Pethealth Inc. Announces Quarterly Revenue of $8,165,000 and Net Income of $552,000 and Its Full Results for the Quarter and Six Months Ended June 30, 2011


OAKVILLE, ONTARIO--(Marketwire - Aug. 11, 2011) - Pethealth Inc. ("Pethealth" or "the Company") (TSX:PTZ) today announced its financial results for the quarter and six months ended June 30, 2011.

Financial Highlights

Quarter ended June 30, 2011
  • Total revenue for the quarter ended June 30, 2011 was $8.2 million, up 4% from Q2 2010.

  • Net income, before taxes, was $705,000, up 239% from the prior year.

  • Net income, after taxes, for the quarter was $552,000 ($0.017 per share) compared to prior year's after tax net income of $708,000 ($0.022 per share), which included a tax recovery of $500,000 in the prior year.

  • EBITDA (see non IFRS accounting measures) for the quarter was $1.15 million compared to EBITDA of $659,000 for the same period in the prior year, up 75%.

  • Adjusted EBITDA (see non IFRS accounting measures) was $1.15 million for Q2 2011 vs. $785,000 for the same period in the prior year, up 47%.

Foreign exchange had a significant impact on year over year quarterly results particularly the 6% appreciation of the Canadian dollar against the U.S. dollar.

Six months ended June 30, 2011

  • Total revenue for the six months ended June 30, 2011 was $16.1 million, down 1% from 2010.

  • Net income, before taxes, was $1.45 million, up 70% from the prior year.

  • Net income, after taxes, for the six months ended was $1.16 million ($0.017 per share after giving effect to the $585,000 dividend payment made in the first quarter of 2011) compared to prior year's after tax net income of $1.27 million ($0.020) per share after giving effect to the $585,000 dividend payment made in the first quarter of 2010 and which included a $500,000 tax recovery in the second quarter of 2010.

  • EBITDA (see non IFRS accounting measures) for the six months was $2.36 million compared to EBITDA of $1.76 million for the same period in the prior year, up 34%.

  • Adjusted EBITDA (see non IFRS accounting measures) was $2.38 million for the six months vs. $1.8 million for the same period in the prior year, up 32%.

Foreign exchange had a significant impact on year over year six month results particularly the 6% appreciation of the Canadian dollar against the U.S. dollar.

Transition to IFRS

As of January 1, 2011, the company began reporting its results in accordance with International Financial Reporting Standards (IFRS). A comprehensive summary of all the changes, including reconciliations of Canadian GAAP financial statements to those prepared under IFRS is presented in Note 22 "Transition to IFRS" of the Company's unaudited June 30, 2011 Condensed Consolidated Interim Financial Statements.

Adopting IFRS did not impact the cash the Company generates or how it conducts its businesses. Additionally, the transition to IFRS did not have a significant impact on the Company's reported results for the current or comparative quarters but did however have an impact on its accounting policies, the most significant of which relate to the Company's translation of foreign currency balances upon the consolidation of its US subsidiaries and its calculation of share based compensation expenses.

All results and balances reported in the release, including 2010 comparative results and balances, have been presented under IFRS.

Results of Operations

Pethealth Inc. reports its financial results in two reportable segments; its insurance operations and its non-insurance operations. Its insurance operations currently consist of the distribution and administration of the PetCare, Pet Protect, petPals, ShelterCare, QuickCare, Best Friends and other co-branded, white labelled or private labelled pet insurance programs, while its non-insurance operations are made up of its 24PetWatch and Pet Protect manufacturer-neutral pet registry and recovery service, the distribution of RFID microchip technology, the development and distribution of PetPoint, its animal shelter management software program, and Petango.com, its on-line pet portal which includes its on-line adoptable search engine, thePetangoStore.com and social networking.

For the three months ended For the six months ended

('000)
June 30
2011
June 30
2010

Change
June 30
2011
June 30
2010

Change
Revenue
Insurance segment $ 5,461 $ 5,693 (4% ) $ 10,933 $ 12,014 (9% )
Non-insurance segment 2,704 2,165 25% 5,195 4,196 24%
8,165 7,858 4% 16,128 16,210 (1% )
Profit (loss) before taxes
Insurance segment 1,158 1,126 3% 2,429 2,519 (4% )
Non-insurance segment (453 ) (918 ) 51% (978 ) (1,666 ) 41%
705 208 239% 1,451 853 70%
Profit (loss) after taxes
Insurance segment 1,005 1,626 (38% ) 2,135 2,931 (27% )
Non-insurance segment (453 ) (918 ) 51% (978 ) (1,666 ) 41%
552 708 (22% ) 1,157 1,265 (9% )
EBITDA(1)
Insurance segment 1,338 1,364 (2% ) 2,799 3,015 (7% )
Non-insurance segment (185 ) (705 ) 74% (438 ) (1,253 ) 65%
1,153 659 75% 2,361 1,762 34%
Adjusted EBITDA (2)
Insurance segment 1,335 1,490 (10% ) 2,816 3,058 (8% )
Non-insurance segment (185 ) (705 ) 74% (438 ) (1,253 ) 65%
1,150 785 46% 2,378 1,805 32%
  1. EBITDA, a non IFRS accounting measure, is operating income before amortization, plus interest on long-term debt and income taxes.
  2. Adjusted EBITDA, a non IFRS accounting measure, is EBITDA before stock option and equity-based compensation expenses and adjusted for non-cash foreign currency accounting translation gains and losses resulting from the Company's U.S. denominated debt.
Foreign exchange had a significant impact on year over year results particularly the 6% appreciation of the Canadian dollar against the U.S. dollar.
For the three months ended For the six months ended
('000s) Q2
2011
Q2
2010
Change
%
Q2
2011
Q2
2011
Change
%
Revenue as reported $ 8,165 $ 7,858 4% $ 16,128 $ 16,210 (1%)
Year over year foreign exchange impact on revenue 306 - 627 -
Revenue adjusted for changes in foreign exchange rates for comparative purposes $ 8,471 $ 7,858 8% $ 16,755 $ 16,210 3%

Pre-tax net income has been impacted by both non-cash foreign exchange gains and losses related to the translation of the Company's long term debt denominated in U.S. dollars and by year over year changes in foreign exchange rates. For comparative purposes, the following table adjusts net income before taxes for non-cash foreign exchange translation gains and losses:

For the three months ended For the six months ended

('000s)
Q2
2011
Q2
2010
Change
%
Q2
2011
Q2
2010
Change
%
Pre-tax profit as reported $ 705 $ 208 239 % $ 1,451 $ 853 70 %
Non-cash foreign exchange gain (9 ) - (35 ) -
Year over year foreign exchange impact on operating income 197 - 371 -
Pre-tax net income adjusted for the impact of changes in foreign exchange rates for comparative purposes $ 893 $ 208 329 % $ 1,787 $ 853 110 %

At June 30, 2011, the Company had total assets of $24.0 million including unrestricted cash balances of $4.5 million compared to assets of $24.9 million including unrestricted cash balances of $5.1 million at December 31, 2010.

"Our Q2 results I believe represent a solid overall performance of our business which generated both year on year and sequential revenue growth on the back of a stabilizing trend in our insurance operations and solid growth in our non insurance operations" said Mark Warren, President and CEO. "Pre-tax earnings and EBITDA were also up significantly year on year as we begin to reap the benefits from being on the downside of both our current capital expenditure and marketing expense cycles. However we cannot ignore both the overall macro environment and the fact that many of the bell weather companies operating in the companion animal market report slowdowns in discretionary spending of pet owners. Therefore our outlook remains cautiously optimistic as we enter the last half of the year."

Insurance Operations:

The Company is North America's number two provider of pet insurance operating in Canada, the United States and the United Kingdom. In all three jurisdictions, the Company operates as a Managing General Agent ("MGA") and, as such, is responsible for all aspects of its pet insurance programs other than the underwriting risk which is entirely borne by its third party carriers other than the Company's limited participation in its core U.S. and U.K. aggregate underwriting results.

Pet insurance revenues are earned primarily through commissions and fees generated from the sale of pet insurance policies at a blended base commission rate of approximately 37% in the United States, 35% in Canada and 33% in the United Kingdom.

New policy sales in the United States are generated via animal welfare organizations, direct to consumer advertising, co-branded and white labelled programs, and the Company's own advertising platform, in that order. To date, the Company has focused limited attention on the veterinary clinic channel in the United States as a means of distributing its insurance except where it cross sells its insurance to pet owners who are clients of clinics using its 24PetWatch microchip program.

During the first quarter, the Company announced a partnership with Best Friends Animal Society. In March of this year, Best Friends was identified by Harris Interactive as the number one not-for-profit brand name in the U.S. During the quarter, two additional white label programs were announced to leverage the brand recognition of both the Pennsylvania SPCA and Wisconsin SPCA with donors, adopters and veterinary clinics in their respective states.

In Canada, distribution of pet insurance is done primarily through animal welfare organizations, veterinary clinics (through both direct promotion and via the Company's 24PetWatch program), direct to consumer advertising, and via the Company's own advertising platform. In the United Kingdom, policy sales are generated via direct to consumer advertising and the veterinary channel both through exclusive relationships with selected veterinary clinics and hospitals as well as through the Company's microchip program.

Results

Insurance revenue fell by 4% for the quarter as compared to Q2 2010 and by 9% for the first six months of the year when compared to the first six months of the prior year. The decline was due primarily four factors:

(1) The restructuring of the Company's insurance program via animal welfare organizations in the U.S. and Canada.

On May 1, 2010, the Company restructured its insurance program delivered through North American animal welfare organisations which reduced both the non-cash component of its insurance revenue and the program's marketing expenses, discussed below under the heading Customer Acquisition Costs. The restructuring was fully completed at April 30, 2011. The impact on a foreign exchange adjusted basis of the restructuring on the Company's second quarter results was less than previous quarters as only one of three months was impacted. The change in the ShelterCare program reduced on a foreign exchange adjusted basis non-case revenues by $155,000 for the quarter and $631,000 for the six month period and increased net income and cash flows by $126,000 for the quarter and $516,000 for the six months to date by virtue of lower associated marketing costs. The change to the program fully flowed through the program on April 30, 2011 and will not impact Q3's comparable. Evidence of the long term positive impact of the change can be seen in the increase in the conversion rate of adopters enrolling in core policies and an overall positive impact on net policy growth, particularly in the United States.

(2) The appreciation of the Canadian dollar against the U.S. dollar.

For the three and six months ended June 30, 2011, the Canadian dollar appreciated by 6% against its US counterpart while remaining relatively flat against the Pound Sterling. For the quarter, the Canadian dollar's appreciation reduced revenues $306,000 and for the six months by $627,000.

(3) The decline in net policies in the United Kingdom, over and above the foreign exchange impact.

Net policies declined due to a combination of premium increases made necessary to combat continued high veterinary inflation and the macroeconomic environment in the U.K. which remains challenged. The decline in the UK policy book accounted for approximately a $250,000 comparative decline in commission and fee revenue for the quarter and $475,000 for the six months ended June 30, 2011.

(4) No amount was recorded in the first six months of the year related to the Company's participation in its programs' underwriting results compared to $51,000 being recorded in at June 30, 2010 as discussed below under the heading "Underwriting Participation".

For the three months period ended June 30, 2011, profit before income tax of the insurance operations was up 3% to $1.16 million and, for the six month period ended June 30 2011, was down 4% to $2.43 million.

For the three and six months ended June 30, 2011, EBITDA in the Company's insurance operations was down 2% to $1.34 million and down 7% to $2.80 million respectively when compared to the same period in 2010.

Administration costs consist of claims adjudication, medical underwriting, billing, and customer service but exclude corporate expenses. For the six months ended June 30, 2011, administration costs were 12.8% as compared to 11.7% for the same period in the prior year. When adjusted for the impact of foreign exchange and the change in the ShelterCare program, administration costs were broadly in-line with that reported last year. All marketing costs are expensed when incurred.

Under the terms of its MGA agreement with Praetorian Financial Group (USA) and QBE (Europe)(UK), both subsidiaries of QBE Insurance Group (collectively "QBE"), the Company participates in a portion of the underwriting results for core pet insurance policies placed with QBE in the U.S. and the U.K. on an aggregated weighted basis. The Company participates positively for policies underwritten by QBE when the aggregate weighted average accident year loss ratio is less than 50% and negatively when the actual accident year loss ratio exceeds 50%. The Company's participation in QBE's underwriting results is capped at 2.5% of earned premium.

As the Company's participation is based on the actual calendar year end loss ratio, it is required to use estimates for interim reporting purposes. The U.S. and U.K. core underwriting results for policies underwritten by Praetorian and QBE (Europe), in aggregate, are currently estimated to be between 48.5% and 51.5% for the 2011 year. Actual results will be influenced by several factors through 2011 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 and the impact of changes in underwriting guidelines. Given the number of factors influencing the actual outcome by year end, the mid-point of the current range, or $0, was recorded in the six months related to the Company's participation in its programs' underwriting results compared to $51,000 being recorded in the same period in 2010.

Non-Insurance Operations:

The Company's non-insurance segment focuses on generating revenues principally from North American pet owners who have acquired their pets through adoption, and from corporate entities and charitable foundations wishing to participate directly or indirectly with the adopter or in the pet adoption process. The non-insurance business leverages PetPoint, a cloud-computing network.

PetPoint had been licensed by 1,681 animal welfare organisations by June 30, 2011, an increase of 16% from those licensed at June 30, 2010. For the quarter and six months ended June 30, 2011, 610,970 and 1,068,628 intakes (animals entering the welfare organisations) and 206,212 and 405,073 adoptions were completed through PetPoint, an increase in intakes of 8% and 9% and adoptions of 15% and 13% from those completed last year. Recently, the Company added several new features including the Transfer Network (used to facilitate the movement of cats and dogs between animal welfare organisations), the revamped Case Module (used for Animal Control and Humane Law Enforcement), and an expanded medical module, features that are driving the number of animal welfare organisations licensing the system.

In addition to PetPoint, the Company has developed both the 24PetWatch microchip and database services business and the Petango pet portal which includes its adoptable search engine, social networking and thePetangoStore.com. These platforms have been used to develop what is now the premier network through which the Company can establish and maintain a relationship with the pet owner from the time they begin to search for their new dog or cat and through the lifetime of that newly adopted pet. As at June 30, 2011, the Company had in excess of 4.66 million individual files of pet and pet owner information in its 24PW database. This represents an increase of over 1.10 million cat and dog subscription, or 31% compared to those subscribed at the end of Q2 2010. The Company's strategic advantage is that it is both able to make this connection with the adopter and influence purchasing decisions prior to that adopter establishing his or her buying habits for their new dog or cat as well as the ability to maintain an on-going relationship based on the provision of various products and services, including pet insurance. On an aggregated basis, revenue opportunities generated via the PetPoint network of animal welfare organisations include medical and data publishing, content syndication, e-commerce, and sponsorship and advertising.

The Company's petango.com brand operates in two areas:
(i) Adoptable search, whereby potential pet owners can access all pets available for adoption from the Company's network of approximately 1,681 animal welfare organizations running its PetPoint platform. Petango.com is the only adoptable search site featuring exclusively live, real time available animal data. Additionally, the Company uses its petango.com platform to power adoptable search on over 650 websites of animal welfare organizations using PetPoint. In Q2 2011, over 2.2-million unique visitors viewed over 52.5 million pages on the petango.com site;
(ii) Pet Specialty Retail. The petangostore.com offers pet owners, and principally adopters of pets, the ability to buy pet medications online at prices better than through traditional channels. A key advantage of the Petango Store is that as "cause giving" online becomes more entrenched in consumer purchasing habits, the petangostore.com offers adopters the ability to donate directly to the animal welfare organization of their choice via purchases made on the site. The Company's involvement in online pet medication is not only to drive additional revenue for the Company's existing platform, but it is the Company's aim to also enhance the profitability of its insurance operations to hold down the cost of claims related to pet medications made by the Company's insured customer base. As of June 30, 2011, ThePetangoStore.com was offering pet owners approximately 9,300 skus with plans to have as many as 11,000 by the end of Q3, 2011.

Results

Revenue from non-insurance operations totalled $2.7 million and $5.2 million for the three and six months ended June 30, 2011, up 25% and 24% over the same period in the prior year. Adjusted for the impact of foreign exchange on the Company's non-insurance results, revenue would have increased by 32% and 30% over the same period in the prior year.

The EBITDA loss from non-insurance operations improved to $185,000 and $438,000 for the three and six months ended June 30, 2011, from EBITDA losses of $705,000 and $1,253,000 respectively in the prior year, a 74% and 65% improvement. The net operating loss on the Company's non-insurance operations after taxes fell 51% and 41% to $453,000 and $978,000 over the same period in the prior year.

24PetWatch/PetProtect microchip identification

For the three and six months ended June 30, 2011, the Company sold, in aggregate, 324,651 and 635,410 RFID microchips in the United States, Canada and the United Kingdom, in each case a 4% increase in unit sales from the same periods in 2010. Revenue from microchip sales for the three and six months ended June 30, 2011 increased 9% and 8% to $1.83 million and $3.7 million from the same period in the prior year. Unit sales increased during the quarter to U.S. animal welfare organizations, Canadian animal welfare organizations, Canadian veterinary clinics and U.K. veterinary clinics, but declined to U.S. veterinary clinics. Timing issues related to price increases and weather tend to distort monthly and quarterly sales of microchip units. As a result, the Company expects unit sales for the year to trend towards historical norms of low double-digit increases driven mainly through U.S. animal welfare organizations where adoptions completed via the Company's software application increased by 15% over the quarter. As a percentage of total non-insurance revenue over the quarter, microchip revenue fell from 78% in Q2 2010 to 68% in Q2 2011, indicating the Company's growing diversity in revenue generation through its non-insurance platform.

The sale of ancillary products and services to the 24PetWatch database of pet owners, such as pet tags and change of address fees but excluding core insurance products and sales through the petangostore.com, accounted for $520,000 in revenue during Q2, a 98% increase over Q2 2010. Inbound calls to the Company's non-insurance call centre totalled 56,691 during Q2, representing a 13.4% increase over the same quarter last year. The conversion rate on those calls into sales reached 29.6% for the quarter, up 9.3% from Q2 2010.

Petango.com/Petango Store

Sales via thepetangostore.com totalled $245,000 and $412,000 for the three and six months ended June 30, 2011, a 215% and 228% increase from sales recorded in the same period in the prior year. Approximately 79% of sales recorded were for pet medications.

Consolidated Capital expenditures, Marketing costs and Debt repayments

Capital expenditure for the three and six months ended June 30, 2011, totalled $658,000 and $1.35 million, a decline of 24% and 15% over what the Company spent for capital purposes in the same period in the prior year. As previously announced, the Company's significant investment in its own technologies used for its own day-to-day operations and for its investment in the technology used by its animal welfare organisation partners peaked in the current cycle and is now in a downward trend over the next 24 months as the Company began deploying the final free version of PetPoint, PetPoint 4.0, during the second quarter. Future development in software applications for its animal welfare organisations will be on a pay-as-you-go basis, either from these groups directly or from corporate sponsors wishing to have their brand more closely associated with animal welfare.

Marketing expenses for the three and six months ended June 30, 2011, declined 41% and 46% from the same period in the prior year. The decline in marketing costs relates principally to the restructuring of the Company's shelter insurance channel and as a result of a decrease in the cost of promoting its Petango brand. As was the case with both the Company's move into creating insurance solutions for animal welfare organisations and the introduction of its microchip program and services, its animal welfare organisation partners have become more efficient in the promotion of all of the Company's products and services to their adopters. The Company's own marketing spend to establish new programs is historically cyclical where it is initially quite high and then is reduced over time as animal welfare organisation partners become more proficient in promoting the Company's offerings. Consistent with this approach in 2009 and through the first half of 2010, the Company invested significantly in promoting the Company's own Petango brand but now has been able to reduce its own marketing costs as its animal welfare organisation partners have become more familiar with and see the value of their own organisations in promoting Petango-related offerings.

Debt repayments of $535,000 were made during Q2, 2011 reducing the term debt associated with the Company's 2008 acquisition of Pet Protect Limited to $361,000 at June 30, 2011. The Company made its final debt payment associated with its acquisition loan on August 1, 2011.

OUTLOOK

U.S.

The decline in consumer confidence noted at the end of Q1 continued during most of Q2. Based on macro conditions and the reported financial results of bellwether companies operating in the companion animal markets, Pethealth remains cautious in its outlook for the latter half of the year. Trends in the purchase of veterinary services and other pet-related discretionary products and services indicate fragility in pet-related discretionary spending in general and continued bifurcation in the pet owning consumer.

Canada

Conditions in Canada as compared to the United States and the U.K. remain relatively stable although pet owners would appear to be extending the periods between visits to veterinary clinics except for needed treatments and surgeries.

U.K.

Consumer spending in the U.K. remains challenged and earnings reports of companies operating in the companion animal marketplace indicate continued reluctance on the part of pet owners to make discretionary purchases and continued trading down to lower end products and services for their pets.

The Company is hosting an investor conference call on Thursday, August 11th, 2011, at 4:30 PM (EST) which can be accessed at 1-800-952-6845 or on-line at www.pethealthinc.com. For those unable to participate, a replay of the call will be available shortly after the call concludes on the Company's website at www.pethealthinc.com.

CONSOLIDATED FINANCIAL HIGHLIGHTS: For three months ended
('000) Jun 30, 2011 Jun 30, 2010 Change %
Insurance Commissions and Fees $ 5,461 $ 5,693 (4) %
Microchip Technology and Non-insurance Revenue 2,704 2,165 25 %
Total Revenue 8,165 7,858 4 %
Cost of Goods Sold 1,392 1,114 25 %
Selling and marketing 2,623 3,153 (17) %
Administrative and general 3,423 3,138 9 %
Other expenses 36 219 (84) %
Total Expenses 7,474 7,624 (2) %
Results from operating activities 691 234 195 %
Finance revenue 24 18 33 %
Finance costs (10) (44) (77) %
Profit before income tax 705 208 239 %
Income tax expense (recovery) 153 (500) 131 %
Net Income 552 708 (22) %
EPS Basic1 0.017 0.022 (23) %
EPS Diluted1 0.015 0.019 (21) %
EBITDA2 1,153 659 75 %
Adjusted EBITDA3 1,150 785 46 %
Gross Premiums Earned by Carriers 14,152 14,611 (3) %
(1) Basic and diluted earnings per share are adjusted to reflect the dividend payments made during the first quarter of 2011 and 2010. For the quarter ended June 30, 2011 the Company had weighted average basic common shares of 32,513,568 (2010 – 32,503,568) and fully diluted common shares of 37,515,527 (2010 – 37,775,668).
(2) The Company believes the presentation of EBITDA is a useful means of providing investors with additional information in reviewing and analyzing the Company's operating results. EBITDA is considered to be a non-IFRS earnings measure and does not have any standardized meaning prescribed by IFRS. It is, therefore, unlikely to be comparable to similar measures presented by other issuers. EBITDA is net income adjusted for interest, taxes and amortization.
(3) The Company believes the presentation of Adjusted EBITDA is a useful means of providing investors with additional information in reviewing and analyzing the Company's operating results. Adjusted EBITDA is considered to be a non-IFRS earnings measure and does not have any standardized meaning prescribed by IFRS. It is, therefore, unlikely to be comparable to similar measures presented by other issuers. Adjusted EBITDA is EBITDA adjusted for stock option and equity-based compensation expense and non-cash translation gains and losses associated with the Company's U.S. denominated debt.
CONSOLIDATED FINANCIAL HIGHLIGHTS: For six months ended
('000) Jun 30, 2011 Jun 30, 2010 Change %
Insurance Commissions and Fees $ 10,933 $ 12,014 (9) %
Microchip Technology and Non-insurance Revenue 5,195 4,196 24 %
Total Revenue 16,128 16,210 (1) %
Cost of Goods Sold 2,627 2,144 23 %
Selling and marketing 5,204 6,660 (22) %
Administrative and general 6,825 6,431 6 %
Other expenses 41 52 (21) %
Total Expenses 14,697 15,287 (4) %
Results from operating activities 1,431 923 55 %
Finance revenue 40 27 48 %
Finance costs (20) (97) (79) %
Profit before income tax 1,451 853 70 %
Income tax expense (recovery) 294 (412) 17 %
Net Income 1,157 1,265 (9) %
EPS – Basic1 0.017 0.020 (15) %
EPS – Diluted1 0.015 0.017 (12) %
EBITDA2 2,361 1,762 34 %
Adjusted EBITDA3 2,378 1,805 32 %
Gross Premiums Earned by Carriers 28,456 30,451 (7) %
(1) Basic and diluted earnings per share are adjusted to reflect the dividend payments made during the first quarter of 2011 and 2010. At June 30, 2011 the Company had weighted average basic common shares of 32,513,568 (2010 – 32,489,163) and fully diluted common shares of 37,584,397 (2010 – 37,971,263).
(2) The Company believes the presentation of EBITDA is a useful means of providing investors with additional information in reviewing and analyzing the Company's operating results. EBITDA is considered to be a non-IFRS earnings measure and does not have any standardized meaning prescribed by IFRS. It is, therefore, unlikely to be comparable to similar measures presented by other issuers. EBITDA is net income adjusted for interest, taxes and amortization.
(3) The Company believes the presentation of Adjusted EBITDA is a useful means of providing investors with additional information in reviewing and analyzing the Company's operating results. Adjusted EBITDA is considered to be a non-IFRS earnings measure and does not have any standardized meaning prescribed by IFRS. It is, therefore, unlikely to be comparable to similar measures presented by other issuers. Adjusted EBITDA is EBITDA adjusted for stock option and equity-based compensation expense and non-cash translation gains and losses associated with the Company's U.S. denominated debt.

About Pethealth

Pethealth is North America's second largest provider of medical insurance for dogs and cats to pet owners, operating in Canada, the United States 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 www.pethealthinc.com

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 www.sedar.com. 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.

Contact Information:

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