Trupanion : Q1 2025 Earnings Results

Published: 2025-05-01 16:21:30 ET TRUP

Published on 05/01/2025 at 16:21

SEATTLE, WA. May 1, 2025 -- Trupanion, Inc. (Nasdaq: TRUP), a leading provider of medical insurance for cats and dogs, today announced financial results for the first quarter ended March 31, 2025.

"Q1 was a strong start to the year, with performance ahead of plan across key metrics," said Margi Tooth, Chief Executive Officer and President of Trupanion. "We saw early momentum in both retention and pet acquisition, and with expanded margins in our subscription business, we're well-positioned to continue to invest in growth."

Total revenue was $342.0 million, an increase of 12% compared to the first quarter of 2024.

Total enrolled pets (including pets from our other business segment) was 1,667,637 at March 31, 2025, a decrease of 2% over March 31, 2024.

Subscription business revenue was $233.1 million, an increase of 16% compared to the first quarter of 2024.

Subscription enrolled pets was 1,052,845 at March 31, 2025, an increase of 5% over March 31, 2024.

Net loss was $(1.5) million, or $(0.03) per basic and diluted share, compared to a net loss of $(6.9) million, or

$(0.16) per basic and diluted share, in the first quarter of 2024.

Adjusted EBITDA was $12.2 million, compared to adjusted EBITDA of $4.8 million in the first quarter of 2024.

Operating cash flow was $16.0 million and free cash flow was $14.0 million in the first quarter of 2025. This compared to operating cash flow of $2.4 million and free cash flow of $(0.6) million in the first quarter of 2024.

At March 31, 2025, the Company held $321.8 million in cash and short-term investments, including $48.8 million held outside the insurance entities, with an additional $15.0 million available under its credit facility.

Trupanion's management will host a conference call today to review its first quarter 2025 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 1-866-250-8117 (United States) or 1-412-317-6011 (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: 10197710.

Trupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada, and certain countries in Continental Europe with over 1,000,000 pets currently 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 parents 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 in Canada by Canada Pet Health Insurance Services, Inc. dba Trupanion 309-1277 Lynn Valley Road, North Vancouver, BC V7J 0A2 and in the United States by Trupanion Managers USA, Inc. (CA license No. 0G22803, NPN 9588590). Canada Pet Health Insurance Services, Inc. is a registered damage insurance agency and claims adjuster in Quebec #603927. Trupanion Australia is a partnership between Trupanion and Hollard Insurance Company. For more information, please visit trupanion.com.

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 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, 2024 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.

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.

Condensed Consolidated Statements of Operations (in thousands, except share data)

Three Months Ended March 31,

2025

2024

(unaudited)

Revenue:

Subscription business

$ 233,064

$ 201,134

Other business

108,911

104,987

Total revenue

341,975

306,121

Cost of revenue:

Subscription business

189,845

172,132

Other business

101,027

97,762

Total cost of revenue(1),(2)

290,872

269,894

Operating expenses:

Technology and development(1)

8,072

6,960

General and administrative(1)

19,892

14,673

New pet acquisition expense(1)

20,516

16,843

Depreciation and amortization

3,791

3,785

Total operating expenses

52,271

42,261

Loss from investment in joint venture

(305)

(103)

Operating loss

(1,473)

(6,137)

Interest expense

3,211

3,596

Other (income), net

(3,240)

(2,843)

Loss before income taxes

(1,444)

(6,890)

Income tax (benefit) expense

(38)

Net loss

$ (1,483)

$ (6,852)

Net loss per share:

Basic and diluted

$ (0.03)

$ (0.16)

Weighted average shares of common stock outstanding:

Basic and diluted

42,775,955

41,917,094

(1)Includes stock-based compensation expense as follows:

Three Months Ended March 31,

2025

2024

Cost of revenue

$ 1,259

$ 1,390

Technology and development

1,151

1,254

General and administrative

4,528

3,449

New pet acquisition expense

2,892

2,059

Total stock-based compensation expense

$ 9,830

$ 8,152

(2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:

Three Months Ended March 31,

2025

2024

Veterinary invoice expense

$ 247,450

$ 233,569

Other cost of revenue

43,422

36,325

Total cost of revenue

$ 290,872

$ 269,894

Trupanion, Inc.

Condensed Consolidated Balance Sheets (in thousands, except share data)

March 31, 2025

December 31, 2024

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$ 166,308

$ 160,295

Short-term investments

155,508

147,089

Accounts and other receivables, net of allowance for credit losses of $1,046 at March 31, 2025 and

$1,117 at December 31, 2024

290,104

274,031

Prepaid expenses and other assets

16,417

15,912

Total current assets

628,337

597,327

Restricted cash

39,702

39,235

Long-term investments

376

373

Property, equipment and internal-use software, net

101,938

102,191

Intangible assets, net

12,130

13,177

Other long-term assets

16,356

17,579

Goodwill

38,323

36,971

Total assets

$ 837,162

$ 806,853

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$ 9,681

$ 11,532

Accrued liabilities and other current liabilities

36,907

33,469

Reserve for veterinary invoices

54,042

51,635

Deferred revenue

267,357

251,640

Long-term debt - current portion

1,350

Total current liabilities

369,337

349,626

Long-term debt

127,526

127,537

Deferred tax liabilities

1,884

1,946

Other liabilities

4,742

4,476

Total liabilities

503,489

483,585

Stockholders' equity:

Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 43,804,141 and 42,775,955 issued and outstanding at March 31, 2025; 43,516,631 and 42,488,445 shares issued

and outstanding at December 31, 2024

Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding

Additional paid-in capital

578,293

568,302

Accumulated other comprehensive loss

(715)

(2,612)

Accumulated deficit

(227,371)

(225,888)

Treasury stock, at cost: 1,028,186 shares at March 31, 2025 and December 31, 2024

(16,534)

Total stockholders' equity

333,673

323,268

Total liabilities and stockholders' equity

$ 837,162

$ 806,853

Trupanion, Inc.

Condensed Consolidated Statements of Cash Flows (in thousands)

Three Months Ended March 31,

2025

2024

(unaudited)

Operating activities

Net loss

$ (1,483)

$ (6,852)

Adjustments to reconcile net loss to cash provided by operating activities:

Depreciation and amortization

3,791

3,785

Stock-based compensation expense

9,830

8,152

Other, net

349

(202)

Changes in operating assets and liabilities:

Accounts and other receivables

(15,965)

(10,718)

Prepaid expenses and other assets

(204)

287

Accounts payable, accrued liabilities, and other liabilities

1,527

(5,131)

Reserve for veterinary invoices

2,407

(885)

Deferred revenue

15,712

13,998

Net cash provided by operating activities

15,964

2,434

Investing activities

Purchases of investment securities

(40,875)

(19,193)

Maturities and sales of investment securities

33,242

19,005

Purchases of property, equipment, and internal-use software

(1,928)

(3,065)

Other

588

516

Net cash used in investing activities

(8,973)

(2,737)

Financing activities

Repayment of debt financing

(338)

Proceeds from exercise of stock options

1,024

372

Shares withheld to satisfy tax withholding

(915)

(245)

Other

(230)

(75)

Net cash used in financing activities

(459)

(286)

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net

(52)

(313)

Net change in cash, cash equivalents, and restricted cash

6,480

(902)

Cash, cash equivalents, and restricted cash at beginning of period

199,530

170,464

Cash, cash equivalents, and restricted cash at end of period

$ 206,010

$ 169,562

The following tables set forth our key operating metrics.

Three Months Ended March 31,

2025

2024

Total Business:

Total pets enrolled (at period end)

1,667,637

1,708,017

Subscription Business:

Total subscription pets enrolled (at period end)

1,052,845

1,006,168

Monthly average revenue per pet

$ 77.53

$ 69.79

Average pet acquisition cost (PAC)

$ 267

$ 207

Average monthly retention

98.28 %

98.41 %

Three Months Ended

Mar. 31,

2025

Dec. 31,

2024

Sep. 30,

2024

Jun. 30,

2024

Mar. 31,

2024

Dec. 31,

2023

Sep. 30,

2023

Jun. 30,

2023

Total Business:

Total pets enrolled (at period end)

1,667,637

1,677,570

1,688,903

1,699,643

1,708,017

1,714,473

1,712,177

1,679,659

Subscription Business:

Total subscription pets enrolled (at period end)

1,052,845

1,041,212

1,032,042

1,020,934

1,006,168

991,426

969,322

943,958

Monthly average revenue per pet

$ 77.53

$ 76.02

$ 74.27

$ 71.72

$ 69.79

$ 67.07

$ 65.82

$ 64.41

Average pet acquisition cost (PAC)

$ 267

$ 261

$ 243

$ 231

$ 207

$ 217

$ 212

$ 236

Average monthly retention

98.28 %

98.25 %

98.29 %

98.34 %

98.41 %

98.49 %

98.55 %

98.61 %

The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):

Three Months Ended March 31,

2025

2024

Net cash provided by operating activities

$ 15,964

$ 2,434

Purchases of property, equipment, and internal-use software

(1,928)

(3,065)

Free cash flow

$ 14,036

$ (631)

The following tables reflect the reconciliation between GAAP and non-GAAP measures (in thousands except percentages):

Three Months Ended March 31,

2024

2023

Veterinary invoice expense

$ 247,450

$ 233,569

Less:

Stock-based compensation expense(1)

(763)

(862)

Other business cost of paying veterinary invoices(3)

(79,269)

(81,213)

Subscription cost of paying veterinary invoices (non-GAAP)

$ 167,418

$ 151,494

% of subscription revenue

71.8 %

75.3 %

Other cost of revenue

$ 43,422

$ 36,325

Less:

Stock-based compensation expense(1)

(482)

(420)

Other business variable expenses(3)

(21,736)

(16,498)

Subscription variable expenses (non-GAAP)

$ 21,204

$ 19,407

% of subscription revenue

9.1 %

9.6 %

Technology and development expense

$ 8,072

$ 6,960

General and administrative expense

19,892

14,673

Less:

Stock-based compensation expense(1)

(5,396)

(4,258)

Development expenses(2)

(1,406)

(1,178)

Fixed expenses (non-GAAP)

$ 21,162

$ 16,197

% of total revenue

6.2 %

5.3 %

New pet acquisition expense

$ 20,516

$ 16,843

Less:

Stock-based compensation expense(1)

(2,873)

(1,857)

Other business pet acquisition expense(3)

(3)

(13)

Subscription acquisition cost (non-GAAP)

$ 17,640

$ 14,973

% of subscription revenue

7.6 %

7.4 %

(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 for the three months ended March 31, 2025.

(2) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant.

(3) Excluding the portion of stock-based compensation expense attributable to the other business segment.

The following tables reflect the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):

Three Months Ended March 31,

2025

2024

Operating Loss

$ (1,473)

$ (6,138)

Non-GAAP expense adjustments

Acquisition cost

17,643

14,985

Stock-based compensation expense(1)

9,514

7,397

Development expenses(2)

1,406

1,179

Depreciation and amortization

3,791

3,785

Gain (loss) from investment in joint venture

(305)

(103)

Total adjusted operating income (non-GAAP)

$ 31,186

$ 21,312

Subscription Business:

Subscription operating income (loss)

$ 1,065

$ (4,525)

Non-GAAP expense adjustments

Acquisition cost

17,640

14,973

Stock-based compensation expense(1)

7,772

5,882

Development expenses(2)

958

774

Depreciation and amortization

2,584

2,487

Subscription adjusted operating income (non-GAAP)

$ 30,019

$ 19,591

Other Business:

Other business operating loss

$ (2,233)

$ (1,510)

Non-GAAP expense adjustments

Acquisition cost

Stock-based compensation expense(1)

1,742

1,516

Development expenses(2)

448

404

Depreciation and amortization

1,207

1,298

Other business adjusted operating income (non-GAAP)

$ 1,167

$ 1,720

(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 in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $0.3 million for the three months ended March 31, 2025.

(2) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant.

The following tables reflect the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):

Three Months Ended March 31,

2025

2024

Subscription revenue

$ 233,064

$ 201,134

Subscription cost of paying veterinary invoices

167,418

151,493

Subscription variable expenses

21,204

19,407

Subscription fixed expenses*

14,423

10,642

Subscription adjusted operating income (non-GAAP)

$ 30,019

$ 19,591

Other business revenue

108,911

104,987

Other business cost of paying veterinary invoices

79,269

81,213

Other business variable expenses

21,736

16,498

Other business fixed expenses*

6,739

5,555

Other business adjusted operating income (non-GAAP)

$ 1,167

$ 1,721

Revenue

341,975

306,121

Cost of paying veterinary invoices

246,687

232,707

Variable expenses

42,940

35,905

Fixed expenses*

21,162

16,197

Total business adjusted operating income (non-GAAP)

$ 31,186

$ 21,312

As a percentage of revenue:

Three Months Ended March 31,

2024

2023

Subscription revenue

100.0 %

Subscription cost of paying veterinary invoices

71.8 %

75.3 %

Subscription variable expenses

9.1 %

9.6 %

Subscription fixed expenses*

6.2 %

5.3 %

Subscription adjusted operating income (non-GAAP)

12.9 %

9.7 %

Other business revenue

100.0 %

Other business cost of paying veterinary invoices

72.8 %

77.4 %

Other business variable expenses

20.0 %

15.7 %

Other business fixed expenses*

6.2 %

5.3 %

Other business adjusted operating income (non-GAAP)

1.1 %

1.6 %

Revenue

100.0 %

Cost of paying veterinary invoices

72.1 %

76.0 %

Variable expenses

12.6 %

11.7 %

Fixed expenses*

6.2 %

5.3 %

Total business adjusted operating income (non-GAAP)

9.1 %

7.0 %

*Fixed expenses represent shared services that support both our subscription and other business segments and, as such, are generally allocated to each segment pro-rata based on revenues.

Adjusted operating income is a non-GAAP financial measure that adjusts operating income (loss) to remove the effect of acquisition cost, development expenses, non-recurring transaction or restructuring expenses, and gain (loss) from investment in joint venture. Non-cash items, such as stock-based compensation expense and depreciation and amortization, are also excluded. Acquisition cost, development expenses, gain (loss) from investment in joint venture, stock-based compensation expense, and depreciation and amortization are expected to remain recurring expenses for the foreseeable future, but are excluded from this metric to measure scale in other areas of the business. Management believes acquisition costs primarily represent the cost to acquire new subscribers and are driven by the amount of growth we choose to pursue based primarily on the amount of our adjusted operating income period over period. Accordingly, this measure is not indicative of our core operating income performance. We also exclude development expenses, gain (loss) from investment in joint venture, stock-based compensation expense, and depreciation and amortization because some investors may not view those items as reflective of our core operating income performance.

Management uses adjusted operating income and the margin on adjusted operating income to understand the effects of scale in its non-acquisition cost and development expenses and to plan future advertising expenditures, which are designed to acquire new pets. Management uses this measure as a principal way of understanding the operating performance of its business exclusive of acquisition cost and new product exploration and development initiatives. Management believes disclosure of this metric provides investors with the same data that the Company employs in assessing its overall operations and that disclosure of this measure may provide useful information regarding the efficiency of our utilization of revenues, return on advertising dollars in the form of new subscribers and future use of available cash to support the continued growth of our business.

The following tables reflect the reconciliation of adjusted EBITDA to net loss (in thousands):

Three Months Ended March 31,

2025

2024

Net loss

$ (1,483)

$ (6,852)

Excluding:

Stock-based compensation expense

9,514

7,398

Depreciation and amortization expense

3,791

3,785

Interest income

(2,835)

(3,045)

Interest expense

3,211

3,596

Income tax expense (benefit)

(38)

Adjusted EBITDA

$ 12,237

$ 4,844

Three Months Ended

Mar. 31,

2025

Dec. 31,

2024

Sep. 30,

2024

Jun. 30,

2024

Mar. 31,

2024

Dec. 31,

2023

Sep. 30,

2023

Jun. 30,

2023

Net (loss) income

$ (1,483)

$ 1,656

$ 1,425

$ (5,862)

$ (6,852)

$ (2,163)

$ (4,036)

$ (13,714)

Excluding:

Stock-based compensation expense

9,514

8,036

8,127

8,381

7,398

6,636

6,585

6,503

Depreciation and amortization expense

3,791

3,924

4,381

4,376

3,785

3,029

2,990

3,253

Interest income

(2,835)

(2,999)

(3,232)

(3,135)

(3,045)

(2,842)

(2,389)

(2,051)

Interest expense

3,211

3,427

3,820

3,655

3,596

3,697

3,053

2,940

Income tax expense (benefit)

(44)

(38)

130

(43)

(238)

Goodwill impairment charges

5,299

Non-recurring transaction or restructuring expenses

(Gain) loss from equity method investment

(33)

(110)

Adjusted EBITDA

$ 12,237

$ 19,381

$ 14,527

$ 7,371

$ 4,844

$ 8,487

$ 6,058

$ (3,242)

Laura Bainbridge, Senior Vice President, Corporate Communications Gil Melchior, Director, Investor Relations [email protected]

Disclaimer

Trupanion Inc. published this content on May 01, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 01, 2025 at 20:19 UTC.