• Trupanion Reports Fourth Quarter & Full Year 2023 Results

    المصدر: Nasdaq GlobeNewswire / 15 فبراير 2024 16:05:48   America/New_York

    SEATTLE, Feb. 15, 2024 (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, 2023.   The financial results are preliminary and subject to completion of the Company’s audit as described below.   

    “I am pleased that Q4 showed continued improvement in our financial metrics,” said Darryl Rawlings, CEO and Chair of the Board. “The combination of accelerated subscription revenue growth, continued margin expansion and efficient acquisition spend drove another quarter of positive free cash flow.”

    Total Revenue by Quarter
    Fourth Quarter 2023 Financial and Business Highlights

    • Total revenue was $295.9 million, an increase of 20% compared to the fourth quarter of 2022.
    • Total enrolled pets (including pets from our other business segment) was 1,714,473 at December 31, 2023, an increase of 12% over December 31, 2022.
    • Subscription business revenue was $191.5 million, an increase of 21% compared to the fourth quarter of 2022.
    • Subscription enrolled pets was 991,426 at December 31, 2023, an increase of 14% over December 31, 2022.
    • Net loss was $(2.2) million, or $(0.05) per basic and diluted share, compared to net loss of $(9.3) million, or $(0.23) per basic and diluted share, in the fourth quarter of 2022.
    • Adjusted EBITDA was $8.5 million, compared to adjusted EBITDA of $2.2 million in the fourth quarter of 2022.
    • Operating cash flow was $17.5 million and free cash flow was $13.5 million in the fourth quarter of 2023. This compared to operating cash flow of $1.0 million and free cash flow of $(4.5) million in the fourth quarter of 2022.

    Full Year 2023 Financial and Business Highlights

    • Total revenue was $1.1 billion, an increase of 22% compared to 2022.
    • Subscription business revenue was $712.9 million, an increase of 19% compared to 2022.
    • Net loss was $(44.7) million, or $(1.08) per basic and diluted share, compared to net loss of $(44.7) million, or $(1.10) per basic and diluted share, in 2022.
    • Adjusted EBITDA was $6.4 million, compared to adjusted EBITDA of $0.7 million in 2022.
    • Operating cash flow was $18.6 million and free cash flow was $0.4 million in 2023. This compared to operating cash flow of $(8.0) million and free cash flow of $(25.1) million in 2022.
    • At December 31, 2023, the Company held $277.2 million in cash and short-term investments, including $46.6 million held outside the insurance entities, with an additional $15 million available under its credit facility.
    • The Company maintained $241.3 million of capital surplus at its insurance subsidiaries. This was $64.1 million more than the estimated risk-based capital requirement of $177.2 million.

    Annual Report on Form 10-K
    While the Company is still completing its assessment of the effectiveness of its internal controls over financial reporting in its upcoming fiscal 2023 Annual Report on Form 10-K, the Company expects to report two material weaknesses in internal controls. The first material weakness relates to information technology controls, primarily in the areas of user access and program change-management over certain information technology systems.

    The second material weakness relates to internal controls over financial reporting, pertaining to the Company’s Other Business segment. The 2023 audit remains open, and the Company is working with its auditors to complete the process. As a result, the Company’s financial results for the fourth quarter and full year 2023 are preliminary and subject to the completion of the audit. Efforts to remediate these material weaknesses are underway. The Company expects to provide additional details about the material weaknesses, including its remediation efforts, in its Annual Report on Form 10-K.

    Conference Call
    Trupanion’s management will host a conference call today to review its fourth quarter and full year 2023 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: 10182458.

    About Trupanion
    Trupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada, Europe, Puerto Rico and Australia with over 990,000 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 Omega General Insurance Company. Trupanion Australia is a partnership between Trupanion and Hollard Insurance Company. For more information, please visit trupanion.com.

    Forward-Looking Statements
    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, its ability to remediate the material weaknesses in internal control over financial reporting and the timing thereof, its’ ability to complete its 2023 annual audit and timely file its Form 10-K, 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 complete its 2023 annual audit and timely file its Form 10-K, 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, 2022 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 Measures
    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.
    Consolidated Statements of Operations
    (in thousands, except share data)
     Three Months Ended December 31, Year Ended December 31,
      2023   2022   2023   2022 
     (unaudited)   (unaudited)     
    Revenue:       
    Subscription business$191,537  $158,562  $712,906  $596,610 
    Other business 104,320   87,447   395,699   308,569 
    Total revenue 295,857   246,009   1,108,605   905,179 
    Cost of revenue:       
    Subscription business(1) 158,631   131,823   613,686   497,684 
    Other business 97,162   80,537   363,903   285,310 
    Total cost of revenue(2) 255,793   212,360   977,589   782,994 
    Operating expenses:       
    Technology and development(1) 5,969   6,955   21,403   25,133 
    General and administrative(1) 13,390   10,472   60,207   39,379 
    New pet acquisition expense(1) 17,189   22,457   77,372   89,500 
    Depreciation and amortization 3,029   2,897   12,474   10,921 
    Total operating expenses 39,577   42,781   171,456   164,933 
    Gain (loss) from investment in joint venture (79)  (85)  (219)  (253)
    Operating loss 408   (9,217)  (40,659)  (43,001)
    Interest expense 3,697   1,587   12,077   4,267 
    Other income, net (1,256)  (1,504)  (7,701)  (3,072)
    Loss before income taxes (2,033)  (9,300)  (45,035)  (44,196)
    Income tax expense (benefit) 130   (15)  (342)  476 
    Net loss$(2,163) $(9,285) $(44,693) $(44,672)
            
    Net loss per share:       
    Basic and diluted$(0.05) $(0.23) $(1.08) $(1.10)
    Weighted average shares of common stock outstanding:       
    Basic and diluted 41,716,527   40,936,507   41,436,882   40,765,355 
            
    (1)Includes stock-based compensation expense as follows:    
     Three Months Ended December 31,
     Year Ended December 31,
     
      2023   2022   2023   2022 
    Cost of revenue$1,478  $1,346  $5,279  $6,484 
    Technology and development 861   1,549   2,846   4,742 
    General and administrative 3,269   3,550   17,717   12,831 
    New pet acquisition expense 1,693   2,122   7,319   9,336 
    Total stock-based compensation expense$7,301  $8,567  $33,161  $33,393 
            
    (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,
      2023   2022   2023   2022 
    Veterinary invoice expense$217,739  $176,083  $831,055  $649,737 
    Other cost of revenue 38,054   36,277   146,534   133,257 
    Total cost of revenue$255,793  $212,360  $977,589  $782,994 


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

     December 31, 2023 December 31, 2022
       (unaudited)  
    Assets   
    Current assets:   
    Cash and cash equivalents$147,501  $65,605 
    Short-term investments 129,667   156,804 
    Accounts and other receivables, net of allowance for doubtful accounts of $1,085 at December 31, 2023 and $540 at December 31, 2022 267,899   232,439 
    Prepaid expenses and other assets 17,022   14,248 
    Total current assets 562,089   469,096 
    Restricted cash 22,963   19,032 
    Long-term investments 12,866   7,841 
    Property, equipment and internal-use software, net 103,650   90,701 
    Intangible assets, net 18,745   24,031 
    Other long-term assets 18,922   18,943 
    Goodwill 43,713   41,983 
    Total assets$782,948  $671,627 
    Liabilities and stockholders’ equity   
    Current liabilities:   
    Accounts payable$10,505  $9,471 
    Accrued liabilities and other current liabilities 34,052   32,616 
    Reserve for veterinary invoices 63,238   43,734 
    Deferred revenue 235,329   202,692 
    Long-term debt - current portion 1,350   1,103 
    Total current liabilities 344,474   289,616 
    Long-term debt 127,580   68,354 
    Deferred tax liabilities 2,685   3,392 
    Other liabilities 4,487   4,968 
    Total liabilities 479,226   366,330 
    Stockholders’ equity:   
    Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 42,887,052 and 41,858,866 issued and outstanding at December 31, 2023; 42,041,344 and 41,013,158 shares issued and outstanding at December 31, 2022     
    Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding     
    Additional paid-in capital 536,108   499,694 
    Accumulated other comprehensive loss 403   (6,301)
    Accumulated deficit (216,255)  (171,562)
    Treasury stock, at cost: 1,028,186 shares at December 31, 2023 and December 31, 2022 (16,534)  (16,534)
    Total stockholders’ equity 303,722   305,297 
    Total liabilities and stockholders’ equity$782,948  $671,627 


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

     Three Months Ended December 31, Year Ended December 31,
      2023   2022   2023   2022 
     (unaudited)   (unaudited)  
    Operating activities       
    Net loss$(2,163) $(9,285) $(44,693) $(44,672)
    Adjustments to reconcile net loss to cash provided by (used in) operating activities:       
    Depreciation and amortization 3,029   2,897   12,474   10,921 
    Stock-based compensation expense 7,301   8,567   33,161   33,393 
    Other, net 2,481   1,023   1,347   1,051 
    Changes in operating assets and liabilities:       
    Accounts and other receivables 10,153   (8,034)  (35,440)  (66,982)
    Prepaid expenses and other assets 854   (807)  (1,907)  (5,227)
    Accounts payable, accrued liabilities, and other liabilities 5,476   2,388   1,644   3,136 
    Reserve for veterinary invoices 1,788   4,164   19,485   4,227 
    Deferred revenue (11,412)  106   32,567   56,153 
    Net cash provided by (used in) operating activities 17,507   1,019   18,638   (8,000)
    Investing activities       
    Purchases of investment securities (56,547)  (147,346)  (165,936)  (273,006)
    Maturities and sales of investment securities 42,905   134,718   190,270   239,210 
    Cash paid in business acquisition, net of cash acquired    (12,279)     (15,034)
    Purchases of property, equipment, and internal-use software (3,970)  (5,478)  (18,280)  (17,088)
    Other 165   (167)  1,585   (1,598)
    Net cash provided by (used in) investing activities (17,447)  (30,552)  7,639   (67,516)
    Financing activities       
    Proceeds from debt financing, net of financing fees    14,826   60,102   69,138 
    Repayment of debt financing (337)  (271)  (1,717)  (571)
    Repurchases of common stock          (5,755)
    Proceeds from exercise of stock options 1,374   706   2,655   2,290 
    Shares withheld to satisfy tax withholding (240)  (579)  (1,536)  (4,359)
    Other (228)     (378)   
    Net cash provided by (used in) financing activities 569   14,682   59,126   60,743 
    Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net 1,254   505   424   (1,459)
    Net change in cash, cash equivalents, and restricted cash 1,883   (14,346)  85,827   (16,232)
    Cash, cash equivalents, and restricted cash at beginning of period 168,581   98,983   84,637   100,869 
    Cash, cash equivalents, and restricted cash at end of period$170,464  $84,637  $170,464  $84,637 


    The following tables set forth our key operating metrics:              
                                    
     Year Ended
    December 31,

                            
     2023 2022                        
    Total Business:                               
    Total pets enrolled (at period end) 1,714,473   1,537,573                         
    Subscription Business:                               
    Total subscription pets enrolled (at period end) 991,426   869,862                         
    Monthly average revenue per pet$65.26  $63.82                         
    Lifetime value of a pet, including fixed expenses$419  $641                         
    Average pet acquisition cost (PAC)$228  $289                         
    Average monthly retention 98.49%  98.69%                        
                                    
                                    
     Three Months Ended
     Dec. 31,
    2023

     Sep. 30,
    2023

     Jun. 30,
    2023

     Mar. 31,
    2023

     Dec. 31,
    2022

     Sep. 30,
    2022

     Jun. 30,
    2022

     Mar. 31,
    2022

    Total Business:                               
    Total pets enrolled (at period end) 1,714,473   1,712,177   1,679,659   1,616,865   1,537,573   1,439,605   1,348,145   1,267,253 
    Subscription Business:                               
    Total subscription pets enrolled (at period end) 991,426   969,322   943,958   906,369   869,862   808,077   770,318   736,691 
    Monthly average revenue per pet$67.07  $65.82  $64.41  $63.58  $63.11  $63.80  $64.26  $64.21 
    Lifetime value of a pet, including fixed expenses$419  $428  $470  $541  $641  $673  $713  $730 
    Average pet acquisition cost (PAC)$217  $212  $236  $247  $283  $268  $309  $301 
    Average monthly retention 98.49%  98.55%  98.61%  98.65%  98.69%  98.71%  98.74%  98.75%


    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,
      2023   2022   2023   2022 
                
    Net cash provided by (used in) operating activities$17,507  $1,019  $18,638  $(8,000)
    Purchases of property, equipment, and internal-use software (3,970)  (5,478)  (18,280)  (17,088)
    Free cash flow$13,537  $(4,459) $358  $(25,088)


    The following tables reflect the reconciliation between GAAP and non-GAAP measures (in thousands except percentages):
      Three Months Ended December 31, Year Ended December 31,
       2023   2022   2023   2022 
    Veterinary invoice expense $217,739  $176,083  $831,055  $649,737 
    Less:        
    Stock-based compensation expense1  (885)  (899)  (3,450)  (4,054)
    Other business cost of paying veterinary invoices  (77,572)  (59,946)  (287,858)  (212,857)
    Subscription cost of paying veterinary invoices (non-GAAP) $139,282  $115,238  $539,747  $432,826 
    % of subscription revenue  72.7%  72.7%  75.7%  72.5%
             
    Other cost of revenue $38,054  $36,277  $146,534  $133,257 
    Less:        
    Stock-based compensation expense1  (386)  (414)  (1,544)  (2,232)
    Other business variable expenses  (19,301)  (20,591)  (75,756)  (72,453)
    Subscription variable expenses (non-GAAP) $18,367  $15,272  $69,234  $58,572 
    % of subscription revenue  9.6%  9.6%  9.7%  9.8%
             
    Technology and development expense $5,969  $6,955  $21,403  $25,133 
    General and administrative expense  13,390   10,472   60,207   39,379 
    Less:        
    Stock-based compensation expense1  (3,797)  (5,019)  (19,869)  (17,135)
    Non-recurring transaction or restructuring expenses2     (193)  (4,175)  (372)
    Development expenses3  (1,683)  (2,084)  (5,100)  (7,789)
    Fixed expenses (non-GAAP) $13,879  $10,131  $52,466  $39,216 
    % of total revenue  4.7%  4.1%  4.7%  4.3%
             
    New pet acquisition expense $17,189  $22,457  $77,372  $89,500 
    Less:        
    Stock-based compensation expense1  (1,567)  (2,079)  (7,000)  (9,116)
    Other business pet acquisition expense  (77)  (65)  (200)  (541)
    Subscription acquisition cost (non-GAAP) $15,545  $20,313  $70,172  $79,843 
    % of subscription revenue  8.1%  12.8%  9.8%  13.4%
             
    1Trupanion 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 $0.7 million and $1.3 million for the three months and year ended December 31, 2023, respectively.
    2Consists of business acquisition transaction expenses, severance and legal costs due to certain executives' departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
    3As 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.


    The following tables reflect the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages): 
             
     Three Months Ended December 31, Year Ended December 31, 
      2023   2022   2023   2022  
    Operating Income, GAAP Basis$408  $(9,217) $(40,659) $(43,001) 
    Non-GAAP Expense adjustments        
    Acquisition cost 15,622   20,378   70,372   80,384  
    Stock-based compensation expense1 6,636   8,411   31,864   32,537  
    Development expenses3 1,683   2,084   5,100   7,789  
    Depreciation and amortization 3,029   2,897   12,474   10,921  
    Non-recurring transaction or restructuring expenses2    193   4,175   372  
    Gain (loss) from investment in joint venture (79)  (85)  (219)  (253) 
    Total Adjusted Operating income$27,457  $24,831  $83,545  $89,255  
             
    Subscription Business:        
    Subscription Operating Income, GAAP Basis$1,300  $(8,753) $(35,994) $(39,757) 
    Non-GAAP Expense adjustments        
    Acquisition cost 15,545   20,313   70,172   79,843  
    Stock-based compensation expense1 5,006   6,628   24,488   26,673  
    Development expenses3 1,090   1,343   3,281   5,123  
    Depreciation and amortization 1,961   1,867   8,021   7,205  
    Non-recurring transaction or restructuring expenses2    124   218   241  
    Subscription Adjusted Operating income$24,902  $21,522  $70,186  $79,328  
             
    Other Business:        
    Other Business Operating Income, GAAP Basis$(813) $(379) $(4,446) $(2,992) 
    Non-GAAP Expense adjustments        
    Acquisition cost 77   65   200   541  
    Stock-based compensation expense1 1,630   1,783   7,376   5,865  
    Development expenses3 593   741   1,819   2,666  
    Depreciation and amortization 1,068   1,030   4,453   3,716  
    Non-recurring transaction or restructuring expenses2    69   3,957   131  
    Other Business Adjusted Operating income$2,555  $3,309  $13,359  $9,927  
             
    1Trupanion 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 $0.7 million and $1.3 million for the three months and year ended December 31, 2023, respectively.
    2Consists of business acquisition transaction expenses, severance and legal costs due to certain executives' departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
    3As 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.


    The following tables reflect the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
            
     Three Months Ended December 31, Year Ended December 31,
      2023   2022   2023   2022 
    Subscription revenue$191,537  $158,562  $712,906  $596,610 
    Subscription cost of paying veterinary invoices 139,281   115,238   539,746   432,826 
    Subscription variable expenses 18,367   15,272   69,234   58,572 
    Subscription fixed expenses* 8,987   6,530   33,740   25,884 
    Subscription adjusted operating income$24,902  $21,522  $70,186  $79,328 
            
    Other business revenue$104,320  $87,447  $395,699  $308,569 
    Other business cost of paying veterinary invoices 77,572   59,946   287,858   212,857 
    Other business variable expenses 19,301   20,591   75,756   72,453 
    Other business fixed expenses* 4,892   3,601   18,726   13,332 
    Other business adjusted operating income$2,555  $3,309  $13,359  $9,927 
            
    Revenue$295,857  $246,009  $1,108,605  $905,179 
    Cost of paying veterinary invoices 216,854   175,184   827,605   645,683 
    Variable expenses 37,668   35,863   144,990   131,025 
    Fixed expenses* 13,879   10,131   52,466   39,216 
    Total business adjusted operating income$27,457  $24,831  $83,545  $89,255 
            
    As a percentage of revenue:Three Months Ended December 31, Year Ended December 31,
      2023   2022   2023   2022 
    Subscription revenue 100.0%  100.0%  100.0%  100.0%
    Subscription cost of paying veterinary invoices 72.7%  72.7%  75.7%  72.5%
    Subscription variable expenses 9.6%  9.6%  9.7%  9.8%
    Subscription fixed expenses* 4.7%  4.1%  4.7%  4.3%
    Subscription adjusted operating income 13.0%  13.6%  9.8%  13.3%
            
    Other business revenue 100.0%  100.0%  100.0%  100.0%
    Other business cost of paying veterinary invoices 74.4%  68.6%  72.7%  69.0%
    Other business variable expenses 18.5%  23.5%  19.1%  23.5%
    Other business fixed expenses* 4.7%  4.1%  4.7%  4.3%
    Other business adjusted operating income 2.4%  3.8%  3.4%  3.2%
            
    Revenue 100.0%  100.0%  100.0%  100.0%
    Cost of paying veterinary invoices 73.3%  71.2%  74.7%  71.3%
    Variable expenses 12.7%  14.6%  13.1%  14.5%
    Fixed expenses* 4.7%  4.1%  4.7%  4.3%
    Total adjusted operating income 9.3%  10.1%  7.5%  9.9%


    *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):
                    
     Year Ended December 31,            
      2023   2022             
    Net loss$(44,693) $(44,672)            
    Excluding:               
    Stock-based compensation expense 31,864   32,537             
    Depreciation and amortization expense 12,474   10,921             
    Interest income (9,011)  (3,026)            
    Interest expense 12,077   4,267             
    Other non-operating expenses    (1)            
    Income tax (benefit) expense (342)  476             
    Non-recurring transaction or restructuring expenses 4,175   372             
    (Gain) loss from equity method investment (110)  (131)            
    Adjusted EBITDA$6,434  $743             
                    
     Three Months Ended
     Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 Dec. 31, 2022 Sep. 30, 2022 Jun. 30, 2022 Mar. 31, 2022
    Net loss$(2,163) $(4,036) $(13,714) $(24,780) $(9,285) $(12,914) $(13,618) $(8,855)
    Excluding:               
    Stock-based compensation expense 6,636   6,585   6,503   12,140   8,412   8,306   8,462   7,358 
    Depreciation and amortization expense 3,029   2,990   3,253   3,202   2,897   2,600   2,707   2,717 
    Interest income (2,842)  (2,389)  (2,051)  (1,729)  (1,614)  (1,018)  (297)  (97)
    Interest expense 3,697   3,053   2,940   2,387   1,587   1,408   1,193   79 
    Other non-operating expenses                   (1)   
    Income tax expense (benefit) 130   (43)  (238)  (191)  (15)  496   19   (24)
    Non-recurring transaction or restructuring expenses    8   65   4,102   193   179       
    (Gain) loss from equity method investment    (110)              (131)   
    Adjusted EBITDA$8,487  $6,058  $(3,242) $(4,869) $2,175  $(943) $(1,666) $1,178 
     

    Contacts:

    Investors:
    Laura Bainbridge
    Senior Vice President, Corporate Communications
    Investor.Relations@trupanion.com

    A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/43ac6979-0a60-4a85-be2c-e575f1305fdf


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