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home / news releases / TRUP - Trupanion Reports Third Quarter 2022 Results

TRUP - Trupanion Reports Third Quarter 2022 Results

Trupanion Inc.

SEATTLE, Nov. 03, 2022 (GLOBE NEWSWIRE) -- Trupanion , Inc. (Nasdaq: TRUP), the leading provider of medical insurance for cats and dogs, today announced financial results for the third quarter ended September 30, 2022.

“The team’s ability to deploy capital at strong estimated internal rates of return continues to impress. This is illustrated by our record third quarter new subscription pet growth, which was led by the veterinary channel,” said Darryl Rawlings, founder and chief executive officer of Trupanion.

Third Quarter 2022 Financial and Business Highlights

  • Total revenue was $233.8 million, an increase of 29% compared to the third quarter of 2021.
  • Total enrolled pets (including pets from our other business segment) was 1,439,605 at September 30, 2022, an increase of 30% over the third quarter of 2021.
  • Subscription business revenue was $152.4 million, an increase of 20% compared to the third quarter of 2021 (21% on a constant currency basis).
  • Subscription enrolled pets was 808,077 at September 30, 2022, an increase of 19% over the third quarter of 2021.
  • Net loss was $(12.9) million, or $(0.32) per basic and diluted share, compared to net loss of $(6.8) million, or $(0.17) per basic and diluted share, in the third quarter of 2021. Net loss per share is inclusive of share-based compensation expense per share of $0.20 and $0.16 for the three months ended September 30, 2022 and September 30, 2021, respectively.
  • Adjusted EBITDA was $(0.9) million, compared to adjusted EBITDA of $2.2 million in the third quarter of 2021.
  • Operating cash flow was $(2.3) million and free cash flow was $(6.4) million in the third quarter of 2022. This compared to operating cash flow of $6.2 million and free cash flow of $3.5 million in the third quarter of 2021.

First Nine Months 2022 Financial and Business Highlights

  • Total revenue was $659.2 million, an increase of 31% compared to the first nine months of 2021.
  • Subscription business revenue was $438.0 million, an increase of 21% compared to the first nine months of 2021 (22% on a constant currency basis).
  • Net loss was $(35.4) million, or $(0.87) per basic and diluted share, compared to net loss of $(28.5) million, or $(0.71) per basic and diluted share, in the first nine months of 2021. Net loss per share is inclusive of share-based compensation expense per share of $0.59 and $0.53 for the nine months ended September 30, 2022 and September 30, 2021, respectively.
  • Adjusted EBITDA was $(1.4) million, compared to adjusted EBITDA of $1.2 million in the first nine months of 2021.
  • Operating cash flow was $(9.0) million and free cash flow was $(20.6) million in the first nine months of 2022. This compared to operating cash flow of $2.3 million and free cash flow of $(6.2) million in the first nine months of 2021.

PDF available: http://ml.globenewswire.com/Resource/Download/10fed8d5-9e31-4791-9a18-80a3b77cc93c

Conference Call
Trupanion’s management will host a conference call today to review its third quarter 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 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 1-800-753-6150 (United States) or 1-212-231-2903 (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: 22020781.

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 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, 2021 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 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 September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
(unaudited)
Revenue:
Subscription business
$
152,401
$
127,077
$
438,048
$
360,742
Other business
81,359
54,590
221,122
143,870
Total revenue
233,760
181,667
659,170
504,612
Cost of revenue:
Subscription business (1)
128,158
103,754
365,861
299,037
Other business
75,543
49,747
204,773
131,764
Total cost of revenue (2)
203,701
153,501
570,634
430,801
Operating expenses:
Technology and development (1)
6,553
4,391
18,178
12,201
General and administrative (1)
10,314
8,246
28,907
22,897
New pet acquisition expense (1)
22,434
19,708
67,043
58,802
Depreciation and amortization
2,600
2,944
8,024
9,195
Total operating expenses
41,901
35,289
122,152
103,095
Gain (loss) from investment in joint venture
(57
)
(69
)
(168
)
(149
)
Operating loss
(11,899
)
(7,192
)
(33,784
)
(29,433
)
Interest expense
1,408
—
2,680
1
Other income, net
(889
)
(61
)
(1,568
)
(222
)
Loss before income taxes
(12,418
)
(7,131
)
(34,896
)
(29,212
)
Income tax expense (benefit)
496
(312
)
491
(724
)
Net loss
$
(12,914
)
$
(6,819
)
$
(35,387
)
$
(28,488
)
Net loss per share:
Basic and diluted
$
(0.32
)
$
(0.17
)
$
(0.87
)
$
(0.71
)
Weighted average shares of common stock outstanding:
Basic and diluted
40,799,819
40,283,818
40,707,677
40,044,518
(1) Includes stock-based compensation expense as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Cost of revenue
$
1,472
$
1,311
$
5,138
$
5,769
Technology and development
1,184
749
3,193
2,213
General and administrative
3,792
2,271
9,281
6,412
New pet acquisition expense
2,195
2,112
7,214
7,024
Total stock-based compensation expense
$
8,643
$
6,443
$
24,826
$
21,418
(2) The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Veterinary invoice expense
$
171,112
$
125,058
$
473,654
$
353,210
Other cost of revenue
32,589
28,443
96,980
77,591
Total cost of revenue
$
203,701
$
153,501
$
570,634
$
430,801


Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2022
December 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
85,506
$
87,400
Short-term investments
97,438
126,012
Accounts and other receivables, net of allowance for doubtful accounts of $384 at September 30, 2022 and $342 at December 31, 2021
224,082
165,217
Prepaid expenses and other assets
14,802
12,325
Total current assets
421,828
390,954
Restricted cash
13,477
13,469
Long-term investments, at fair value
55,119
7,061
Property and equipment, net
87,066
77,950
Intangible assets, net
19,327
22,663
Other long-term assets
21,553
17,776
Goodwill
29,526
32,709
Total assets
$
647,896
$
562,582
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
7,627
$
8,952
Accrued liabilities and other current liabilities
31,112
28,162
Reserve for veterinary invoices
39,542
39,671
Deferred revenue
202,504
146,911
Long-term debt - current portion
600
—
Total current liabilities
281,385
223,696
Long-term debt
53,560
—
Deferred tax liabilities
2,601
2,827
Other liabilities
4,612
3,859
Total liabilities
342,158
230,382
Stockholders’ equity:
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 41,901,548 and 40,873,362 issued and outstanding at September 30, 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
490,566
466,792
Accumulated other comprehensive loss
(6,017
)
3,077
Accumulated deficit
(162,277
)
(126,890
)
Treasury stock, at cost: 1,028,186 shares at September 30, 2022 and 933,165 shares at December 31, 2021
(16,534
)
(10,779
)
Total stockholders’ equity
305,738
332,200
Total liabilities and stockholders’ equity
$
647,896
$
562,582


Trupanion, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
(unaudited)
Operating activities
Net loss
$
(12,914
)
$
(6,819
)
$
(35,387
)
$
(28,488
)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization
2,600
2,944
8,024
9,195
Stock-based compensation expense
8,643
6,443
24,826
21,418
Other, net
102
(386
)
28
(931
)
Changes in operating assets and liabilities:
Accounts and other receivables
(19,821
)
(17,977
)
(58,948
)
(58,773
)
Prepaid expenses and other assets
(1,599
)
170
(4,420
)
(1,922
)
Accounts payable, accrued liabilities, and other liabilities
45
5,225
748
4,353
Reserve for veterinary invoices
3,061
2,984
63
9,854
Deferred revenue
17,584
13,640
56,047
47,596
Net cash (used in) provided by operating activities
(2,299
)
6,224
(9,019
)
2,302
Investing activities
Purchases of investment securities
(78,292
)
(18,915
)
(125,660
)
(62,288
)
Maturities of investment securities
73,280
8,486
104,492
39,066
Cash paid in business acquisition, net of cash acquired
(2,755
)
—
(2,755
)
—
Purchases of property and equipment
(4,131
)
(2,767
)
(11,610
)
(8,537
)
Other
71
25
(1,431
)
(48
)
Net cash used in investing activities
(11,827
)
(13,171
)
(36,964
)
(31,807
)
Financing activities
Proceeds from debt financing, net of financing fees
(119
)
—
54,312
—
Repayments of debt
(150
)
—
(300
)
—
Repurchases of common stock
(4
)
—
(5,755
)
—
Proceeds from exercise of stock options
413
698
1,584
3,056
Shares withheld to satisfy tax withholding
(850
)
(979
)
(3,780
)
(3,730
)
Net cash (used in) provided by financing activities
(710
)
(281
)
46,061
(674
)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net
(1,268
)
(461
)
(1,964
)
(53
)
Net change in cash, cash equivalents, and restricted cash
(16,104
)
(7,689
)
(1,886
)
(30,232
)
Cash, cash equivalents, and restricted cash at beginning of period
115,087
123,654
100,869
146,197
Cash, cash equivalents, and restricted cash at end of period
$
98,983
$
115,965
$
98,983
$
115,965


The following tables set forth our key operating metrics:
Nine Months Ended
September 30,
2022
2021
Total Business:
Total pets enrolled (at period end)
1,439,605
1,104,376
Subscription Business:
Total subscription pets enrolled (at period end)
808,077
676,463
Monthly average revenue per pet
$
64.09
$
63.43
Lifetime value of a pet, including fixed expenses
$
673
$
697
Average pet acquisition cost (PAC)
$
291
$
281
Average monthly retention
98.71
%
98.72
%
Three Months Ended
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Sept. 30,
2021
Jun. 30,
2021
Mar. 31,
2021
Dec. 31,
2020
Total Business:
Total pets enrolled (at period end)
1,439,605
1,348,145
1,267,253
1,176,778
1,104,376
1,024,226
943,854
862,928
Subscription Business:
Total subscription pets enrolled (at period end)
808,077
770,318
736,691
704,333
676,463
643,395
609,835
577,957
Monthly average revenue per pet
$
63.80
$
64.26
$
64.21
$
63.89
$
63.60
$
63.69
$
62.97
$
62.03
Lifetime value of a pet, including fixed expenses
$
673
$
713
$
730
$
717
$
697
$
681
$
684
$
653
Average pet acquisition cost (PAC)
$
268
$
309
$
301
$
306
$
280
$
284
$
279
$
272
Average monthly retention
98.71
%
98.74
%
98.75
%
98.74
%
98.72
%
98.72
%
98.73
%
98.71
%


The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net cash (used in) provided by operating activities
$
(2,299
)
$
6,224
$
(9,019
)
$
2,302
Purchases of property and equipment
(4,131
)
(2,767
)
(11,610
)
(8,537
)
Free cash flow
$
(6,430
)
$
3,457
$
(20,629
)
$
(6,235
)


The following table reflects the reconciliation between GAAP and non-GAAP measures (in thousands except percentages):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Veterinary invoice expense
$
171,112
$
125,058
$
473,654
$
353,210
Less:
Stock-based compensation expense 1
(960
)
(769
)
(3,155
)
(3,740
)
Other business cost of paying veterinary invoices
(58,197
)
(34,432
)
(152,911
)
(91,605
)
Subscription cost of paying veterinary invoices (non-GAAP)
$
111,955
$
89,857
$
317,588
$
257,865
% of subscription revenue
73.5
%
70.7
%
72.5
%
71.5
%
Other cost of revenue
$
32,589
$
28,443
$
96,980
$
77,591
Less:
Stock-based compensation expense 1
(433
)
(542
)
(1,818
)
(2,029
)
Other business variable expenses
(17,346
)
(15,315
)
(51,862
)
(40,159
)
Subscription variable expenses (non-GAAP)
$
14,810
$
12,586
$
43,300
$
35,403
% of subscription revenue
9.7
%
9.9
%
9.9
%
9.8
%
Technology and development expense
$
6,553
$
4,391
$
18,178
$
12,201
General and administrative expense
10,314
8,246
28,907
22,897
Less:
Stock-based compensation expense 1
(4,805
)
(3,020
)
(12,116
)
(8,625
)
Business combination transaction costs
(179
)
—
(179
)
(82
)
Development expenses 2
(2,435
)
(919
)
(5,705
)
(2,861
)
Fixed expenses (non-GAAP)
$
9,448
$
8,698
$
29,085
$
23,530
% of total revenue
4.0
%
4.8
%
4.4
%
4.7
%
New pet acquisition expense
$
22,434
$
19,708
$
67,043
$
58,802
Less:
Stock-based compensation expense 1
(2,108
)
(2,112
)
(7,037
)
(7,024
)
Other business pet acquisition expense
(181
)
(134
)
(476
)
(423
)
Subscription acquisition cost (non-GAAP)
$
20,145
$
17,462
$
59,530
$
51,355
% of subscription revenue
13.2
%
13.7
%
13.6
%
14.2
%
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 $0.3 million and $0.7 million for the three and nine months ended September 30, 2022, respectively.
2 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 new pet acquisition expense, previously called "sales and marketing", to acquisition cost and net acquisition cost (in thousands):
Nine Months Ended
September 30,
2022
2021
New pet acquisition expense
$
67,043
$
58,802
Excluding:
Stock-based compensation expense
(7,037
)
(7,024
)
Acquisition cost
60,006
51,778
Net of:
Sign-up fee revenue
(3,793
)
(3,792
)
Other business segment pet acquisition expense
(476
)
(423
)
Net acquisition cost
$
55,737
$
47,563
Three Months Ended
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Sept. 30,
2021
Jun. 30,
2021
Mar. 31,
2021
Dec. 31,
2020
New pet acquisition expense
$
22,434
$
22,982
$
21,627
$
19,845
$
19,708
$
19,390
$
19,704
$
14,809
Excluding:
Stock-based compensation expense
(2,108
)
(2,601
)
(2,328
)
(2,136
)
(2,112
)
(2,181
)
(2,731
)
$
(801
)
Acquisition cost
20,326
20,381
19,299
17,709
17,596
17,209
16,973
$
14,008
Net of:
Sign-up fee revenue
(1,339
)
(1,252
)
(1,202
)
(1,162
)
(1,268
)
(1,260
)
(1,264
)
$
(919
)
Other business segment pet acquisition expense
(181
)
(186
)
(109
)
(76
)
(134
)
(118
)
(171
)
$
(201
)
Net acquisition cost
$
18,806
$
18,943
$
17,988
$
16,471
$
16,194
$
15,831
$
15,538
$
12,888


The following tables reflect the reconciliation of adjusted EBITDA to net income (loss) (in thousands):
Nine Months Ended
September 30,
2022
2021
Net loss
$
(35,387
)
$
(28,488
)
Excluding:
Stock-based compensation expense
24,125
21,418
Depreciation and amortization expense
8,024
9,195
Interest income
(1,412
)
(257
)
Interest expense
2,680
1
Other non-operating expenses
(1
)
2
Income tax expense (benefit)
491
(724
)
Business combination transaction costs
179
82
(Gain) loss from equity method investment
(131
)
6
Adjusted EBITDA
$
(1,432
)
$
1,235
Three Months Ended
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Sept. 30,
2021
Jun. 30,
2021
Mar. 31,
2021
Dec. 31,
2020
Net loss
$
(12,914
)
$
(13,618
)
$
(8,855
)
$
(7,042
)
$
(6,819
)
$
(9,221
)
$
(12,448
)
$
(3,502
)
Excluding:
Stock-based compensation expense
8,306
8,462
7,358
6,808
6,443
6,527
8,448
2,602
Depreciation and amortization expense
2,600
2,707
2,717
2,770
2,944
3,158
3,093
2,301
Interest income
(1,018
)
(297
)
(97
)
(80
)
(85
)
(84
)
(88
)
(83
)
Interest expense
1,408
1,193
79
9
—
3
(2
)
337
Other non-operating expenses
—
(1
)
—
—
(1
)
3
—
1
Income tax expense (benefit)
496
19
(24
)
1,034
(312
)
(195
)
(217
)
44
Business combination transaction costs
179
—
—
—
—
—
82
522
(Gain) loss from equity method investment
—
(131
)
—
—
—
6
—
—
Adjusted EBITDA
$
(943
)
$
(1,666
)
$
1,178
$
3,499
$
2,170
$
197
$
(1,132
)
$
2,222

Contacts :

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


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