Pethealth Inc. Announces Annual Revenue of $33,204,000 and Net Income of $2,827,000 and Its Full Results for the Year and Quarter Ended December 31, 2011

OAKVILLE, ONTARIO--(Marketwire - March 7, 2012) - Pethealth Inc. ("Pethealth" or "the Company") (TSX:PTZ) today announced its financial results for the year and quarter ended December 31, 2011.

	For the year ended				For the quarter ended
($'000 except for per share figures)	Dec. 31 2011	Dec. 31 2010	Change		Dec. 31 2011	Dec. 31 2010	Change
Revenue	33,204	32,208	3	%	8,758	7,817	12	%
EBITDA(1)	5,091	3,790	34	%	1,491	1,043	43	%
Net income before taxes	3,259	2,003	63	%	1,023	612	67	%
Net income after taxes	2,827	2,423	17	%	906	748	21	%
Basic earnings per share	0.07	0.06			0.03	0.02
Fully diluted earnings per share	0.06	0.05			0.02	0.02

(1)	EBITDA, a non IFRS accounting measure, is net income before amortization and depreciation, interest and income taxes.

"I am pleased to report our annual and fourth quarter numbers, which showed both sequential and annual consolidated revenue growth as well as a significant improvement in consolidated net income," said Mark Warren, President and Chief Executive Officer of Pethealth Inc. "Our non-insurance business in particular stood out, not only because it continued to show exceptional year-on-year revenue growth but also because it became cash flow positive for the first time for the fourth quarter. Overall we remain encouraged by trends in U.S. consumer confidence seen during the fourth quarter and continuing into the first quarter of 2012, as purchases of veterinary services and other pet-related discretionary products and services appears to be improving."

Full year consolidated results:

Consolidated revenue increased 3% to $33.2-million for the full year ended December 31, 2011. The growth in consolidated revenue was muted by the 4% appreciation of the Canadian dollar vs. the U.S. dollar over the course of the year which reduced current year revenue by $921,000. In addition to foreign exchange, consolidated revenue was also impacted by a 5% decline in insurance segment operating revenues which was offset by the 24% growth in the Company's non-insurance segment operating revenues.

Consolidated net income before tax increased 63% to $3.3-million. The increase is primarily the result of the 51% decrease in the pre-tax operating loss in the non-insurance segment.

Fourth quarter consolidated results:

Consolidated revenue increased 12%, as compared to 3% for the year as a whole, to $8.8-million for the quarter. The increase is due in large part to the 32% growth in non-insurance segment operating revenues which, similar for the full year, was the result of expanded microchip and 24PetWatch database cross sales.

Consolidated net income before tax increased 67%, as compared to 63% for the year as a whole, to $1.02-million.

Insurance segment results:

	For the year ended				For the quarter ended
($'000)	Dec. 31 2011	Dec. 31 2010	Change		Dec. 31 2011	Dec. 31 2010	Change
Revenue	22,278	23,430	(5	)%	5,879	5,632	4	%
EBITDA(1)	5,614	6,254	(10	)%	1,485	1,601	(7	)%
Net income before taxes	4,890	5,311	(8	)%	1,309	1,396	(6	)%
Net income after taxes	4,511	5,731	(21	)%	1,245	1,532	(19	)%

(1)	EBITDA, a non IFRS accounting measure, is net income before amortization and depreciation, interest and income taxes.

The insurance segment results were primarily influenced by the following:

Full year 2011

(1) The appreciation of the Canadian dollar against the U.S. dollar.

For the year ended December 31, 2011, the Canadian dollar appreciated by 4% against its US counterpart while remaining relatively flat against the Pound Sterling. For the year, the Canadian dollar's appreciation reduced insurance segment revenues by $517,000.

(2) The restructuring of the Company's insurance program via animal welfare organisations in the U.S. and Canada.

On May 1, 2010, the Company restructured its insurance program delivered through North American animal welfare organisations which reduced both the non-cash component of its insurance revenue and the program's marketing expenses. The restructuring was fully completed at April 30, 2011. The change in the ShelterCare program reduced, on a foreign exchange adjusted basis, non-cash revenues by $631,000 for the year and increased net income and cash flows by $516,000 by virtue of lower associated marketing costs.

(3) The year-on-year decline in net policies in the United Kingdom

The decline in the UK in-force policies, excluding the impact of foreign exchange, accounted for approximately a $568,000 comparative decline in commission and fee revenue for the year ended December 31, 2011. As part of its underwriting profit improvement plan, put in place upon acquiring Pet Protect in the U.K., the Company made several adjustments to its underwriting guidelines which reduced the in-force policy count and commission revenues in the U.K. Having completed the process, the Company began investing in U.K. new policy acquisition which saw an 8% sequential increase in in-force policies during the last six months of 2011.

(4) Participation in underwriting results

The U.S. and U.K. core underwriting results for policies underwritten by Praetorian and QBE (Europe) in aggregate were 49.4% consisting of 40.6% in the U.S. and 64.4% in the U.K. During the year a positive participation in underwriting of $123,000 was recorded compared to an underwriting participation provision of $233,000 in the previous year.

(5) Tax expense/recovery

For the year, comparative net income after taxes was impacted by tax differences of $852,000, being the net of the current year tax expense of $432,000 and the prior year's tax recovery of ($420,000).

Fourth Quarter

(1) The year-on-year decline in net policies in the United Kingdom

While the number of U.K. in-force policies grew by 2% sequentially over the course of the fourth quarter, the net decline of 3% when compared to the number in-force for the same period in the prior year accounted for approximately a $139,000 comparative decline in commission and fee revenue for the quarter.

(2) Participation in underwriting results

Participation in underwriting results had a net positive impact on the year-on-year quarterly comparative of $300,000.

(3) Tax expense/recovery

For the quarter, comparative net income after taxes was impacted by tax differences of $253,000 being the net of the current year tax expense of $117,000 and the prior year's tax recovery of ($136,000).

Non-insurance segment results:

	For the year ended						For the quarter ended
($'000)	Dec. 31 2011		Dec. 31 2010		Change		Dec. 31 2011		Dec. 31 2010		Change
Revenue	10,926		8,778		24	%	2,879		2,185		32	%
EBITDA(1)	(523	)	(2,464	)	79	%	6		(558	)	n/a
Net loss before taxes	(1,631	)	(3,308	)	51	%	(286	)	(784	)	64	%
Net loss after taxes	(1,684	)	(3,308	)	49	%	(339	)	(784	)	57	%

(1)	EBITDA, a non IFRS accounting measure, is net income before amortization and depreciation, interest and income taxes.

Full year 2011

The non-insurance results consist of aggregate growth in the following:

PetPoint™

PetPoint had been licensed by 1,773 animal welfare organisations by December 31, 2011, an increase of 13% from those licensed at December 31, 2010. For the year ended December 31, 2011, 2,250,873 intakes (animals entering the welfare organisations) and 890,565 adoptions, respectively, were completed through PetPoint, an increase in intakes of 11% and adoptions of 13% for the year.

24PetWatch™ & petprotect RFID Microchip and Database Management

For the year ended December 31, 2011, the Company sold, in aggregate, 1,323,235 RFID microchips in the United States, Canada and the United Kingdom, a 6% increase in unit sales from the same periods in 2010. Revenue from microchip sales for the year ended December 31, 2011 increased 10% to $7.71 million from the same period in the prior year.

Total individual pet and pet owner registrations in the 24PetWatch database surpassed 5.26 million by December 31, 2011, representing an increase of over 1.12 million registered cats and dogs, or 27%, compared to those registered at the end of 2010.

The sale of ancillary products and services to the 24PetWatch database of pet owners accounted for $1,978,000 in revenue for the year ended December 31, 2011, a 70% increase from the same period in the prior year.

Petango.com

Petango.com attracted more than 9.2 million unique visitors and generated over 93 million page views during 2011.

Sales via thepetangostore.com totalled $879,000 for the year ended December 31, 2011, a 166% increase from sales recorded in the same periods in the prior year. Approximately 69% of sales recorded were for pet medications.

Fourth Quarter

PetPoint™

For the quarter, 532,423 intakes and 247,149 adoptions were completed through PetPoint, an increase in intakes of 10% and adoptions of 18%.

24PetWatch™ & petprotect RFID Microchip and Database Management

For the quarter ended December 31, 2011, the Company sold, in aggregate, 328,183 RFID microchips in the United States, Canada and the United Kingdom, a 12% increase in unit sales from the same period in 2010. Revenue from microchip sales for the quarter ended December 31, 2011 increased 19% to $1.96 million from the same period in the prior year.

The sale of ancillary products and services to the 24PetWatch database of pet owners, such as pet tags and change of address fees but excluding core insurance products and sales through thepetangostore.com, accounted for $531,000 in revenue during 2011, a 52% increase over Q4 2010.

Petango.com

For the quarter, Petango.com attracted more than 2.37 million unique visitors and generated over 24 million page views.

Sales via thepetangostore.com totalled $258,000 for the quarter, a 158% increase from sales recorded in Q4, 2010.

For detailed financial statements for the year and quarter ended December 31, 2011, including Management's Discussion and Analysis, please refer to the Company's website or SEDAR at www.sedar.com after March 7, 2012.

The Company is hosting an investor conference call on Thursday, March 8th, 2012, at 11:00 AM (EST) which can be accessed at 1-877-240-9772 or on-line at www.pethealthinc.com. For those unable to participate, a replay of the call will be available shortly after the call concludes on the Company's website at www.pethealthinc.com.

About Pethealth

Pethealth is North America's second largest provider of medical insurance for dogs and cats to pet owners, operating in the United States, Canada and the United Kingdom. In addition, the Company is the leading provider of management software to North American animal welfare organisations through its SaaS-based application and is the leading provider of pet related database management services to the North American companion animal industry. Pethealth offers a unique range of products and services for veterinarians, shelters and pet owners through a number of wholly owned subsidiaries using a range of brand names including PetCare, 24PetWatch, Pet Protect, Petpals Direct, ShelterCare, PetPoint, Petango.com and ThePetangoStore.com.

Pethealth is based in Oakville, Ontario. To find out more about Pethealth, visit the web site at www.pethealthinc.com.

Forward-Looking Statements

This press release contains information that is forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or the negative of these terms or other similar expressions concerning matters that are not historical facts.

Forward-looking information by its nature necessarily involves risks and uncertainties including, without limitation, the difficulty of predicting the current regulatory and supervisory environment, the timing and conditions to obtaining any regulatory approval, reliance on insurance underwriters for pet insurance policies, market acceptance and demand for existing and new products and services, including PetPoint and EVE Software and the 24PetWatch microchip program, the Company's ability to maintain and service new and existing customers, the protection of intellectual property associated with its products and services, the impact of competition generally and new competitive products, currency and foreign exchange fluctuations, risks associated with the Company's customer care solutions facility, and related risks and uncertainties. Additional risks and uncertainties affecting the Company can be found in the Company's Annual Information Form available on SEDAR at www.sedar.com. If any of these risks or uncertainties were to materialize or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein. The Company disclaims any intention or obligation, other than those required by security laws, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.