
(1,666 |
) |
|
Contacts:
Investors:Laura Bainbridge Senior Vice
President, Corporate
CommunicationsInvestor.Relations@trupanion.com
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/98997a6f-abb9-4b5a-996b-c603837b7fca
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