Pethealth Inc.
TSX : PTZ

Pethealth Inc.

August 08, 2013 16:01 ET

Pethealth Inc. Announces Record Quarterly Revenue of $10,475,000; Quarterly Profit of $219,000 and Its Full Results for the Quarter and Six Months Ended June 30, 2013

OAKVILLE, ONTARIO--(Marketwired - Aug. 8, 2013) - Pethealth Inc. (TSX:PTZ) ("Pethealth" or "the Company") today announced its financial results for the quarter and six months ended June 30, 2013.

For the quarter ended For the six months ended

($'000 except for per share figures)
June 30
2013
June 30
2012
Change
%
June 30
2013
June 30
2012
Change
%
Revenue 10,475 9,002 16 % 20,100 18,711 7 %
EBITDA(1) 1,145 1,212 (6 %) 2,427 2,993 (19 %)
Adjusted EBITDA(2) 1,301 1,344 (3 %) 2,670 3,232 (17 %)
Profit before taxes 318 436 (27 %) 797 1,738 (54 %)
Basic effective tax rate 31 % (237 %) - 30 % (54 %) -
Profit after taxes 219 1,468 (85 %) 559 2,683 (79 %)
Basic earnings per share 0.01 0.05 (80 %) 0.00 0.06 -
Fully diluted earnings per share 0.01 0.04 (75 %) 0.00 0.06 -
(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 foreign exchange.

"I am pleased to report our Q2 results for 2013," said Mark Warren, President and Chief Executive Officer of Pethealth Inc. "In an environment where top line growth has been a challenge for many companies, we demonstrated our ability to grow our top line in both our two main business segments. In our insurance operations, top line growth benefited from the closing of our PurinaCare insurance acquisition and strong organic policy sales in the U.K. In our non-insurance operations, microchip sales rebounded from a slow Q1, both BtoB and BtoC sales of pet specialty retail and pet pharmacy showed good growth and, most dramatically, database related sales via our 24PetWatch call centre were again at record levels during Q2. We look forward to growth continuing through Q3 for both our insurance and non-insurance operations."

Second quarter results:

Consolidated revenue increased by 16% to a record $10.5-million as both the insurance and non-insurance segments recorded double digit revenue growth.

Insurance segment revenues increased 12% to $6.3-million. The increase was the combination of organic growth, where US and UK core commission revenue grew 5% and 6% respectively, and growth by acquisition as the Company acquired certain assets of Nestle Purina Claims Processing, Inc ("PurinaCare"). On May 1, 2013, the Company announced that it had closed the acquisition which included the right to administer and renew 12,196 PurinaCare policies from close. Consideration for the Acquisition is to a maximum of US$800,000, with the all-cash transaction is being financed through a 3 year loan agreement with a recognised financial institution at an interest rate of 6 month LIBOR plus 2.25%, reset bi-annually. As a result of the acquisition, an incremental $321,000 in commission and fee revenue was generated for May and June, in aggregate, while 100% of the transaction costs, totalling $146,000, were expensed in the quarter.

Non-insurance revenues increased 24% to $4.2-million which included an 11% increase in the sale of microchip technology, a 54% increase in cross sales of products and services to the 24PetWatch database in North America and an aggregate 54% increase in business-to-business and business-to-consumer sales through the PetangoStore.com.

Consolidated EBITDA decreased by 6% to $1.15-million and was impacted by:

(1) One-off expenses including incremental professional fees and a bonus accrual adjustment totalling, in aggregate, $333,000;
(2) The increase in the Company's share price which resulted in a stock based compensation mark-to-market expense of $111,000.

In the absence of the one-off expenses and the stock based compensation mark-to-market expense, consolidated EBITDA would have grown by 28%.

In addition, EBITDA was impacted by the Company's continued year-on-year growth in its investment in insurance segment organic growth as an incremental $182,000 was invested in the combination of the 24PetWatch gift of insurance program in North America and in success based payments to aggregator websites in the UK.

Net income before taxes fell 27% to $318,000 as a result of the same factors impacting EBITDA while net income after taxes fell 85% to $219,000 as a result of the recognition of a net tax asset (recovery) of $1.03-million during the second quarter of 2012 vs. a tax expense of $99,000 recorded in the current quarter.

Six months results:

Consolidated revenue increased by 7% to $20.1-million for the first six months, which was the aggregate of an 8% growth in insurance segment revenues and a 7% increase in non-insurance segment revenues.

Consolidated comparative results for the first six months were negatively impacted by the unseasonably cold weather during first four months of 2013 vs. an unseasonably warm first four months of 2012 which caused a timing difference in the growth rates of both intakes and adoptions of dogs and cats completed through PetPoint in North America. The year-on-year growth in North American intakes completed through PetPoint fell to 2% from 9% a year earlier while the growth in adoptions fell to 6% from 11% in the prior year.

This timing difference suppressed market demand for various products as compared to the prior year as (i) certain AWOs had anticipated a repeat of the prior year's intake and adoption growth rates and as such had built microchip inventory prior to the periods commencement and (ii) seasonally concentrated sales, for products such as flea & tick medications were deferred until the weather warranted their use. In addition, comparative results were also impacted by the one-off data report agreement with Best Friends Animal Society which generated $435,000 of data publishing revenue in Q1 of last year.

Consolidated EBITDA decreased by 19% to $2.43-million as a result of the same factors influencing quarterly EBITDA and year to date revenues.

Consolidated profit after taxes decreased 79% to $559,000 as a result of the recognition of a net tax asset (recovery) of $1.03-million during the second quarter of 2012.

Normal Course Issuer Bid:

On September 20, 2012, the Company's Board of Directors announced its intention to make a Normal Course Issuer Bid to repurchase up to 1,669,000 of its common shares. Repurchases commenced on November 08, 2012 and will terminate no later than September 23, 2013.

The Company appointed Industrial Alliance Securities Inc. to purchase the shares on its behalf. Up to June 30, 2013, 1,328,820 common shares were repurchased and cancelled at an average price of approximately $1.02 per common share, for an aggregate of $1,355,000. As of today's date, the Company has repurchased 1,382,954 common shares at an average price of approximately $1.04 per common share, for an aggregate of $1,436,000 in cash.

Conference call

The Company is hosting an investor conference call on Thursday, August 8, 2013, at 4:30PM (EST) which can be accessed at 1-866-226-1792 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, 2013, including Management's Discussion and Analysis, please refer to the Company's website or SEDAR at www.sedar.com shortly after August 8, 2013.

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