What happened
Shares of pet insurance specialist Trupanion (TRUP 1.79%) were hit hard on Thursday. The stock fell as much as 20%. But as of 11 a.m. ET, the stock was down about 16%.
The growth stock's decline came after the company reported fourth-quarter earnings after market close on Wednesday. Though revenue for the period was slightly ahead of analysts' consensus forecast, growth in subscription-enrolled pets underwhelmed.
Image source: Getty Images.
So what
Trupanion reported fourth-quarter revenue of $194.4 million, up 36% year over year. On average, analysts were expecting revenue of $193.1 million. Operating cash flow improved slightly, rising from $4 million in the year-ago quarter to $5.2 million. Free cash flow rose from $1 million in the fourth quarter of 2020 to $1.3 million in the fourth quarter of 2021.
Subscription-enrolled pets were 704,333, up 22% year over year.
"Gross pet ads were up year-over-year but down sequentially due to COVID temporarily depressing industry leads, which is recovering," said Trupanion chief financial officer Drew Wolff in the company's fourth-quarter earnings call.
Management also said it was having issues with converting leads, putting pressure on its conversion rates. But it identified and rectified the problem.
Now what
Regarding its outlook, management said it expects to grow its adjusted operating income from its subscription business 25% year over year in 2022.
"Adjusted operating income represents the funds generated from our existing pets in a given period and is the single most important metric to understanding and evaluating our performance," said Trupanion founder and CEO Darryl Rawlings in the company's fourth-quarter earnings call. "It also serves as a proxy for value creation."
Management hopes to sustain an average compound growth rate of 25% in adjusted operating income every year for the next five years.
