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1 Pethealth Inc. announces quarterly revenue of $9,303,000 and profit of $892,000 and its full results for the quarter and nine months ended September 30,. OAKVILLE, ON, November 7,. (TSX: PTZ) Pethealth Inc. ("Pethealth" or "the Company") today announced its financial results for the quarter and nine months ended September 30,. ($ 000 except for per share figures) Revenue 9,303 8, ,014 24, EBITDA 1,237 1,239-4,230 3, Profit before taxes (41) 2,200 2,236 (2) Profit after taxes ,575 1, Basic earnings per share Fully diluted earnings per share I am pleased to be able to present our Q3 and nine-month numbers for which continue to show consistent top line growth, said Mark Warren, President and Chief Executive Officer of Pethealth. Q3 was a quarter when we invested more for future growth based on our view that the overall economic conditions in our two largest markets, the United States and the United Kingdom, are improving. This investment in growth was most noticeable in our core U.K. pet insurance business where our policy in force count was up 13 year on year; our rigorous mining of our 24PetWatch database, where year on year revenue was up by 50; and the launch of our subscription pet food program now being offered through our network of PetPoint licensed shelters where pet food sales were up 177 year on year. The recurring revenue generated from these initiatives we expect will yield significant returns in the coming quarters, improving our earnings and cash flow. Third quarter consolidated results: Consolidated revenue increased by 12 to $9.3 million for the quarter which was the aggregate of a 4 growth in insurance segment revenues and a 27 increase in the Company s non-insurance segment revenues. The positive results from the insurance segment resulted from 8 growth in total U.S. insurance revenues which were partially offset by a decline in insurance revenues in both the U.K. and Canada. Growth in the non-insurance segment revenues is attributed to (i) the increase in the number of microchips sold coupled with increased pricing, (ii) the increase in the cross selling of products and services to the 24PetWatch database and (iii) increased sales through the PetangoStore.com. Although consolidated revenues increased by 12, consolidated profit before taxes was negatively affected by (i) an increase in the investment in insurance segment organic growth in where marketing dollars are expensed when incurred even though new policyholders represent long-term recurring monthly revenues over the course of the contract; (ii) a significant increase in amortisation expense as a result of the recent deployment of both the Company's internal ERP systems and the first version of PetPoint Enterprise, the Company's first paid version of its cloud based animal welfare management system and (iii) an increase in employment expenses related to the maintenance of its recently deployed systems. EBITDA remained flat at 1.24 million. In addition to the above, consolidated profit after taxes was positively impacted by the recognition of a deferred income tax asset associated with prior period operating losses in the Company's U.S. operations of $446,000. While the Company determined at June 30th that it had a total tax asset available of approximately $2.2-million to recognize for, under IFRS, the Company is to split recognition over the last three quarters of the year. As such, $1.1 million was recognized in Q2, $446,000 in the current quarter and the balance will be recognized in Q4. 1

2 Nine months consolidated results: Consolidated revenue increased by 15 to $28-million compared to the same period in the prior year. Consolidated revenue growth was the aggregate of a 4 increase in the insurance segment revenues and the 36 increase in the Company s non-insurance segment revenues. In addition to the positive trends impacting the quarter, the nine month results were also influenced by a data report agreement completed with Best Friends during the first quarter totalling $435,000 in data publishing revenue. For the nine month period, profit before taxes decreased by 2 as a result of the same negative trends impacting the quarter. EBITDA increased by 17 to $4.23-million. Consolidated profit after tax increased by 86 to $3.58 million which included the recognition of a deferred income tax asset of $1.5 million. Insurance segment results: ($ 000) Revenue 5,695 5, ,048 16,399 4 EBITDA 1,184 1,330 (11) 3,608 4,129 (13) Profit before taxes 843 1,152 (27) 2,675 3,581 (25) Profit after taxes 1,351 1, ,161 3, The insurance segment results were influenced by the following: Third quarter A 3 increase in US core commission revenues driven in large part by the Company s continued investment in the U.S. animal welfare community. During the quarter, an additional 22,496 ShelterCare policies were issued at a total incremental cost of $207,000, a 38 increase vs. the prior year. A 6 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 from Q3,. 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, in time, to have a positive impact on the loss ratios. During the quarter, an additional $55,000 was invested in success based aggregator marketing compared to that invested last year. The U.S. and the U.K. core accident year loss ratios for policies underwritten by Praetorian and QBE (Europe), in aggregate, are currently estimated at 50 for the accident year. Actual results could vary materially from current estimates and will be influenced by several factors including, but not limited to, the U.S. and U.K claims inflation compared to premium increases, changes in the relative weightings of the U.S. and U.K. programs, the relative strength or weakness of the Pound Sterling vs. the U.S. dollar over the course of the year, prior year loss development, and the impact of changes in underwriting guidelines. Given the current year end estimate, $0 ( - $79 return of commission), was recorded in the third quarter related to the Company s participation in its programs underwriting results. An 87 increase in amortization related primarily to the Company s internal ERP system which was deployed April 1,. The recognition of a deferred tax asset of $446,000 related to the Company s U.S. operations as discussed under the heading Overall Performance. 2

3 Nine months The nine month results were influenced by the same factors influencing the quarterly results. Non-insurance segment results: ($ 000) Revenue 3,608 2, ,966 8, EBITDA 53 (91) (529) - Profit/(loss) before taxes (381) (367) (4) (475) (1,345) 65 Profit/(loss) after taxes (459) (367) (25) (586) (1,345) 56 The non-insurance results consist of aggregate growth in the following: Third quarter Revenue from non-insurance operations totalled $3.6 million, up 27. EBITDA from non-insurance operations was $53,000, an improvement from an EBITDA loss of ($91,000). The operating loss on the Company s non-insurance operations, after taxes, was ($459,000) vs. a loss of ($367,000) from the same period in the prior year. The increase in loss was mainly on account of increased amortization and tax expense. For the quarter, the non-insurance results consist of aggregate growth in the following: PetPoint TM 647,000 intakes (animals entering the welfare organisations) and 257,000 adoptions were completed through PetPoint, an increase in intakes of 1 and adoptions of 8. As of September 30,, 72 animal welfare organisations were paying to licence PetPoint, the Company s cloudbased animal welfare management system. In the quarter, $36,000 of licence fee revenue was generated. 24PetWatch TM & petprotect RFID Microchip and Database Management The microchip and database products and services continued strong growth in the quarter. The Company sold, in aggregate, 389,000 RFID microchips in the United States, Canada and the United Kingdom, an 8 increase in unit sales. Revenue from microchip sales increased 18 to $2.46 million. As a percentage of total non-insurance revenue, microchip revenue fell to 70 from 73. The sale of ancillary products and services to the 24PetWatch database of pet owners accounted for $606,000 in revenue, a 26 increase. Petango.com Petango.com attracted more than 2.5 million unique visitors and generated 45 million page views. Sales via thepetangostore.com totalled $323,000, a 55 increase. Nine months Revenue from non-insurance operations totalled $10.97 million, up 36. EBITDA from non-insurance operations was $622,000, an improvement from an EBITDA loss of ($529,000). The operating loss on the Company s non-insurance operations after taxes was ($586,000) vs. a loss of ($1.35 million) from the same period in the prior year. September 30, the non-insurance results consist of aggregate growth in the following: 3

4 PetPoint TM PetPoint had been licensed by 1,906 animal welfare organisations by September 30,, an increase of 10 from those licensed at September 30,. 1,804,000 intakes (animals entering the welfare organisations) and 709,000 adoptions were completed through PetPoint, an increase in intakes of 5 and adoptions of PetWatch TM & petprotect RFID Microchip and Database Management The Company sold, in aggregate, 1.13 million RFID microchips in the United States, Canada and the United Kingdom, a 13 increase. Revenue from microchip sales increased 25 to $7.21 million. As a percentage of total non-insurance revenue, microchip revenue fell to 67 from 71. The sale of ancillary products and services to the 24PetWatch database of pet owners accounted for $1.87 million in revenue, a 29 increase. Total individual pet and pet owner registrations in the 24PetWatch database surpassed 6.1 million by September 30,, representing an increase of over 1.2 million registered cats and dogs, or 25. Petango.com Petango.com attracted more than 7.5 million unique visitors and generated million page views. Sales via thepetangostore.com totalled $949,000, a 53 increase. Conference call The Company is hosting an investor conference call on Thursday, November 8,, at 2:00PM (EST) which can be accessed at 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 quarter and nine months ended September 30,, including Management s Discussion and Analysis, please refer to the Company s website or SEDAR at after November 7,. 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 4

5 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. Investor Relations Contacts: Mark Warren, President and Chief Executive Officer Glen Tennison, Chief Financial Officer Pethealth Inc. (905)