Pethealth Inc.
TSX : PTZ

Pethealth Inc.

August 08, 2012 16:00 ET

Pethealth Inc. Announces Quarterly Revenue of $9,002,000 and Profit of $1,468,000 and Its Full Results for the Quarter and Six Months Ended June 30, 2012

OAKVILLE, ONTARIO--(Marketwire - Aug. 8, 2012) - Pethealth Inc. (TSX:PTZ) ("Pethealth" or "the Company") today announced its financial results for the quarter and six months ended June 30, 2012.

For the quarter ended For the six months ended

($'000 except for per share figures)
June 30
2012
June 30
2011
Change
%
June 30
2012
June 30
2011
Change
%
Revenue 9,002 8,165 10 % 18,711 16,128 16 %
EBITDA(1) 1,212 1,153 5 % 2,993 2,361 27 %
Adjusted EBITDA(2) 1,344 1,186 13 % 3,232 2,419 34 %
Profit before taxes 436 705 (38 %) 1,738 1,451 20 %
Profit after taxes 1,468 552 166 % 2,683 1,157 132 %
Basic earnings per share 0.05 0.02 - 0.06 0.02 -
Fully diluted earnings per share 0.04 0.01 - 0.06 0.02 -
(1) EBITDA, a non IFRS accounting measure, is profit before amortisation and depreciation, interest and income taxes.
(2) Adjusted EBITDA, a non-IFRS measure, is EBITDA plus stock option and equity-based compensation expense adjusted for non-operating f/x and foreign exchange. Non-operating f/x, a non-IFRS measure, is the accounting loss (gain) associated with the translation of the Company's intercompany balances.

"As previously disclosed, we anticipated that Q2 was likely to be our most difficult quarter for the year and indeed our Q2 numbers were sequentially poorer than Q1," said Mark Warren, President and Chief Executive Officer of Pethealth. "That being said, two points should be made. Firstly, the weak performance of Q2 can be laid squarely at the feet of the month of April, and against all other months recorded so far April has proven to be a significant outlier. Secondly, whereas in Q1 we were decelerating as we came out of what was a record quarter for the Company, we are enjoying upward acceleration coming out of Q2, and early indications are that our July numbers continue on the upward trend. Management is mindful of the slow growth in discretionary spending in all three jurisdictions in which we operate and will be focusing more of its time on creating greater operational leverage in the existing lines of the business, as opposed to looking for new channels."

Second quarter consolidated results:

Consolidated revenue increased by 10% to $9 million for the quarter ended June 30, 2012. Consolidated revenue growth was the aggregate of a 4% growth in insurance segment revenues and a 23% increase in the Company's non-insurance segment revenues. The positive results from the insurance segment resulted from 9% growth in the U.S. insurance revenues which were partially offset by a decline in U.K. commission revenue. The non-insurance segment continued its pattern of strong growth despite some pull forward of sales into the first quarter for both microchip products and services due to the unseasonably mild winter in North America. Growth in the non-insurance segment revenues is attributed to (i) the increase in the number of microchips sold coupled with expanding microchip margins, (ii) the increase in the cross selling of products and services to the 24PetWatch database and (iii) increased sales through the PetangoStore.com.

Consolidated profit before taxes was affected by (i) an increase in the marketing investment in the insurance segment related to success based payments in North America and in the U.K. (ii) an significant increase in amortisation expense as a result of the Company's internal ERP being deployed at April 1, 2012 and (iii) a larger foreign exchange loss on the translation of the Company's intercompany accounts.

Adjusted EBITDA, which accounts for both the increase in amortisation and foreign exchange loss, increased by 13% to $1.34-million.

Consolidated profit after taxes increased by 166% to $1.47 million. Of this increase, $1.1 million is directly attributable to the recognition in the quarter of a deferred income tax asset associated with prior period operating losses in the Company's U.S. operations. While the Company determined at June 30th that it was appropriate to recognize a total tax asset of approximately $2.2-million for the 2012 year as a whole, under IFRS, the Company is required to record the benefit on a proportionate basis during the year and will record the appropriate remaining net benefit in Q3 and Q4 of this year.

Six months consolidated results:

Consolidated revenue increased 16% to $19 million over the six months. Consolidated revenue growth was the aggregate of a 4% increase in insurance segment revenues and the 42% increase in the Company's non-insurance segment operating revenues. In addition to the trends impacting the quarter, the six month results were also influenced by a data report agreement with Best Friends during the first quarter totalling $435,000 in data publishing revenue.

For the six month period, profit before taxes increased 20% while adjusted EBIDTA increased by 34% to 3.2 million.

Insurance segment results:

For the quarter ended For the six months ended

($'000)
June 30
2012
June 30
2011
Change
%
June 30
2012
June 30
2011
Change
%
Revenue 5,670 5,461 4 % 11,353 10,933 4 %
EBITDA(1) 1,206 1,338 (10 %) 2,424 2,799 (13 %)
Adjusted EBITDA(2) 1,338 1,371 (2 %) 2,663 2,857 (7 %)
Profit before taxes 782 1,159 (33 %) 1,832 2,430 (25 %)
Profit after taxes 1,811 1,006 80 % 2,810 2,136 32 %
(1) EBITDA, a non IFRS accounting measure, is profit before amortisation and depreciation, interest and income taxes.
(2) Adjusted EBITDA, a non-IFRS measure, is EBITDA plus stock option and equity-based compensation expense adjusted for non-operating f/x and foreign exchange. Non-operating f/x, a non-IFRS measure, is the accounting loss (gain) associated with the translation of the Company's intercompany balances.

The insurance segment results were influenced by the following:

Second quarter

  • A 9% increase in US commission revenues driven in large part by the Company's continued investment in the U.S. animal welfare community. During the quarter, an additional 20,120 ShelterCare policies were issued, a 48% increase vs. the prior year.

  • A 3% decline in UK core commission revenues. The Company continued to invest in new policy acquisition in the UK adding 13% to its average UK policy count over Q2, 2011. The average policy growth was the result of the Company's ongoing engagement of aggregator websites as a source for new policy acquisition. New policies acquired through aggregator sites are lower premium policies that, in turn, offer less coverage and, while initially this has a negative impact on commission revenues, these policies are expected to have a positive impact on the loss ratios. During the quarter, an additional $88,000 was invested in success based aggregator marketing compared to that invested last year.

  • A 125% increase in amortization related primarily to the Company's internal ERP system which was deployed April 1, 2012.

  • A 169% increase in foreign exchange losses related to the Company's translation of its intercompany accounts.

  • The recognition of a deferred tax asset of $1.1 million related to the Company's U.S. operations.

Six months

The six month results were influenced by the same factors influencing the quarterly results.

Non-insurance segment results:

For the quarter ended For the six months ended

($'000)
June 30
2012
June 30
2011
Change
%
June 30
2012
June 30
2011
Change
%
Revenue 3,332 2,704 23 % 7,358 5,195 42 %
EBITDA(1) 6 (185 ) - 569 (438 ) -
Adjusted EBITDA(2) 6 (185 ) - 569 (438 ) -
Profit/(loss) before taxes (346 ) (454 ) 24 % (94 ) (979 ) 90 %
Profit/(loss) after taxes (343 ) (454 ) 24 % (127 ) (979 ) 87 %
(1) EBITDA, a non IFRS accounting measure, is profit before amortisation and depreciation, interest and income taxes.
(2) Adjusted EBITDA, a non-IFRS measure, is EBITDA plus stock option and equity-based compensation expense adjusted for non-operating f/x and foreign exchange. Non-operating f/x, a non-IFRS measure, is the accounting loss (gain) associated with the translation of the Company's intercompany balances.

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

Second quarter

Revenue from non-insurance operations totalled $3.3 million, up 23% over Q2 2011.

Adjusted EBITDA from non-insurance operations was $6,000, an increase from the adjusted EBITDA loss of ($185,000) recorded in the prior year. The loss on the Company's non-insurance operations after taxes was ($343,000) vs. a loss of ($454,000) from the same period in the prior year.

For the quarter, the non-insurance results consist of aggregate growth in the following:

PetPoint™

642,051 intakes (animals entering the welfare organisations) and 222,321 adoptions were completed through PetPoint, an increase in intakes of 5% and adoptions of 8% compared to Q2 2011. Due to an unseasonably warm winter in North America, some intakes and adoptions were pulled forward into Q1.

24PetWatch™ & petprotect RFID Microchip and Database Management

The microchip and database products and services continued strong growth despite some pull forward of sales due to the unseasonably mild winter in North America. The Company sold, in aggregate, 348,000 RFID microchips in the United States, Canada and the United Kingdom, a 7% increase in unit sales from Q2 2011. Revenue from microchip sales increased 23% to $2.25 million from Q2 2011. The sale of ancillary products and services to the 24PetWatch database of pet owners accounted for $579,000 in revenue, an 11% increase from Q2 2011.

Petango.com

Petango.com attracted more than 2.5 million unique visitors and generated 89 million page views. Sales via thepetangostore.com totalled $331,000, a 35% increase from sales recorded in Q2 2011. Approximately 58% of sales recorded were for pet medications.

Six months

Revenue from non-insurance operations totalled $7.4 million, up 42% over the same period in the prior year.

Adjusted EBITDA from non-insurance operations was $569,000, an increase from the adjusted EBITDA loss of ($438,000) recorded in the prior year. The loss on the Company's non-insurance operations after taxes was ($127,000) million, vs. a loss of ($979,000) from the same period in the prior year.

For the six months ended June 30, the non-insurance results consist of aggregate growth in the following:

PetPoint™

PetPoint had been licensed by 1,865 animal welfare organisations by June 30, 2012, an increase of 11% from those licensed at June 30, 2011.

1,150,318 intakes (animals entering the welfare organisations) 451,380 adoptions were completed through PetPoint, an increase in intakes 8% and adoptions of 11% compared to the same period in the prior year.

24PetWatch™ & petprotect RFID Microchip and Database Management

The Company sold, in aggregate, 739,000 RFID microchips in the United States, Canada and the United Kingdom, a 16% increase in unit sales from the same period in the prior year. Revenue from microchip sales increased 29% to $4.7 million from the same period in the prior year. As a percentage of total non-insurance revenue, microchip revenue fell to 65% from 71% compared to the same period in the prior year. The sale of ancillary products and services to the 24PetWatch database of pet owners accounted for $1.26 million in revenue, a 31% increase from the same period in the prior year.

Total individual pet and pet owner registrations in the 24PetWatch database surpassed 5.8 million by June 30, 2012, representing an increase of over 1.1 million registered cats and dogs, or 25%, compared to those registered at the end of Q2 2011.

Petango.com

Petango.com attracted more than 5.0 million unique visitors and generated 172.0 million page views. Sales via thepetangostore.com totalled $625,000, a 52% increase from sales recorded in the same period in the prior year. Approximately 56% of sales recorded were for pet medications.

Conference call

The Company is hosting an investor conference call on Thursday, August 9th, 2012, at 8:30AM (EST) which can be accessed at 1-877-440-9795 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

For detailed financial statements for the quarter and six months ended June 30, 2012, including Management's Discussion and Analysis, please refer to the Company's website or SEDAR at www.sedar.com after August 8th, 2012.

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.

Contact Information

  • Investor Relations Contacts:
    Pethealth Inc.
    Mark Warren
    President and Chief Executive Officer
    (905) 842-2615

    Pethealth Inc.
    Glen Tennison
    Chief Financial Officer
    (905) 842-2615
    www.pethealthinc.com