Trupanion Reports Third Quarter 2024 Results
SEATTLE, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Trupanion, Inc. (NASDAQ:TRUP), a leading provider of medical insurance for cats and dogs, today announced financial results for the third quarter ended September 30, 2024.
"Q3 was a very strong financial quarter for the company, combining consistent revenue growth with a 66% year-over-year increase in subscription discretionary profit," said Margi Tooth, Chief Executive Officer and President of Trupanion. "This outperformance was driven by aligning the cost of veterinary care with member pricing, resulting in the achievement of our target value proposition of 71%. Trupanion is solving a bigger problem today than ever before, and after generating $30 million in free cash flow over the past 12 months, we are well positioned to reach even more pets in this globally underpenetrated market."
Third Quarter 2024 Financial and Business Highlights
Total revenue was $327.5 million, an increase of 15% compared to the third quarter of 2023.
Total enrolled pets (including pets from our other business segment) was 1,688,903 at September 30, 2024, a decrease of 1% over September 30, 2023.
Subscription business revenue was $219.0 million, an increase of 20% compared to the third quarter of 2023.
Subscription enrolled pets was 1,032,042 at September 30, 2024, an increase of 6% over September 30, 2023.
Net income was $1.4 million, or $0.03 per basic and diluted share, compared to a net loss of $(4.0) million, or $(0.10) per basic and diluted share, in the third quarter of 2023.
Adjusted EBITDA was $14.5 million, compared to adjusted EBITDA of $6.1 million in the third quarter of 2023.
Operating cash flow was $15.3 million and free cash flow was $13.4 million in the third quarter of 2024. This compared to operating cash flow of $11.4 million and free cash flow of $7.0 million in the third quarter of 2023.
First Nine Months 2024 Financial and Business Highlights
Total revenue was $948.4 million, an increase of 17% compared to the first nine months of 2023.
Subscription business revenue was $628.7 million, an increase of 21% compared to the first nine months of 2023.
Net loss was $(11.3) million, or $(0.27) per basic and diluted share, compared to a net loss of $(42.5) million, or $(1.03) per basic and diluted share, in the first nine months of 2023.
Adjusted EBITDA was $26.7 million, compared to adjusted EBITDA of $(2.1) million in the first nine months of 2023.
Operating cash flow was $24.6 million and free cash flow was $16.7 million in the first nine months of 2024. This compared to operating cash flow of $1.1 million and free cash flow of $(13.2) million in the first nine months of 2023.
At September 30, 2024, the Company held $293.1 million in cash and short-term investments, including $36.4 million held outside the insurance entities, with an additional $15 million available under its credit facility.
The Company maintained $274.6 million of capital surplus at its insurance subsidiaries. This was $139.9 million more than the estimated risk-based capital requirement of $134.7 million.
Conference CallTrupanion's management will host a conference call today to review its third quarter 2024 results. The call is scheduled to begin shortly after 1:30 p.m. PT/ 4:30 p.m. ET. A live webcast will be accessible through the Investor Relations section of Trupanion's website at https://investors.trupanion.com/ and will be archived online for 3 months upon completion of the conference call. Participants can access the conference call by dialing 1-877-300-8521 (United States) or 1-412-317-6026 (International). A telephonic replay of the call will also be available after the completion of the call, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 10192561.
About TrupanionTrupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada, Continental Europe, Australia, and Puerto Rico with over 1,000,000 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 North American provider with the technology to pay veterinarians directly in seconds at the time of checkout. Trupanion is listed on NASDAQ under the symbol "TRUP". The company was founded in 2000 and is headquartered in Seattle, WA. Trupanion policies are issued, in the United States, by its wholly-owned insurance entity American Pet Insurance Company and, in Canada, by Accelerant Insurance Company of Canada. Trupanion Australia is a partnership between Trupanion and Hollard Insurance Company. Policies are sold and administered by Trupanion Managers USA, Inc. (CA license No. 0G22803, NPN 9588590). For more information, please visit trupanion.com.
Forward-Looking StatementsThis press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to, among other things, expectations, plans, prospects and financial results for Trupanion, including, but not limited to, its expectations regarding its ability to continue to grow its enrollments and revenue, 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 to remediate material weaknesses in internal controls over financial reporting; the ability to protect and enforce Trupanion's intellectual property rights; the ability to successfully implement our alliance with Aflac; the ability to continue key contractual relationships with third parties; third-party claims including litigation and regulatory actions; the ability to recognize benefits from investments in new solutions and enhancements to Trupanion's technology platform and website; our ability to retain key personnel; and deliberations and determinations by the Trupanion board based on the future performance of the company or otherwise.
For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the Securities and Exchange Commission (SEC), including but not limited to, Trupanion's Annual Report on Form 10-K for the year ended December 31, 2023 and any subsequently filed reports on Forms 10-Q, 10-K and 8-K. All documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval system at https://www.sec.gov or the Investor Relations section of Trupanion's website at https://investors.trupanion.com.
Non-GAAP Financial MeasuresTrupanion's stated results may include certain non-GAAP financial measures. These non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry as other companies in its industry may calculate or use non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Trupanion's reported financial results. The presentation and utilization of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Trupanion urges its investors to review the reconciliation of its non-GAAP financial measures to the most directly comparable GAAP financial measures in its consolidated financial statements, and not to rely on any single financial or operating measure to evaluate its business. These reconciliations are included below and on Trupanion's Investor Relations website.
Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company's non-cash expenses, Trupanion believes that providing various non-GAAP financial measures that exclude stock-based compensation expense and depreciation and amortization expense allows for more meaningful comparisons between its operating results from period to period. Trupanion offsets new pet acquisition expense with sign-up fee revenue in the calculation of net acquisition cost because it collects sign-up fee revenue from new members at the time of enrollment and considers it to be an offset to a portion of Trupanion's new pet acquisition expense. Trupanion believes this allows it to calculate and present financial measures in a consistent manner across periods. Trupanion's management believes that the non-GAAP financial measures and the related financial measures derived from them are important tools for financial and operational decision-making and for evaluating operating results over different periods of time.
Trupanion, Inc.Condensed Consolidated Statements of Operations(in thousands, except share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(unaudited)
Revenue:
Subscription business
$
218,986
$
182,906
$
628,738
$
521,369
Other business
108,470
102,947
319,639
291,379
Total revenue
327,456
285,853
948,377
812,748
Cost of revenue:
Subscription business(1)
177,365
157,444
525,237
455,055
Other business
100,712
93,176
297,265
266,741
Total cost of revenue(2)
278,077
250,620
822,502
721,796
Operating expenses:
Technology and development(1)
7,933
5,302
23,083
15,434
General and administrative(1)
16,977
12,664
46,903
46,817
New pet acquisition expense(1)
18,308
17,772
53,025
60,183
Depreciation and amortization
4,381
2,990
12,542
9,445
Total operating expenses
47,599
38,728
135,553
131,879
Gain (loss) from investment in joint venture
(34
)
4
(184
)
(140
)
Operating income (loss)
1,746
(3,491
)
(9,862
)
(41,067
)
Interest expense
3,820
3,053
11,071
8,380
Other income, net
(3,538
)
(2,465
)
(9,601
)
(6,445
)
Income (loss) before income taxes
1,464
(4,079
)
(11,332
)
(43,002
)
Income tax expense (benefit)
39
(43
)
(43
)
(472
)
Net income (loss)
$
1,425
$
(4,036
)
$
(11,289
)
$
(42,530
)
Net income (loss) per share:
Basic
$
0.03
$
(0.10
)
$
(0.27
)
$
(1.03
)
Diluted
$
0.03
$
(0.10
)
$
(0.27
)
$
(1.03
)
Weighted average shares of common stock outstanding:
Basic
42,233,903
41,536,575
42,076,998
41,344,195
Diluted
42,822,505
41,536,575
42,076,998
41,344,195
(1)Includes stock-based compensation expense as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Cost of revenue
$
1,401
$
1,176
$
4,186
$
3,801
Technology and development
1,259
650
3,774
1,985
General and administrative
4,125
3,281
11,435
14,448
New pet acquisition expense
1,555
1,785
5,743
5,626
Total stock-based compensation expense
$
8,340
$
6,892
$
25,138
$
25,860
(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,
2024
2023
2024
2023
Veterinary invoice expense
$
238,814
$
212,441
$
703,485
$
613,316
Other cost of revenue
39,263
38,179
119,017
108,480
Total cost of revenue
$
278,077
$
250,620
$
822,502
$
721,796
Trupanion, Inc.Condensed Consolidated Balance Sheets(in thousands, except share data)
September 30, 2024
December 31, 2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
137,477
$
147,501
Short-term investments
155,580
129,667
Accounts and other receivables, net of allowance for doubtful accounts of $1,015 at September 30, 2024 and $1,085 at December 31, 2023
289,823
267,899
Prepaid expenses and other assets
16,692
17,022
Total current assets
599,572
562,089
Restricted cash
23,394
22,963
Long-term investments
14,215
12,866
Property, equipment and internal-use software, net
102,862
103,650
Intangible assets, net
14,888
18,745
Other long-term assets
16,004
18,922
Goodwill
45,183
43,713
Total assets
$
816,118
$
782,948
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
$
10,136
$
10,505
Accrued liabilities and other current liabilities
33,461
34,052
Reserve for veterinary invoices
56,668
63,238
Deferred revenue
260,238
235,329
Long-term debt - current portion
1,350
1,350
Total current liabilities
361,853
344,474
Long-term debt
127,548
127,580
Deferred tax liabilities
2,166
2,685
Other liabilities
4,376
4,487
Total liabilities
495,943
479,226
Stockholders' equity:
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 43,368,881 and 42,340,695 issued and outstanding at September 30, 2024; 42,887,052 and 41,858,866 shares issued and outstanding at December 31, 2023
—
—
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding
—
—
Additional paid-in capital
561,010
536,108
Accumulated other comprehensive income (loss)
3,243
403
Accumulated deficit
(227,544
)
(216,255
)
Treasury stock, at cost: 1,028,186 shares at September 30, 2024 and December 31, 2023
(16,534
)
(16,534
)
Total stockholders' equity
320,175
303,722
Total liabilities and stockholders' equity
$
816,118
$
782,948
Trupanion, Inc.Condensed Consolidated Statements of Cash Flows(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(unaudited)
Operating activities
Net income (loss)
$
1,425
$
(4,036
)
$
(11,289
)
$
(42,530
)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization
4,381
2,990
12,542
9,445
Stock-based compensation expense
8,341
6,892
25,138
25,860
Other, net
(136
)
(549
)
(453
)
(1,134
)
Changes in operating assets and liabilities:
Accounts and other receivables
(3,794
)
(12,409
)
(22,020
)
(45,593
)
Prepaid expenses and other assets
