GlobeNewswire Inc | Feb 10, 2021 04:05PM EST

February 10, 2021

SEATTLE, Feb. 10, 2021 (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, 2020.

The fourth quarter capped off a strong year for Trupanion. Were set up well to capture the growing opportunities within our large, underpenetrated market, said Darryl Rawlings, founder and chief executive officer of Trupanion.

Full Year 2020 Financial and Business Highlights

-- Total revenue was $502.0 million, an increase of 31% compared to 2019. -- Total enrolled pets (including pets from our other business segment) was 862,928 at December 31, 2020, an increase of 33% over 2019. -- Subscription business revenue was $387.7 million, an increase of 21% compared to 2019. -- Subscription enrolled pets was 577,957 at December 31, 2020, an increase of 17% over 2019. -- Net loss was $(5.8) million, or $(0.16) per basic and diluted share, compared to a net loss of $(1.8) million, or $(0.05) per basic and diluted share, in 2019. -- Adjusted EBITDA was $11.5 million, compared to adjusted EBITDA of $10.6 million in 2019. -- Operating cash flow was $21.5 million and free cash flow was $14.1 million in 2020. This compared to operating cash flow of $16.2 million and free cash flow of $10.8 million in 2019. -- In the fourth quarter of2020, the Company issued 3,636,364 shares of common stock through a private placement, for net proceeds of $192.3 million. The shares were issued subject to a minimum holding period of 3 years.

Fourth Quarter 2020 Financial and Business Highlights

-- Total revenue was $142.7 million, an increase of 35% compared to the fourth quarter of 2019. -- Subscription business revenue was $106.4 million, an increase of 23% compared to the fourth quarter of 2019. -- Net loss was $(3.5) million, or $(0.09) per basic and diluted share, compared to net income of $0.6 million, or $0.02 per basic and diluted share, in the fourth quarter of 2019. -- Adjusted EBITDA was $2.2 million, compared to adjusted EBITDA of $3.7 million in the fourth quarter of 2019. -- Operating cash flow was $4.0 million and free cash flow was $1.0 million in the fourth quarter of 2020. This compared to operating cash flow of $4.5 million and free cash flow of $2.7 million in the fourth quarter of 2019.

Revenue by QuarterA chart accompanying this announcement is available at: http://ml.globenewswire.com/Resource/Download/161557cd-38c6-49a0-b8bf-8cf1f943d727

Conference CallTrupanions management will host a conference call today to review its fourth quarter and full year 2020 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 Trupanions website at http://investors.trupanion.comand 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: 13715194.

About TrupanionTrupanion is a leader in medical insurance for cats and dogs throughout the United States and Canada. 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. 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. 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,implement its alliance with Aflac and otherwise execute its business plan. These forward-looking statements are based upon the current expectations and beliefs of Trupanions 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 Trupanions 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 Trupanions 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, Trupanions Annual Report on Form 10-K for the year ended December 31, 2019 and any subsequently filed reports on Forms 10-Q and 8-K. All documents are available through the SECs Electronic Data Gathering Analysis and Retrieval system at www.sec.govor the Investor Relations section of Trupanions website at http://investors.trupanion.com.

Non-GAAP Financial MeasuresTrupanions 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 Trupanions 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 Trupanions Investor Relations website.

Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a companys 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 Trupanions sales and marketing expenses. Trupanion believes this allows it to calculate and present financial measures in a consistent manner across periods. Trupanions 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 Year Ended December 31, December 31, 2020 2019 2020 2019 (unaudited) Revenue: Subscription $ 106,416 $ 86,592 $ 387,732 $ 321,163 businessOther business 36,271 18,891 114,296 62,773 Total revenue 142,687 105,483 502,028 383,936 Cost of revenue:Subscription 85,761 70,718 314,875 262,139 business^(1)Other business 33,333 17,031 105,252 56,873 Total cost of 119,094 87,749 420,127 319,012 revenue^(2)Operating expenses:Technology anddevelopment^ 3,108 1,928 9,947 7,025 (1)General andadministrative 6,502 4,665 21,847 18,384 ^(1)Sales and 14,809 9,212 47,837 35,451 marketing^(1)Depreciationand 2,301 1,275 7,071 5,632 amortization^(3)Totaloperating 26,720 17,080 86,702 66,492 expensesGain (loss)from (42 ) (21 ) (126 ) (352 ) investment injoint ventureOperating (3,169 ) 633 (4,927 ) (1,920 ) income (loss)Interest 337 375 1,381 1,349 expenseOther income, (48 ) (535 ) (581 ) (1,629 ) netGain (loss)before income (3,458 ) 793 (5,727 ) (1,640 ) taxesIncome taxexpense 44 157 113 169 (benefit)Net income $ (3,502 ) $ 636 $ (5,840 ) $ (1,809 ) (loss) Net income(loss) per share:Basic $ (0.09 ) $ 0.02 $ (0.16 ) $ (0.05 ) Diluted (0.09 ) 0.02 (0.16 ) (0.05 ) Weightedaverage sharesof common stockoutstanding:Basic 37,841,055 34,876,438 35,858,869 34,645,345 Diluted 37,841,055 36,354,620 35,858,869 34,645,345 ^(1)Includesstock-based Three Months Ended Year Endedcompensation December 31, December 31,expense asfollows: 2020 2019 2020 2019Cost of $ 526 $ 267 $ 1,586 $ 1,050 revenueTechnology and 392 97 758 364 developmentGeneral and 883 860 3,795 3,312 administrativeSales and 801 547 2,773 2,120 marketingTotalstock-based $ 2,602 $ 1,771 $ 8,912 $ 6,846 compensationexpense ^(2)The breakout of cost of revenue between veterinary invoice expense andother cost of revenue is as follows: Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Veterinaryinvoice $ 98,169 $ 74,646 $ 351,124 $ 270,947 expenseOther cost of 20,925 13,103 69,003 48,065 revenueTotal cost of $ 119,094 $ 87,749 $ 420,127 $ 319,012 revenue ^(3)Depreciation and amortization expenses have been reclassified as aseparate line item and prior period amounts have been reclassified from theiroriginal presentation to conform to the current period presentation. TheCompany has elected to present depreciation and amortization expenses as aseparate line to better align with management's view of the Company's operatingresults.

Trupanion, Inc.Consolidated Balance Sheets(in thousands, except share data)

December 31, December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 139,878 $ 29,168 Short-term investments 89,862 69,732 Accounts and other receivables 99,065 54,408 Prepaid expenses and other assets 8,222 5,513 Total current assets 337,027 158,821 Restricted cash 6,319 1,400 Long-term investments, at fair value 5,566 4,323 Property and equipment, net 72,602 70,372 Intangible assets, net 27,134 7,731 Other long-term assets 16,557 14,553 Goodwill 33,045 ? Total assets $ 498,250 $ 257,200 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 6,059 $ 4,087 Accrued liabilities and other current liabilities 22,864 13,798 Reserve for veterinary invoices 28,929 21,194 Deferred revenue 92,547 52,546 Total current liabilities 150,399 91,625 Long-term debt ? 26,086 Deferred tax liabilities 4,705 1,118 Other liabilities 3,207 1,611 Total liabilities 158,311 120,440 Stockholders? equity: Common stock: $0.00001 par value per share,100,000,000 shares authorized at December 31,2020 and December31, 2019, 40,383,972 and39,450,807 shares issued and outstanding at ? ? December 31, 2020; 35,876,882 and 34,947,017shares issued and outstanding at December 31,2019Preferred stock: $0.00001 par value per share,10,000,000 shares authorized at December 31, 2020and December 31, 2019, and 0 shares issued and ? ? outstanding at December 31, 2020 and December 31,2019Additional paid-in capital 439,007 232,731 Accumulated other comprehensive loss 3,071 250 Accumulated deficit (91,360 ) (85,520 ) Treasury stock, at cost: 933,165 shares atDecember 31, 2020 and 929,865 shares at December (10,779 ) (10,701 ) 31, 2019Total stockholders? equity 339,939 136,760 Total liabilities and stockholders? equity $ 498,250 $ 257,200

Trupanion, Inc.Consolidated Statements of Cash Flows(in thousands)

Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019 (unaudited) Operating activitiesNet income (loss) $ (3,502 ) $ 636 $ (5,840 ) $ (1,809 ) Adjustments toreconcile net lossto cash provided by operatingactivities:Depreciation and 2,301 1,274 7,071 5,632 amortizationStock-basedcompensation 2,602 1,771 8,912 6,846 expenseOther, net 35 (38 ) 153 105 Changes inoperating assets and liabilities:Accounts and other (5,204 ) (4,190 ) (43,272 ) (22,772 ) receivablesPrepaid expenses (860 ) (707 ) (2,839 ) (432 ) and other assetsAccounts payable,accrued 3,349 1,304 9,951 4,110 liabilities, andother liabilitiesReserve for (30 ) 1,872 7,662 5,059 veterinary invoicesDeferred revenue 5,273 2,610 39,746 19,418 Net cash providedby operating 3,964 4,532 21,544 16,157 activitiesInvesting activitiesPurchases ofinvestment (21,314 ) (20,014 ) (65,286 ) (65,506 ) securitiesMaturities ofinvestment 14,249 21,538 44,066 49,762 securitiesCash paid inbusiness (48,133 ) (48,133 ) ? acquisition, net ofcash acquiredPurchases of other ? (4,000 ) ? (4,000 ) investmentsPurchases ofproperty, equipment (2,939 ) (1,787 ) (7,451 ) (5,373 ) and intangibleassetsOther (31 ) (954 ) 57 (2,891 ) Net cash used ininvesting (58,168 ) (5,217 ) (76,747 ) (28,008 ) activitiesFinancing activitiesProceeds fromissuance of common 192,265 ? 192,265 ? stock, net ofissuance costsProceeds fromexercise of stock 1,717 727 6,013 2,982 optionsShares withheld tosatisfy tax (459 ) (57 ) (1,115 ) (1,667 ) withholdingBorrowings fromline of credit, net ? 4,000 6,213 13,167 of financing feesRepayments to line (29,950 ) ? (32,450 ) ? of creditOther financing ? ? (78 ) (438 ) Net cash providedby financing 163,573 4,670 170,848 14,044 activitiesEffect of foreignexchange ratechanges on cash, 198 156 (16 ) 423 cash equivalents,and restrictedcash, netNet change in cash,cash equivalents, 109,567 4,141 115,629 2,616 and restricted cashCash, cashequivalents, and 36,630 26,427 30,568 27,952 restricted cash atbeginning of periodCash, cashequivalents, and $ 146,197 $ 30,568 $ 146,197 $ 30,568 restricted cash atend of period

The following tables set forth our key operating metrics: Year Ended December 31, 2020 2019 Total Business: Total petsenrolled (at 862,928 646,728 period end)Subscription Business:Totalsubscription 577,957 494,026 pets enrolled(at period end)Monthly average $ 60.37 $ 57.52 revenue per petLifetime valueof a pet, $ 653 $ 523 including fixedexpensesAverage petacquisition cost $ 247 $ 212 (PAC)Average monthly 98.71 % 98.58 % retention Three Months Ended Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31, 2020 2020 2020 2020 2019 2019 2019 2019Total Business: Total petsenrolled (at 862,928 804,251 744,727 687,435 646,728 613,694 577,686 548,002 period end)Subscription Business:Totalsubscription 577,957 552,909 529,400 508,480 494,026 479,427 461,314 445,148 pets enrolled(at period end)Monthly average $ 62.03 $ 60.87 $ 59.40 $ 58.96 $ 58.58 $ 58.12 $ 57.11 $ 56.13 revenue per petLifetime valueof a pet, $ 653 $ 615 $ 597 $ 535 $ 523 $ 511 $ 482 $ 471 including fixedexpensesAverage petacquisition cost $ 272 $ 261 $ 199 $ 247 $ 222 $ 208 $ 213 $ 205 (PAC)Average monthly 98.71 % 98.69 % 98.66 % 98.59 % 98.58 % 98.59 % 98.57 % 98.58 %retention

The following table reflects the reconciliation of cash provided by operatingactivities to free cash flow (in thousands): Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Net cashprovided by $ 3,964 $ 4,532 $ 21,544 $ 16,157 operatingactivitiesPurchases ofproperty and (2,939 ) (1,787 ) (7,451 ) (5,373 ) equipmentFree cash $ 1,025 $ 2,745 $ 14,093 $ 10,784 flow

The following tables reflect the reconciliation of acquisition cost and netacquisition cost to sales and marketing expense (in thousands): Year Ended December 31, 2020 2019 Sales andmarketing $ 47,837 $ 35,451 expensesExcluding: Stock-basedcompensation (2,773 ) (2,120 ) expenseAcquisition cost 45,064 33,331 Net of: Sign-up fee (3,292 ) (2,957 ) revenueOther businesssegment sales and (820 ) (414 ) marketing expenseNet acquisition $ 40,952 $ 29,960 cost Three Months Ended Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31, 2020 2020 2020 2020 2019 2019 2019 2019Sales andmarketing $ 14,809 $ 13,344 $ 9,242 $ 10,442 $ 9,212 $ 9,255 $ 8,757 $ 8,227 expensesExcluding: Stock-basedcompensation (801 ) (741 ) (675 ) (556 ) (547 ) (577 ) (567 ) (429 )expenseAcquisition cost 14,008 12,603 8,567 9,886 8,665 8,678 8,190 7,798 Net of: Sign-up fee (919 ) (827 ) (781 ) (765 ) (730 ) (790 ) (734 ) (703 )revenueOther businesssegment sales and (201 ) (265 ) (191 ) (163 ) (152 ) (94 ) (38 ) (130 )marketing expenseNet acquisition $ 12,888 $ 11,511 $ 7,595 $ 8,958 $ 7,783 $ 7,794 $ 7,418 $ 6,965 cost

The following tables reflect the reconciliation of adjusted EBITDA to netincome (loss) (in thousands): Year Ended December 31, 2020 2019 Net loss $ (5,840 ) $ (1,809 ) Excluding: Stock-based compensation 8,912 6,846 expenseDepreciation and 7,071 5,632 amortization expenseInterest income (628 ) (1,681 ) Interest expense 1,381 1,349 Other non-operating 99 201 expensesIncome tax expense 113 169 (benefit)Business combination 522 ? transaction costsGain from equity method (117 ) (125 ) investmentAdjusted EBITDA $ 11,513 $ 10,582 Three Months Ended Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31, 2020 2020 2020 2020 2019 2019 2019 2019Net income (loss) $ (3,502 ) $ (2,558 ) $ 1,353 $ (1,133 ) $ 636 $ 782 $ (1,931 ) $ (1,296 )Excluding: Stock-based compensation 2,602 2,430 2,227 1,653 1,771 1,845 1,873 1,357 expenseDepreciation and 2,301 1,666 1,723 1,381 1,274 1,181 1,564 1,613 amortization expenseInterest income (83 ) (74 ) (134 ) (337 ) (516 ) (411 ) (412 ) (342 )Interest expense 337 324 341 379 375 340 317 317 Other non-operating 1 2 44 52 (22 ) 122 101 ? expensesIncome tax expense 44 26 17 26 157 18 (46 ) 40 (benefit)Business combination 522 ? ? ? ? ? ? ? transaction costs(Gain) loss from equity ? ? (117 ) ? ? ? (125 ) ? method investmentAdjusted EBITDA $ 2,222 $ 1,816 $ 5,454 $ 2,021 $ 3,675 $ 3,877 $ 1,341 $ 1,689

Contacts

Investors:Laura Bainbridge, Head of Corporate Communications206.607.1929InvestorRelations@trupanion.com