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home / news releases / TRUP - Trupanion Reports Second Quarter 2021 Results

TRUP - Trupanion Reports Second Quarter 2021 Results

Trupanion Inc.

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 business
47,887
25,467
89,280
47,284
Total revenue
168,260
117,920
322,945
229,221
Cost of revenue:
Subscription business ( 1)
99,746
74,594
195,283
148,016
Other business
43,969
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 expenses
34,062
18,331
67,806
37,134
Gain (loss) from investment in joint venture
5
(27
)
(80
)
(86
)
Operating income (loss)
(9,512
)
1,509
(22,241
)
499
Interest expense
3
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:
Basic
40,142,872
35,143,592
39,922,885
35,075,322
Diluted
40,142,872
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 development
800
133
1,464
233
General and administrative
2,322
1,075
4,141
1,804
Sales and marketing
2,181
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 revenue
25,433
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 investments
102,089
89,862
Accounts and other receivables
139,966
99,065
Prepaid expenses and other assets
10,535
8,222
Total current assets
369,922
337,027
Restricted cash
6,322
6,319
Long-term investments, at fair value
6,226
5,566
Property and equipment, net
74,405
72,602
Intangible assets, net
25,120
27,134
Other long-term assets
16,476
16,557
Goodwill
33,495
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 liabilities
22,530
22,864
Reserve for veterinary invoices
35,856
28,929
Deferred revenue
126,614
92,547
Total current liabilities
189,863
150,399
Deferred tax liabilities
4,259
4,705
Other liabilities
3,639
3,207
Total liabilities
197,761
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 capital
453,950
439,007
Accumulated other comprehensive loss
4,063
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’ equity
334,205
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 amortization
3,158
1,723
6,251
3,104
Stock-based compensation expense
6,527
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 invoices
5,691
1,439
6,870
3,264
Deferred revenue
15,632
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 securities
20,102
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 options
1,120
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 activities
250
(1,521
)
(393
)
2,383
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net
178
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 period
139,447
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 retention
98.72
%
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 retention
98.72
%
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 expenses 1
(1,121
)
—
(1,942
)
—
Business combination transaction costs 2
—
—
(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 expenses 1
$
1,121
$
—
$
1,942
$
—
% of total revenue
0.7%
—
%
0.6%
—
%
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 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 cost
34,182
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 cost
17,209
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 expense
14,975
3,880
Depreciation and amortization expense
6,251
3,104
Interest income
(172
)
(471
)
Interest expense
1
720
Other non-operating expenses
3
96
Income tax (benefit) expense
(412
)
43
Business combination transaction costs
82
—
Loss (gain) from equity method investment
6
(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 expense
6,527
8,448
2,602
2,430
2,227
1,653
1,771
1,845
Depreciation and amortization expense
3,158
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 expense
3
(2
)
337
324
341
379
375
340
Other non-operating expenses
3
—
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 investment
6
—
—
—
(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


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