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home / news releases / TRUP - Trupanion Reports Fourth Quarter and Full Year 2021 Results

TRUP - Trupanion Reports Fourth Quarter and Full Year 2021 Results

Trupanion Inc.

SEATTLE, Feb. 16, 2022 (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, 2021.

“Our 60 month plan is off to a great start, as shown in our strong year-over-year growth metrics,” said Darryl Rawlings, founder and CEO of Trupanion. “In 2021, we added a record number of new pets while sustaining high-levels of retention, and maintaining scale in our subscription business. As a result, we were able to grow the funds generated from our existing pets by 37% and deploy 56% more capital year-over-year to acquire new pets at strong internal rates of return.”

Full Year 2021 Financial and Business Highlights

  • Total revenue was $699.0 million, an increase of 39% compared to 2020.
  • Total enrolled pets (including pets from our other business segment) was 1,176,778 at December 31, 2021, an increase of 36% over 2020.
  • Subscription business revenue was $494.9 million, an increase of 28% compared to 2020.
  • Subscription enrolled pets was 704,333 at December 31, 2021, an increase of 22% over 2020.
  • Net loss was $(35.5) million, or $(0.89) per basic and diluted share, compared to net loss of $(5.8) million, or $(0.16) per basic and diluted share, in 2020. Net loss per share was impacted by $0.48 due to an increase in stock-based compensation and by $0.12 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 the Company’s accelerated growth and associated acquisition spend in 2021.
  • Adjusted EBITDA was $4.7 million, compared to adjusted EBITDA of $11.5 million in 2020.
  • Operating cash flow was $7.5 million and free cash flow was $(4.9) million in 2021. This compared to operating cash flow of $21.5 million and free cash flow of $14.1 million in 2020.

Fourth Quarter 2021 Financial and Business Highlights

  • Total revenue was $194.4 million, an increase of 36% compared to the fourth quarter of 2020.
  • Subscription business revenue was $134.1 million, an increase of 26% compared to the fourth quarter of 2020 (25% on a constant currency basis).
  • Net loss was $(7.0) million, or $(0.17) per basic and diluted share, compared to net loss of $(3.5) million, or $(0.09) per basic and diluted share, in the fourth quarter of 2020. Net loss per share was impacted by $0.10 due to an increase in stock-based compensation and by $0.01 due to an increase in depreciation and amortization when compared to the prior year-period.
  • Adjusted EBITDA was $3.5 million, compared to adjusted EBITDA of $2.2 million in the fourth quarter of 2020.
  • Operating cash flow was $5.2 million and free cash flow was $1.3 million in the fourth quarter of 2021. This is compared to operating cash flow of $4.0 million and free cash flow of $1.0 million in the fourth quarter of 2020.

Revenue by Quarter

A chart accompanying this announcement is available at: http://ml.globenewswire.com/Resource/Download/d04ecfb3-ce86-4884-8f83-cb66298373fd

Conference Call
Trupanion’s management will host a conference call today to review its fourth quarter and full year 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: 13726158.

About Trupanion
Trupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada and Australia with over 700,000 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 new pet acquisition expense 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,
2021
2020
2021
2020
(unaudited)
Revenue:
Subscription business
$
134,120
$
106,416
$
494,862
$
387,732
Other business
60,259
36,271
204,129
114,296
Total revenue
194,379
142,687
698,991
502,028
Cost of revenue:
Subscription business (1)
108,627
85,761
407,664
314,875
Other business
55,217
33,333
186,981
105,252
Total cost of revenue (2)
163,844
119,094
594,645
420,127
Operating expenses:
Technology and development (1)
4,665
3,108
16,866
9,947
General and administrative (1)
8,996
6,502
31,893
21,847
New pet acquisition expense (1)
19,845
14,809
78,647
47,837
Depreciation and amortization
2,770
2,301
11,965
7,071
Total operating expenses
36,276
26,720
139,371
86,702
Loss from investment in joint venture
(22
)
(42
)
(171
)
(126
)
Operating loss
(5,763
)
(3,169
)
(35,196
)
(4,927
)
Interest expense
9
337
10
1,381
Other expense (income), net
236
(48
)
14
(581
)
Loss before income taxes
(6,008
)
(3,458
)
(35,220
)
(5,727
)
Income tax expense
1,034
44
310
113
Net loss
$
(7,042
)
$
(3,502
)
$
(35,530
)
$
(5,840
)
Net loss per share:
Basic and diluted
$
(0.17
)
$
(0.09
)
$
(0.89
)
$
(0.16
)
Weighted average shares of common stock outstanding:
Basic and diluted
40,413,434
37,841,055
40,137,505
35,858,869
(1) Includes stock-based compensation expense as follows:
Three Months Ended December 31,
Year Ended December 31,
2021
2020
2021
2020
Cost of revenue
$
1,379
$
526
$
7,148
$
1,586
Technology and development
843
392
3,056
758
General and administrative
2,450
883
8,862
3,795
New pet acquisition expense
2,136
801
9,160
2,773
Total stock-based compensation expense
$
6,808
$
2,602
$
28,226
$
8,912
(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,
2021
2020
2021
2020
Veterinary invoice expense
$
132,852
$
98,169
$
486,062
$
351,124
Other cost of revenue
30,992
20,925
108,583
69,003
Total cost of revenue
$
163,844
$
119,094
$
594,645
$
420,127


Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
December 31, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
87,400
$
139,878
Short-term investments
126,012
89,862
Accounts and other receivables, net of allowance for doubtful accounts of $342 and $271
165,217
99,065
Prepaid expenses and other assets
12,325
8,222
Total current assets
390,954
337,027
Restricted cash
13,469
6,319
Long-term investments, at fair value
7,061
5,566
Property and equipment, net
77,950
72,602
Intangible assets, net
22,663
27,134
Other long-term assets
17,776
16,557
Goodwill
32,709
33,045
Total assets
$
562,582
$
498,250
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
8,952
$
6,059
Accrued liabilities and other current liabilities
28,162
22,864
Reserve for veterinary invoices
39,671
28,929
Deferred revenue
146,911
92,547
Total current liabilities
223,696
150,399
Deferred tax liabilities
2,827
4,705
Other liabilities
3,859
3,207
Total liabilities
230,382
158,311
Stockholders’ equity:
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 41,408,350 and 40,475,185 shares issued and outstanding at December 31, 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 capital
466,792
439,007
Accumulated other comprehensive loss
3,077
3,071
Accumulated deficit
(126,890
)
(91,360
)
Treasury stock, at cost: 933,165 shares at December 31, 2021 and 2020
(10,779
)
(10,779
)
Total stockholders’ equity
332,200
339,939
Total liabilities and stockholders’ equity
$
562,582
$
498,250


Trupanion, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended December 31,
Year Ended December 31,
2021
2020
2021
2020
(unaudited)
Operating activities
Net loss
$
(7,042
)
$
(3,502
)
$
(35,530
)
$
(5,840
)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization
2,770
2,301
11,965
7,071
Stock-based compensation expense
6,808
2,602
28,226
8,912
Other, net
(996
)
35
(1,927
)
153
Changes in operating assets and liabilities:
Accounts and other receivables
(7,397
)
(5,204
)
(66,170
)
(43,272
)
Prepaid expenses and other assets
(1,133
)
(860
)
(3,055
)
(2,839
)
Accounts payable, accrued liabilities, and other liabilities
4,443
3,349
8,796
9,951
Reserve for veterinary invoices
914
(30
)
10,768
7,662
Deferred revenue
6,789
5,273
54,385
39,746
Net cash provided by operating activities
5,156
3,964
7,458
21,544
Investing activities
Purchases of investment securities
(33,384
)
(21,314
)
(95,672
)
(65,286
)
Maturities of investment securities
18,803
14,249
57,869
44,066
Cash paid in business acquisition, net of cash acquired
—
(48,133
)
—
(48,133
)
Purchases of property, equipment and intangible assets
(3,818
)
(2,939
)
(12,355
)
(7,451
)
Other
(1,707
)
(31
)
(1,755
)
57
Net cash used in investing activities
(20,106
)
(58,168
)
(51,913
)
(76,747
)
Financing activities
Proceeds from issuance of common stock, net of issuance costs
—
192,265
—
192,265
Proceeds from exercise of stock options
551
1,717
3,607
6,013
Shares withheld to satisfy tax withholding
(1,002
)
(459
)
(4,732
)
(1,115
)
Borrowings from line of credit, net of financing fees
—
—
—
6,213
Repayments to line of credit
—
(29,950
)
—
(32,450
)
Other financing
—
—
—
(78
)
Net cash (used in) provided by financing activities
(451
)
163,573
(1,125
)
170,848
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net
305
198
252
(16
)
Net change in cash, cash equivalents, and restricted cash
(15,096
)
109,567
(45,328
)
115,629
Cash, cash equivalents, and restricted cash at beginning of period
115,965
36,630
146,197
30,568
Cash, cash equivalents, and restricted cash at end of period
$
100,869
$
146,197
$
100,869
$
146,197


The following tables set forth our key operating metrics:
Year Ended December 31,

2021
2020
Total Business:
Total pets enrolled (at period end)
1,176,778
862,928
Subscription Business:
Total subscription pets enrolled (at period end)
704,333
577,957
Monthly average revenue per pet
$
63.56
$
60.37
Lifetime value of a pet, including fixed expenses
$
717
$
653
Average pet acquisition cost (PAC)
$
287
$
247
Average monthly retention
98.74
%
98.71
%
Three Months Ended
Dec. 31, 2021
Sept. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Dec. 31, 2020
Sept. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Total Business:
Total pets enrolled (at period end)
1,176,778
1,104,376
1,024,226
943,854
862,928
804,251
744,727
687,435
Subscription Business:
Total subscription pets enrolled (at period end)
704,333
676,463
643,395
609,835
577,957
552,909
529,400
508,480
Monthly average revenue per pet
$
63.89
$
63.60
$
63.69
$
62.97
$
62.03
$
60.87
$
59.40
$
58.96
Lifetime value of a pet, including fixed expenses
$
717
$
697
$
681
$
684
$
653
$
615
$
597
$
535
Average pet acquisition cost (PAC)
$
306
$
280
$
284
$
279
$
272
$
261
$
199
$
247
Average monthly retention
98.74
%
98.72
%
98.72
%
98.73
%
98.71
%
98.69
%
98.66
%
98.59
%


The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):
Three Months Ended December 31,
Year Ended December 31,
2021
2020
2021
2020
Net cash provided by operating activities
$
5,156
$
3,964
$
7,458
$
21,544
Purchases of property and equipment
(3,818
)
(2,939
)
(12,355
)
(7,451
)
Free cash flow
$
1,338
$
1,025
$
(4,897
)
$
14,093


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,
2021
2020
2021
2020
Veterinary invoice expense
$
132,852
$
98,169
$
486,062
$
351,124
Excluding:
Stock-based compensation expense
(798
)
(358
)
(4,538
)
(1,118
)
Other business cost of paying veterinary invoices
(38,009
)
(22,254
)
(129,614
)
(72,119
)
Subscription cost of paying veterinary invoices
$
94,045
$
75,557
$
351,910
$
277,887
% of subscription revenue
70.1
%
71.0
%
71.1
%
71.7
%
Other cost of revenue
$
30,992
$
20,925
$
108,583
$
69,003
Excluding:
Stock-based compensation expense
(581
)
(168
)
(2,610
)
(468
)
Other business variable expenses
(17,208
)
(11,079
)
(57,367
)
(33,133
)
Subscription variable expenses
$
13,203
$
9,678
$
48,606
$
35,402
% of subscription revenue
9.8
%
9.1
%
9.8
%
9.1
%
Technology and development expense
$
4,665
$
3,108
$
16,866
$
9,947
General and administrative expense
8,996
6,502
31,893
21,847
Excluding:
Stock-based compensation expense
(3,293
)
(1,275
)
(11,918
)
(4,553
)
Development expenses 1
(858
)
(339
)
(3,719
)
(339
)
Business combination transaction costs 2
—
(522
)
(82
)
(522
)
Fixed expenses
$
9,510
$
7,474
$
33,040
$
26,380
% of total revenue
4.9
%
5.2
%
4.7
%
5.3
%
New pet acquisition expense
$
19,845
$
14,809
$
78,647
$
47,837
Excluding:
Stock-based compensation expense
(2,136
)
(801
)
(9,160
)
(2,773
)
Other business pet acquisition expense
(76
)
(201
)
(499
)
(820
)
Subscription acquisition cost
$
17,633
$
13,807
$
68,988
$
44,244
% of subscription revenue
13.1
%
13.0
%
13.9
%
11.4
%
Technology and development
$
4,665
$
3,108
$
16,866
$
9,947
Excluding:
Stock-based compensation expense
(843
)
(392
)
(3,056
)
(758
)
Technology expenses
(2,964
)
(2,377
)
(10,091
)
(8,850
)
Development expenses 1
$
858
$
339
$
3,719
$
339
% of subscription revenue
0.4
%
0.2
%
0.5
%
0.1
%
1 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.
2 These 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 new pet acquisition expense, previously called “sales and marketing”, to acquisition cost and net acquisition cost (in thousands):
Year Ended December 31,
2021
2020
New pet acquisition expense
$
78,647
$
47,837
Excluding:
Stock-based compensation expense
(9,160
)
(2,773
)
Acquisition cost
69,487
45,064
Net of:
Sign-up fee revenue
(4,954
)
(3,292
)
Other business segment pet acquisition expense
(499
)
(820
)
Net acquisition cost
$
64,034
$
40,952
Three Months Ended
Dec. 31, 2021
Sept. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Dec. 31, 2020
Sept. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
New pet acquisition expense
$
19,845
$
19,708
$
19,390
$
19,704
$
14,809
$
13,344
$
9,242
$
10,442
Excluding:
Stock-based compensation expense
(2,136
)
(2,112
)
(2,181
)
(2,731
)
(801
)
(741
)
(675
)
(556
)
Acquisition cost
17,709
17,596
17,209
16,973
14,008
12,603
8,567
9,886
Net of:
Sign-up fee revenue
(1,162
)
(1,268
)
(1,260
)
(1,264
)
(919
)
(827
)
(781
)
(765
)
Other business segment pet acquisition expense
(76
)
(134
)
(118
)
(171
)
(201
)
(265
)
(191
)
(163
)
Net acquisition cost
$
16,471
$
16,194
$
15,831
$
15,538
$
12,888
$
11,511
$
7,595
$
8,958


The following tables reflect the reconciliation of adjusted EBITDA to net income (loss) (in thousands):
Year Ended December 31,
2021
2020
Net loss
$
(35,530
)
$
(5,840
)
Excluding:
Stock-based compensation expense
28,226
8,912
Depreciation and amortization expense
11,965
7,071
Interest income
(337
)
(628
)
Interest expense
10
1,381
Other non-operating expenses
2
99
Income tax expense
310
113
Business combination transaction costs
82
522
(Gain) loss from equity method investment
6
(117
)
Adjusted EBITDA
$
4,734
$
11,513
Three Months Ended
Dec. 31, 2021
Sept. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Dec. 31, 2020
Sept. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Net income (loss)
$
(7,042
)
$
(6,819
)
$
(9,221
)
$
(12,448
)
$
(3,502
)
$
(2,558
)
$
1,353
$
(1,133
)
Excluding:
Stock-based compensation expense
6,808
6,443
6,527
8,448
2,602
2,430
2,227
1,653
Depreciation and amortization expense
2,770
2,944
3,158
3,093
2,301
1,666
1,723
1,381
Interest income
(80
)
(85
)
(84
)
(88
)
(83
)
(74
)
(134
)
(337
)
Interest expense
9
—
3
(2
)
337
324
341
379
Other non-operating expenses
—
(1
)
3
—
1
2
44
52
Income tax expense (benefit)
1,034
(312
)
(195
)
(217
)
44
26
17
26
Business combination transaction costs
—
—
—
82
522
—
—
—
(Gain) loss from equity method investment
—
—
6
—
—
—
(117
)
—
Adjusted EBITDA
$
3,499
$
2,170
$
197
$
(1,132
)
$
2,222
$
1,816
$
5,454
$
2,021

Contacts :

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


Stock Information
Company Name: Trupanion Inc.
Stock Symbol: TRUP
Market: NASDAQ
Website: trupanion.com
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