Trupanion reports Q1 loss as marketing spend kicks into high gear

Trupanion CEO Darryl Rawlings

Pet insurance provider Trupanion ($TRUP) reported on Tuesday that its revenues in the first quarter jumped 30% to $33.3 million, while its net loss remained flat at $4.9 million, or 18 cents per share. Analysts had been expecting a loss of 20 cents, so the news wasn't all bad, but it's clear the quest for growth is taking a toll on the company's bottom line.

Trupanion spent $3.7 million on marketing during the quarter, up from $2.6 million during the same period last year, which pushed its total operating expenses up 33% to $10.1 million. The company finished the quarter with 246,100 enrolled pets--up 26% year-over-year.

"We are encouraged by the growing interest in Trupanion," said CEO Darryl Rawlings as he opened a conference call with analysts after the earnings report. The company reiterated its guidance for the full year, telling analysts to expect revenues between $145 million and $150 million and a loss before interest, taxes, depreciation and amortization (EBITDA) of at least $10 million.

Trupanion seeks to set itself apart from the competition by integrating with veterinary hospitals, so claims can be filed automatically rather than pet owners having to send them in for reimbursement. Toward that end, the company plans to expand its sales force from 70 to 85 by the end of this year, Rawlings said during the call, and ultimately to 100.

Despite the increase in marketing expenses, Rawlings told analysts to expect the company to reach cash-flow break even by mid-2016. "Once we achieve operational scale of 650,000 to 750,000 enrolled pets, our intention is to have our fixed expense scale as a percentage of revenue, and our discretionary margin should continue to expand," he said.

Trupanion is suffering some impact from unfavorable foreign exchange rates. The company reported that its average monthly adjusted revenue per pet rose 3% during the quarter to $44.34, but that the growth would have been 6% were it not for the fact that the Canadian currency exchange rate dropped by an average of 81%.

"To illustrate the significance of these fluctuations, if [foreign exchange] rates had remained constant," said Chief Financial Officer Michael Banks during the conference call, "our first-quarter 2015 revenue would have … grown 34% year-over-year."

One analyst on the call complimented Trupanion on its ability to regularly boost premiums charged to customers but expressed concerns that pet owners might eventually revolt, fleeing to a competitor or dropping pet insurance altogether. Rawlings said he's not worried. "I don't think pet owners consider their pets disposable or discretionary, although people could put our product into that category," he said. "If we are providing great value we haven't seen a push back on price historically."

- here's the earnings release
- access a transcript of the earnings call here
- read more at the Associated Press

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