OAKVILLE, ONTARIO — (Marketwire) — 03/06/13 — Pethealth Inc. (TSX: PTZ) (“Pethealth” or “the Company”) today announced its financial results for the year and quarter ended December 31, 2012.
“I am pleased to present our Q4 and full results for 2012 where record revenues were achieved,” said Mark Warren, President and Chief Executive Officer of Pethealth. “Sales of core policies achieved record levels every month during 2012 on a year on year basis and indeed policy growth has accelerated over the first two months of 2013. The requirement to expense acquisition costs in the quarter where policies are acquired creates a decline in cash flow from our insurance operations despite the overall positive impact especially when growth accelerates. In the longer term cash flow from these sales will rise significantly. Our non-insurance business continues to grow and this growth looks set to continue. We also expect to see rationalisation in the key markets in which we operate with some participants looking to exit over the course of 2013 providing us with potential acquisition opportunities.”
Full year consolidated results:
Consolidated revenue increased by 13% to a record $37.4 million for the year which was the aggregate of a 2% growth in insurance segment revenues and a 35% increase in the Company-s non-insurance segment revenues. The positive results from the insurance segment resulted from 4% growth in the U.S. insurance core commission revenues which were partially offset by a decline in insurance revenues both in the U.K. and Canada. Growth in non-insurance segment revenues is attributed to (i) the increase in the number of microchips sold coupled with increased pricing,(ii) an increase in the cross selling of products and services to the 24PetWatch database,(iii) an increase in sales through the PetangoStore.com and (iv) an increase in data publishing revenue.
Although consolidated revenues increased by 13%, consolidated profit before taxes was impacted by (i) the acceleration of the investment in organic growth in its insurance segment through the expansion of its 24PetWatch gift of insurance program in North America and through increased exposure on and sales completed through insurance aggregator websites the United Kingdom. The impact of these marketing expenses on income is a reflection of the accounting treatment applied to organic growth where the costs to acquire a new policyholder are expensed as incurred even though new insurance policies represent long-term recurring monthly revenues over the policies life, and (ii) a significant increase in amortisation and depreciation expense as a result of the deployment of the Company-s internal ERP systems in Q1, 2012 and the deployment of the first phase of PetPoint Enterprise, the Company-s first paid version of its cloud based animal welfare management system, in Q3 2012. The impact of the investment in insurance segment organic growth and the increased amortisation and depreciation expenses was partially offset by a significant reduction in the operating loss before taxes of its non-insurance operations.
Consolidated EBITDA increased by 2% to $5.2 million as the Company-s non-insurance business generated its first full year of positive EBITDA at $746,000 vs. an EBITDA loss of ($523,000) in 2011. EBITDA for the Company-s insurance business decreased by 20% to $4.47 million directly related to the Company-s accelerated investment in organic insurance growth.
Consolidated profit after taxes increased by 47% to $4.15 million. In addition to those factors impacting the consolidated profit before taxes, the increase in profits after tax was also impacted by the recognition in the year of a deferred income tax asset associated with prior period operating losses in the Company-s U.S. operations of $2.2 million.
Fourth Quarter consolidated results:
Consolidated revenue increased by 7% to $9.4 million compared to the same period in the prior year. Consolidated revenue growth was the aggregate of a 3% decrease in the insurance segment revenues and the 30% increase in the Company-s non-insurance segment revenues. With the exception of an increase in data publishing revenue, the factors influencing both the insurance and non-insurance segment for the year as a whole were consistent with those impacting the fourth quarter.
For the quarter, profit before taxes decreased by 80% as a result of (i) the Company-s increased investment in organic U.S. and U.K. insurance policyholder growth, (ii) a reduction in insurance company profit share and (iii) increased amortisation expenses related to the deployment of both its internal ERP systems and the first phase of PetPoint Enterprise during 2012. Consolidated EBITDA decreased by 34% to 982,000.
Consolidated profit after tax decreased by 37% for the quarter as the decrease in consolidated profits before taxes was moderated by the recognition in the quarter of a deferred income tax asset associated with prior period operating losses in the Company-s U.S. operations of $654,000. While the Company determined at June 30 that it had a total tax asset available of approximately $2.2 million to recognize for 2012, under IFRS, the Company was required to split the recognition of the asset over the last three quarters of the year.
Insurance segment results:
The insurance segment results were influenced by the following:
Full year 2012
Fourth quarter
The Company-s investment in its organic insurance growth continued to accelerate in the fourth quarter where marketing costs of $651,000 were expensed related to its 24PetWatch gift program in North America and $203,000 were expensed related to one-time fees paid to U.K. aggregators upon the successful addition of a new policyholders compared to an aggregate of $708,000 expensed in Q4 2011 for these two programs. Other factors influencing the quarterly results were similar to those influencing the year as a whole.
The non-insurance results consist of aggregate growth in the following:
Full year 2012
Fourth quarter
The fourth quarter, with the exception of data publishing, was influenced by the same factors as the year as a whole as:
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. As at December 31, 2012, 232,000 common shares had been repurchased at an average price of approximately $0.82 per common share, for an aggregate of $192,000 in cash.
Conference call
The Company is hosting an investor conference call on Thursday, March 7, 2013, at 10:30AM (EST) which can be accessed at 1-800-355-4959 or on-line at . For those unable to participate, a replay of the call will be available shortly after the call concludes on the Company-s website at .
About Pethealth
For detailed financial statements for the year and quarter ended December 31, 2012, including Management-s Discussion and Analysis, please refer to the Company-s website or SEDAR at after March 6, 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 .
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 . 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.
Contacts:
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