SEATTLE, May 02, 2024 (GLOBE NEWSWIRE) -- Trupanion, Inc. (NASDAQ:TRUP), the leading provider of medical insurance for cats and dogs, today announced financial results for the first quarter ended March 31, 2024. "It was a solid start to the year, with performance across our key financial metrics as expected," said Margi Tooth, President of Trupanion. "Subscription revenue increased by 22% year-over-year. Moreover, discretionary profit from our core subscription business increased 55% while acquisition spend decreased 23% year-over-year. We continue to prioritize cash flow generation with the intention of gradually increasing our spending on growth as our margins expand." First Quarter 2024 Financial and Business Highlights Total revenue was $306.1 million, an increase of 19% compared to the first quarter of 2023. Total enrolled pets (including pets from our other business segment) was 1,708,017 at March 31, 2024, an increase of 6% over March 31, 2023. Subscription business revenue was $201.1 million, an increase of 22% compared to the first quarter of 2023. Subscription enrolled pets was 1,006,168 at March 31, 2024, an increase of 11% over March 31, 2023. Net loss was $(6.9) million, or $(0.16) per basic and diluted share, compared to net loss of $(24.8) million, or $(0.60) per basic and diluted share, in the first quarter of 2023. Adjusted EBITDA was $4.8 million, compared to adjusted EBITDA of $(4.9) million in the first quarter of 2023. Operating cash flow was $2.4 million and free cash flow was $(0.6) million in the first quarter of 2024. This compared to operating cash flow of $(6.9) million and free cash flow of $(12.0) million in the first quarter of 2023. At March 31, 2024, the Company held $275.2 million in cash and short-term investments, including $38.1 million held outside the insurance entities, with an additional $15 million available under its credit facility. The Company maintained $256.7 million of capital surplus at its insurance subsidiaries. This was $103.4 million more than the estimated risk-based capital requirement of $153.3 million. Margi Tooth CEO AppointmentToday, in a separate release, the Company announced that its board of directors has unanimously approved the appointment of Margi Tooth to the position of Chief Executive Officer, effective August 1, 2024. Tooth's appointment to CEO marks the culmination of a multi-year, board-led process. Tooth will also continue as President and is anticipated to be appointed to Trupanion's Board of Directors during the board's July meeting. Trupanion's founder and outgoing CEO Darryl Rawlings will continue to serve in the role of Chairman of the Board, and will also enter into a consulting agreement to provide services related to the development of the Company's food initiative under the direction of Ms. Tooth. Conference CallTrupanion's management will host a conference call today to review its first 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: 10187795. About TrupanionTrupanion is the leading provider of medical insurance for over 1,000,000 cats and dogs throughout the United States, Canada, Europe, Puerto Rico and Australia. 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. 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, its ability to remediate the material weaknesses in internal control over financial reporting and the timing thereof, and otherwise execute its business plan; and the Company's announced CEO succession efforts. 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; deliberations and determinations by the Trupanion board based on the future performance of the company or otherwise; or earlier changes in the employment status or role of Ms. Tooth or Mr. Rawlings in advance of the anticipated August 1, 2024 effective date of changes described herein. 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 March 31,       2024       2023     (unaudited) Revenue:         Subscription business   $ 201,134     $ 165,210   Other business     104,987       91,119   Total revenue     306,121       256,329   Cost of revenue:         Subscription business(1)     172,132       146,091   Other business     97,762       83,892   Total cost of revenue(2)     269,894       229,983   Operating expenses:         Technology and development(1)     6,960       4,900   General and administrative(1)     14,673       21,017   New pet acquisition expense(1)     16,843       21,642   Depreciation and amortization     3,785       3,202   Total operating expenses     42,261       50,761   Loss from investment in joint venture     (103 )     (71 ) Operating loss     (6,137 )     (24,486 ) Interest expense     3,596       2,387   Other income, net     (2,843 )     (1,902 ) Loss before income taxes     (6,890 )     (24,971 ) Income tax benefit     (38 )     (191 ) Net loss   $ (6,852 )   $ (24,780 )           Net loss per share:         Basic and diluted   $ (0.16 )   $ (0.60 ) Weighted average shares of common stock outstanding:         Basic and diluted     41,917,094       41,107,889             (1)Includes stock-based compensation expense as follows:   Three Months Ended March 31,         2024       2023   Cost of revenue   $ 1,390     $ 1,318   Technology and development     1,254       708   General and administrative     3,449       8,219   New pet acquisition expense     2,059       2,086   Total stock-based compensation expense   $ 8,152     $ 12,331             (2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:     Three Months Ended March 31,       2024       2023   Veterinary invoice expense   $ 233,569     $ 194,137   Other cost of revenue     36,325       35,846   Total cost of revenue   $ 269,894     $ 229,983     Trupanion, Inc.Condensed Consolidated Balance Sheets(in thousands, except share data)     March 31, 2024   December 31, 2023     (unaudited)     Assets         Current assets:         Cash and cash equivalents   $ 146,455     $ 147,501   Short-term investments     128,734       129,667   Accounts and other receivables, net of allowance for doubtful accounts of $1,093 at March 31, 2024 and $1,085 at December 31, 2023     278,492       267,899   Prepaid expenses and other assets     17,084       17,022   Total current assets     570,765       562,089   Restricted cash     23,106       22,963   Long-term investments     13,007       12,866   Property, equipment and internal-use software, net     104,365       103,650   Intangible assets, net     17,221       18,745   Other long-term assets     18,013       18,922   Goodwill     42,983       43,713   Total assets   $ 789,460     $ 782,948   Liabilities and stockholders' equity         Current liabilities:         Accounts payable   $ 8,348     $ 10,505   Accrued liabilities and other current liabilities     30,473       34,052   Reserve for veterinary invoices     62,275       63,238   Deferred revenue     249,135       235,329   Long-term debt - current portion     1,350       1,350   Total current liabilities     351,581       344,474   Long-term debt     127,482       127,580   Deferred tax liabilities     2,399       2,685   Other liabilities     4,627       4,487   Total liabilities     486,089       479,226   Stockholders' equity:         Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 43,032,805 and 42,004,619 issued and outstanding at March 31, 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     544,593       536,108   Accumulated other comprehensive loss     (1,581 )     403   Accumulated deficit     (223,107 )     (216,255 ) Treasury stock, at cost: 1,028,186 shares at March 31, 2024 and December 31, 2023