Trupanion Reports Fourth Quarter and Full Year 2021 Results
02/16/2022 - 04:05 PM
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
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About Trupanion trupanion.com .
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 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: $0.00 001 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: $0.00 001 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 expenses1 (858 ) (339 ) (3,719 ) (339 ) Business combination transaction costs2 — (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: InvestorRelations@trupanion.com
