Press

Press Releases 2004

Pethealth Inc. announces third consecutive quarter with positive EBITDA, its twenty-second consecutive quarter of record revenue, and results for the third quarter ended September 30, 2004.

OAKVILLE, ON, November 22, 2004. Pethealth Inc. ("Pethealth" or "the Company") (TSX Venture Exchange Tier 1: PTZ) today announced it’s financial results for the third quarter and nine months ended September 30, 2004.

Highlights

FOR THE QUARTER ENDED SEPTEMBER 30, 2004

• Total revenue for the quarter ended September 30, 2004 was $2.99-million, up 56% over the quarter ended September 30, 2003.
• Net loss for the three months ended September 30, 2004 was $50,000, an 88% improvement from the net loss of $426,000 for Q3, 2003.
• Q3, 2004 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $68,000, compared with an EBITDA loss of $342,000 for the quarter ended September 30, 2003.
• The cash inflow from operations, exclusive of changes in non-cash operating working capital balances, was $744,680 for Q3, 2004 compared to the cash outflow in Q3, 2003 of $132,693.
• Gross written premiums for the quarter ended September 30, 2004 were $6.6-million, up 40% from Q3, 2003.
• Q3, 2004 new policy sales were 82,433, an increase of 27% over the same period a year ago. Core policy sales for the quarter were 16,096, up 43% from a year earlier. ShelterCare policy sales were 66,337, up 24% from a year ago.
• Total paid policies in force as at September 30, 2004 were 137,872 vs. the 98,204 reported at the end of Q3, 2003, an increase of 40%.
• Core paid policies in force, as of September 30, 2004, stood at 94,323, an increase over the previous year of 53%.

NINE MONTHS ENDED JUNE 30, 2004

• Total revenue for the nine months ended September 30, 2004 was $8.42-million, up 68% over the nine months ended September 30, 2003.
• Net loss for the nine months ended September 30, 2004 was $235,000, an 86% improvement from the net loss of $1,641,000 for the same period in the prior year.
• For the nine months ended September 30, 2004 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $127,000, compared to an EBITDA loss of $1,400,000 for the same period last year.
• For the nine months ended September 30, 2004 the cash inflow from operations, exclusive of changes in non-cash operating working capital balances, was $1,865,415 compared to cash outflows of $989,351 for the same period last year.
• Gross written premiums for the nine months ended September 30, 2004 were $18.7-million, up 49% from the gross written premiums from the same period in the prior year.
• New policy sales for the nine months ended September 30, 2004, were 223,425, an increase of 34% over the same period a year ago. Core policy sales for the nine months ended September 30, 2004 were 48,124, up 44% from a year earlier. ShelterCare policy sales were 175,301, up 32% from a year ago.

Of the Company’s total revenue in Q3, 2004, 91% was derived from commissions and administration fees earned from the placement of pet insurance policies on behalf of its carriers. In the United States and Canada, the Company earned a blended commission of 38% across all pet insurance products. The Company’s total commission and management fee revenue for Q3 2004 was $2,511,000 compared to commission and management fee revenue in Q3 2003 of $1,737,000, an increase of 45%. For the nine months ended September 30, 2004 the Company’s total commission and management fee revenue was $7,214,000, an increase of 59% compared to $4,548,000 from the same period last year.

The Company had a net loss of $50,000 or $0.01 per share for Q3, 2004, inclusive of net legal fees of $116,000, resulting from the legal action brought by AVID Identification Systems (“AVID”) and in the preparation of its counterclaim against AVID, expensed in the quarter. In the absence of the legal fees associated with the AVID suit, the Company would have reported net income of $66,000. On October 8th, claims made by both AVID and Pethealth were dismissed.

This quarter’s net loss represents an 88% reduction from the $426,000 net loss incurred in Q3, 2003. For the nine-month period ended September 30, 2004, the company had a net loss of $235,000 compared to the net loss of $1,641,000 incurred during from the same period last year. In the absence of the AVID legal fees, the 2004 year-to-date net income would have been $31,000.

For the quarter ended September 30, 2004, the Company wrote 82,433 new insurance policies consisting of 16,096 new core policies and 66,337 new ShelterCare policies. New policy sales for the nine months ended September 30, 2004, were 223,425, an increase of 34% over the same period a year ago. Core policy sales for the nine months ended September 30, 2004 were 48,124, up 44% from a year earlier. The Company’s retention rate on its core policies is approximately 71% on the first annual renewal and 81% on the second annual renewal. ShelterCare policy sales, year-to-date, were 175,301, up 32% from a year ago. New policy sales consist of new core policy sales, new ShelterCare policy sales, ShelterCare policies converted into new core policy sales, ShelterCare policies continued past the first thirty days of coverage, and new EmergencyCare policies.

Effective September 1st, 2004 the 60 day prepaid portion of the ShelterCare policy was reduced to 30 days. While the total number of ShelterCare policy enrolments is expected to continue to grow each quarter, the number of ShelterCare policies reported to be outstanding at a given period end will decrease. The impact of this change on the policyholder is expected to be minimal as 89% of claims occur during the first 30 days of the program.

In Canada, the Company has become the number one distributor of new microchips to the veterinary and shelter communities. In the United States, the Company offers the Allflex microchip technology and provides its manufacturer neutral pet registry, recovery, and database management services in 48 states. As a result of the expanded technology offering, the Company sold microchips to shelters and/or veterinary clinics in an additional 26 states and achieved an increase in microchip sales revenue of 263% over Q3, 2003. At September 30, 2004, 165,285 pets had been registered on the Company’s pet registry of which 71% reside in the United States.
At September 30, 2004, the Company had total assets of $15,203,748 including cash resources of $5,283,240.

“We are delighted to be reporting strong growth in both our pet insurance and microchip businesses, which for the twenty-second consecutive quarter has resulted in record revenue,” said Mark Warren, President and Chief Executive Officer. “Our distribution through the animal shelter community continues to be a significant cornerstone of our business which will be further developed with the introduction of our management software solution to shelters in the fourth quarter. This will not only help further solidify our position within the shelter community but also provide for significant cost savings associated with the delivery of our programs through this distribution channel. In addition, our ‘off the shelf’ program with Petco was launched nationally in October and the early response looks positive.”

The company will host a conference call at 4pm on Tuesday, November 23, 2004 to discuss the third quarter results. To participate, please call 1-800-766-6630.

Financial Highlights:

*The Company, together with Avalon Risk Management Inc. in the United States, writes Gross Premiums and remits the carriers' portion to its pet insurance carriers. The Company's revenue consists of Commissions, Management Fees, Administrative and Interest Income.

** EBITDA is inclusive of amortization of non-cash deferred marketing expenses and is presented before other capital amortization. This data is considered to be a non-GAAP earnings measure and does not have any standardized meaning prescribed by GAAP. It is, therefore, unlikely to be comparable to similar measures presented by other issuers.

*** Administration expenses include net legal fees of $116,000 expensed in the quarter and $266,000 year-to-date, associated with the defence and counterclaim against Avid Identification Systems (AVID).

About Pethealth
Founded in February 1998, Pethealth is Canada's number one provider of pet insurance and is number two in North America, currently offering its PetCare Pet Insurance Programs in 10 provinces, 46 states plus Washington, D.C. In addition to the PetCare Pet Insurance Programs, Pethealth offers its pet insurance programs under a variety of names, including QuickCare, ShelterCare and Union Plus Pet Insurance. In the United States, the PetCare Pet Insurance Programs are underwritten by Lincoln General Insurance Company, York, PA, through PetCare Insurance Brokers Ltd., PetCare Insurance Agency, Ltd., both wholly owned subsidiaries of the Company, and Avalon Risk Management Inc. In Canada, the Company's pet insurance is underwritten by ING Novex, a member of ING Group, and Kingsway General Insurance Company and offered through PetCare Insurance Brokers Ltd. In addition, Pethealth, through its wholly owned subsidiaries Pethealth Services Inc. and Pethealth Services (USA) Inc., distributes Allflex pet microchip supplies to the companion animal market in North America and operates the related pet recovery registry under the trade name 24PetWatch. Pethealth is based in Oakville, Ontario. To find out more about Pethealth Inc. (TSX-V: PTZ), visit the web site at www.pethealthinc.com

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Statements contained in this news release, if not historical, are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from the results described in forward-looking statements.

Not for dissemination in the United States of America or to United States news wire services.

For further information contact:
Mark Warren, President and CEO of Pethealth at (905) 842-2615
Glen Tennison, Chief Financial Officer of Pethealth at (905) 842-2615

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