Press

Press Releases 2004

Pethealth Inc. announces positive EBITDA and its twentieth consecutive quarter of record revenue, and results for the first quarter ended March 31, 2004.

OAKVILLE, ON, May 10, 2004. Pethealth Inc. ("Pethealth" or "the Company") (TSX Venture Exchange Tier 1: PTZ) today announced record financial results for the first quarter ended March 31, 2004.

Highlights

FOR THE QUARTER ENDED MARCH 31, 2004

• Total revenue for the quarter ended March 31, 2004 was $2.55-million, up 75% over the quarter ended March 31, 2003 and up 25% over Q4, 2003.
• Net loss for the three months ended March 31, 2004 was $75,881, an 84% improvement from the net loss of $471,582 for Q1, 2003 and a 78% improvement from the Q4, 2003 net loss of $349,701.
• Q1, 2004 EBITDA (Earnings Before Income Taxes, Depreciation and Amortisation) was $41,287, compared with a loss of $387,636 for the quarter ended March 31, 2003 and a loss of $261,453 for Q4, 2003.
• Gross written premiums for the quarter ended March 31, 2004 were $5.7-million, up 56% from Q1 2003 and 12% over Q4, 2003.
• Q1 new policy sales for the quarter were a record 71,230, an increase of 52% over the same period a year ago. Core policy sales for the quarter were a record 16,580, up 60% from a year earlier and 24% from the 13,424 sales reported in Q4, 2004. ShelterCare policy sales were a record 54,650, up 50% from a year ago.
• Total paid policies in force as at March 31, 2004 were 115,187 vs. 72,737 at the end of Q1 2003, an increase of 58% and an increase of 8% from the Q4, 2003 policies reported of 106,260.
• Core paid policies in force as of March 31, 2004, stood at 79,656, an increase of 66% over the previous year and up 14% from Q4, 2003. ShelterCare policies in force were 35,531, up 43% from the previous year and down 3% from Q4, 2003.

Commission and management fee revenue for the quarter totalled $2,246,421 compared to $1,318,663 for the same period in the prior year, an increase of 70%. Total commission and management fee revenue increased by 21% over Q4, 2003. The Company had a net loss of $75,881 or $0.01 per share for Q1, 2004, inclusive of a $39,948 charge for the prospective adoption of the fair value method of accounting for stock based employee compensation. This represents an 84% reduction from the $471,582 loss in Q1, 2003. The Q1, 2004 net loss is a 78% improvement from the net loss reported for the quarter ended December 31, 2003.

The Company achieved quarterly positive EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) of $41,287, compared to an EBITDA loss of $387,636 reported for the same period in the prior year and a loss of $261,453 in Q4, 2003. Record core policy sales of 16,580 coupled with the further leveraging of the Company’s infrastructure were the primary reason for the quarterly change. During Q1, 2004, the acquisition cost per policy fell by 11% to USD$62 per policy while administration cost per policy fell by 8% to $11 per policy from the fourth quarter of 2003.

For the period ended March 31, 2004, the Company wrote a record 71,230 new insurance policies consisting of 16,580 new core policies and 54,650 new ShelterCare policies to increase the paid policies in force to 115,187. New policy sales consist of new core policy sales, including EmergencyCare policies, new ShelterCare policy sales, ShelterCare policies converted into PetCare policies, ShelterCare policies continued past the first sixty days of coverage. The Company does not include the renewals of existing policies in its calculation of new policy sales.

U.S. new core policy sales accounted for 79% of total new core policy sales in Q1, 2004 (72% in Q1 2003) generating increased revenues in U.S. dollars while 82% (78% in Q1, 2003) of employment and administration costs over the year were paid in Canadian dollars.

The Company, through its wholly owned subsidiary Pethealth Services (USA) Inc., continued to grow its manufacturer-neutral pet registry and recovery service in 48 states and continued distributing the Allflex microchip technology throughout the states of Wisconsin and Oregon. In addition to the Allflex ISO microchip technology, in May 2004, the Company will commence, in the United States, with the distribution of the Allflex non-ISO microchip technology, which will allow for a more rapid rollout of the program, as the readers required to read the non-ISO microchips are more widespread in the market place. In Canada, through its wholly owned subsidiary, Pethealth Services Inc., the Company continued to expand the 24PetWatch cross-promotion of pet insurance to its customers, which will continue to be a major factor for the Company. At March 31, 91,679 pets had been registered on the 24PetWatch database.

At March 31, 2003, the Company had total assets of $15,560,774 including cash resources of $8,097,911.

“We are delighted with the milestones reached in our first quarter of 2004” said Mark Warren, President & C.E.O. of Pethealth Inc. “Not only were record core policy sales achieved but being able to report positive EBITDA is particularly gratifying. These milestones were achieved through our current distribution network highlighting our ability to leverage the infrastructure and distribution channels now in place. With the expansion of our current distribution channels coupled with the addition of new distribution channels, announced earlier this year, we expect earnings and operating cash flows to grow over the remainder of 2004.”

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.

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, 45 states and 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.

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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