TRUPANION, INC. 10-Q

Item 1. Financial Statements TRUPANION, INC. Consolidated Statements of Operations (in thousands, except share data) (unaudited) Three Months Ended March 31, 2021 2020 Revenue $ 154,685 $ 111,301 Cost of revenue: Veterinary invoice expense (1) 109,870 79,640 Other cost of revenue (1) 23,715 13,809 Total cost of revenue 133,585 93,449 Operating expenses: Technology and development (1) 3,731 2,120 General and administrative (1) 7,216 4,860 Sales and marketing (1) 19,704 10,442 Depreciation and amortization 3,093 1,381 Total operating expenses 33,744 18,803 Gain (loss) from investment in joint venture ( 85 ) ( 59 ) Operating loss ( 12,729 ) ( 1,010 ) Interest expense ( 2 ) 379 Other income, net ( 62 ) ( 282 ) Loss before income taxes ( 12,665 ) ( 1,107 ) Income tax (benefit) expense ( 217 ) 26 Net loss $ ( 12,448 ) $ ( 1,133 ) Net loss per share: Basic and diluted $ ( 0.31 ) $ ( 0.03 ) Weighted average shares of common stock outstanding: Basic and diluted 39,700,454 35,007,052 (1) Includes stock-based compensation expense as follows: Veterinary invoice expense $ 2,299 $ 178 Other cost of revenue 935 90 Technology and development 664 100 General and administrative 1,819 729 Sales and marketing 2,731 556 See accompanying notes to the consolidated financial statements. 1 TRUPANION, INC. Consolidated Statements of Comprehensive Income (Loss) (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 Net loss $ ( 12,448 ) $ ( 1,133 ) Other comprehensive income (loss): Foreign currency translation adjustments 618 ( 630 ) Net unrealized gain (loss) on available-for-sale debt securities — ( 5 ) Other comprehensive income (loss), net of taxes 618 ( 635 ) Comprehensive loss $ ( 11,830 ) $ ( 1,768 ) See accompanying notes to the consolidated financial statements. 2 TRUPANION, INC. Consolidated Balance Sheets (in thousands, except share data) March 31, 2021 December 31, 2020 Assets (unaudited) Current assets: Cash and cash equivalents $ 133,126 $ 139,878 Short-term investments 91,331 89,862 Accounts and other receivables 117,884 99,065 Prepaid expenses and other assets 9,664 8,222 Total current assets 352,005 337,027 Restricted cash 6,321 6,319 Long-term investments, at fair value 5,808 5,566 Property and equipment, net 73,664 72,602 Intangible assets, net 26,105 27,134 Other long-term assets 16,468 16,557 Goodwill 33,327 33,045 Total assets $ 513,698 $ 498,250 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 5,262 $ 6,059 Accrued liabilities and other current liabilities 23,365 22,864 Reserve for veterinary invoices 30,135 28,929 Deferred revenue 110,912 92,547 Total current liabilities 169,674 150,399 Deferred tax liabilities 4,477 4,705 Other liabilities 3,470 3,207 Total liabilities 177,621 158,311 Stockholders’ equity: Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 40,989,571 and 40,056,406 issued and outstanding at March 31, 2021; 40,383,972 and 39,450,807 shares issued and outstanding at December 31, 2020 — — Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding — — Additional paid-in capital 446,975 439,007 Accumulated other comprehensive income (loss) 3,689 3,071 Accumulated deficit ( 103,808 ) ( 91,360 ) Treasury stock, at cost: 933,165 shares at March 31, 2021 and 933,165 shares at December 31, 2020 ( 10,779 ) ( 10,779 ) Total stockholders’ equity 336,077 339,939 Total liabilities and stockholders’ equity $ 513,698 $ 498,250 See accompanying notes to the consolidated financial statements. 3 Trupanion, Inc. Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) (unaudited) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity Shares Amount Balance at January 1, 2021 39,450,807 $ — $ 439,007 $ ( 91,360 ) $ 3,071 $ ( 10,779 ) $ 339,939 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 605,599 — ( 643 ) — — — ( 643 ) Stock-based compensation expense — — 8,611 — — — 8,611 Other comprehensive income (loss) — — — — 618 — 618 Net income (loss) — — — ( 12,448 ) — — ( 12,448 ) Balance at March 31, 2021 40,056,406 $ — $ 446,975 $ ( 103,808 ) $ 3,689 $ ( 10,779 ) $ 336,077 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity Shares Amount Balance at January 1, 2020 34,947,017 $ — $ 232,731 $ ( 85,520 ) $ 250 $ ( 10,701 ) $ 136,760 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 140,788 — 205 — — — 205 Stock-based compensation expense — — 1,706 — — — 1,706 Repurchase of common stock ( 3,300 ) — — — — ( 78 ) ( 78 ) Other comprehensive income (loss) — — — — ( 635 ) — ( 635 ) Net income (loss) — — — ( 1,133 ) — — ( 1,133 ) Balance at March 31, 2020 35,084,505 $ — $ 234,642 $ ( 86,653 ) $ ( 385 ) $ ( 10,779 ) $ 136,825 See accompanying notes to the consolidated financial statements. 4 TRUPANION, INC. Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 Operating activities Net loss $ ( 12,448 ) $ ( 1,133 ) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 3,093 1,381 Stock-based compensation expense 8,448 1,653 Other, net ( 230 ) 73 Changes in operating assets and liabilities: Accounts and other receivables ( 18,805 ) ( 11,697 ) Prepaid expenses and other assets ( 1,331 ) ( 195 ) Accounts payable, accrued liabilities, and other liabilities 35 1,322 Reserve for veterinary invoices 1,179 1,825 Deferred revenue 18,324 9,695 Net cash (used in) provided by operating activities ( 1,735 ) 2,924 Investing activities Purchases of investment securities ( 12,157 ) ( 11,579 ) Maturities of investment securities 10,478 5,100 Purchases of property, equipment and intangible assets ( 2,883 ) ( 1,496 ) Other ( 40 ) 9 Net cash used in investing activities ( 4,602 ) ( 7,966 ) Financing activities Proceeds from exercise of stock options 1,238 559 Shares withheld to satisfy tax withholding ( 1,881 ) ( 321 ) Borrowings from line of credit, net of financing fees — 3,744 Other — ( 78 ) Net cash (used in) provided by financing activities ( 643 ) 3,904 Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net 230 ( 809 ) Net change in cash, cash equivalents, and restricted cash ( 6,750 ) ( 1,947 ) Cash, cash equivalents, and restricted cash at beginning of period 146,197 30,568 Cash, cash equivalents, and restricted cash at end of period $ 139,447 $ 28,621 Supplemental disclosures Noncash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 753 $ 355 See accompanying notes to the consolidated financial statements. 5 TRUPANION, INC. Notes to the Consolidated Financial Statements (unaudited) 1. Nature of Operations and Significant Accounting Policies Description of Business and Basis of Presentation Trupanion, Inc. (collectively with its wholly-owned subsidiaries, the Company) provides medical insurance for cats and dogs throughout the United States, Canada, Puerto Rico, and Australia. The Company's data-driven, vertically-integrated approach enables the Company to provide pet owners with products that the Company believes are the highest value medical insurance, priced specifically for each pet’s unique characteristics. The financial data as of December 31, 2020 was derived from the Company's audited consolidated financial statements. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations, comprehensive income (loss), stockholders' equity and cash flows for the interim periods. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC) on February 12, 2021 (the 2020 10-K). The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2020 10-K. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates. See Note 1 to the audited financial statements included in the 2020 10-K for additional discussion of these estimates and assumptions. Reclassifications Depreciation and amortization expenses have been reclassified as a separate line item in the consolidated statement of operations and prior period amounts have been reclassified from their original presentation to conform to the current period presentation. The Company has elected to present depreciation and amortization expenses as a separate line item to better align with management's view of the Company's operating results. 2. Net Income (Loss) per Share Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is calculated using the weighted average number of shares of common stock plus, when dilutive, potential shares of common stock outstanding using the treasury-stock method. Potential shares of common stock outstanding include stock options, unvested restricted stock awards and restricted stock units, and warrants. The following potentially dilutive equity securities were not included in the diluted earnings per share of common stock calculation because they would have had an antidilutive effect: Three Months Ended March 31, 2021 2020 Stock options 1,026,605 2,046,395 Restricted stock awards and restricted stock units 1,232,549 506,863 6 3. Investments The amortized cost, gross unrealized holding gains and losses, and estimates of fair value of long-term and short-term investments by major security type and class of security were as follows as of March 31, 2021 and December 31, 2020 (in thousands): Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of March 31, 2021 Long-term investments: Foreign deposits $ 4,806 $ — $ — $ 4,806 Municipal bond 1,000 2 — 1,002 $ 5,806 $ 2 $ — $ 5,808 Short-term investments: U.S. Treasury securities $ 6,476 $ — $ — $ 6,476 Certificates of deposit 442 — — 442 U.S. government funds 84,413 — — 84,413 $ 91,331 $ — $ — $ 91,331 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of December 31, 2020 Long-term investments: Foreign deposits $ 4,564 $ — $ — $ 4,564 Municipal bond 1,000 2 — 1,002 $ 5,564 $ 2 $ — $ 5,566 Short-term investments: U.S. Treasury securities $ 6,494 $ — $ ( 2 ) $ 6,492 Certificates of deposit 1,696 — — 1,696 U.S. government funds 81,672 — — 81,672 $ 89,862 $ — $ ( 2 ) $ 89,860 Maturities of debt securities classified as available-for-sale were as follows (in thousands): As of March 31, 2021 Amortized Cost Fair Value Available-for-sale: Due after one year through five years $ 5,806 $ 5,808 $ 5,806 $ 5,808 The Company does not expect any credit losses from its held-to-maturity investments, considering the composition of the investment portfolio and the credit loss history of these investments. For available-for-sale debt securities, the Company determined that the unrealized losses were immaterial and due to non-credit factors. The Company does not intend to sell, nor is it more likely than not that the Company will be required to sell, the securities prior to maturity or prior to the recovery of the amortized cost basis. 7 4. Other Investments Investment in Variable Interest Entity The Company has invested $ 7.0 million in preferred stock of a privately held corporation with a complementary business line. The Company does not have power over the activities that most significantly impact the economic performance of the variable interest entity and is, therefore, not the primary beneficiary. The Company has the option to purchase all of the outstanding common shares issued by the variable interest entity in 2023 at an amount approximating its expected fair value. The preferred stock investment in the variable interest entity is accounted for as an available-for-sale debt security and measured at fair value at each balance sheet date. Additionally, the Company has extended a $ 2.5 million revolving line of credit to the variable interest entity to fund its inventory purchases. The Company's investment and amounts loaned under the line of credit are recorded in other long-term assets on its consolidated balance sheet. The outstanding loan balance under the line of credit was $ 2.5 million as of March 31, 2021 and December 31, 2020. The Company has also entered into a series of agreements to provide ancillary services to the variable interest entity at cost. The Company provided $ 0.2 million and $ 0.4 million of these services for the three months ended March 31, 2021 and 2020, respectively, which were recorded against its operating expenses. Investment in Joint Venture In September 2018, the Company acquired a non-controlling equity interest in a joint venture in Australia, whereby it has committed to licensing certain intellectual property and contributing up to $ 2.2 million AUD upon the achievement of specific operational milestones over a period of at least four years from the agreement execution date. As of March 31, 2021, the Company has contributed $ 0.6 million AUD. This equity investment is accounted for using the equity method and is classified in other long-term assets on the Company's consolidated balance sheet. The Company's share of income and losses from this equity method investment is included in gain (loss) from investment in joint venture on its consolidated statement of operations. Also included in this line item are income and expenses associated with administrative services provided to the joint venture. 5. Fair Value Investments The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis, and placement within the fair value hierarchy (in thousands): As of March 31, 2021 Fair Value Level 1 Level 2 Level 3 Assets Restricted cash $ 6,321 $ 6,321 $ — $ — Money market funds 89,658 89,658 — — Fixed maturities: Foreign deposits 4,806 4,806 — — Municipal bond 1,002 — 1,002 — Investment in variable interest entity 7,949 — — 7,949 Total $ 109,736 $ 100,785 $ 1,002 $ 7,949 As of December 31, 2020 Fair Value Level 1 Level 2 Level 3 Assets Restricted cash $ 6,319 $ 6,319 $ — $ — Money market funds 99,054 99,054 — — Fixed maturities: Foreign deposits 4,564 4,564 — — Municipal bond 1,002 — 1,002 — Investment in variable interest entity 7,949 — — 7,949 Total $ 118,888 $ 109,937 $ 1,002 $ 7,949 8 The Company measures the fair value of restricted cash, money market funds, and foreign deposits based on quoted prices in active markets for identical assets. The fair value of the municipal bond is based on either recent trades in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. Short-term investments are carried at amortized cost, and the fair value and changes in unrealized gains (losses) are disclosed in Note 3, Investments. The fair value of these investments is determined in the same manner as for available-for-sale securities and is considered a Level 1 measurement. The Company's preferred stock investment in the variable interest entity (see Note 4) is accounted for as an available-for-sale debt security and measured at fair value at each balance sheet date. The estimated fair value of the preferred stock investment is a Level 3 measurement and is based on certain unobservable inputs such as the value of the underlying enterprise, volatility, time to liquidity, and market interest rates. An increase or decrease in any of these unobservable inputs would result in a change in the fair value measurement. Estimated fair value was $ 7.9 million as of March 31, 2021, unchanged from December 31, 2020, recorded in other long-term assets on the Company's consolidated balance sheet. Fair Value Disclosures The Company's other long-term assets balance included notes receivable of $ 6.1 million as of March 31, 2021 and December 31, 2020, recorded at their estimated collectible amount. The Company estimates that the carrying value of the notes receivable approximates the fair value. The estimated fair value represents a Level 3 measurement within the fair value hierarchy and is based on market interest rates and the assessed creditworthiness of the third party. There was no significant activity in Level 3 of the hierarchy during the three months ended March 31, 2021. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers between levels for the three months ended March 31, 2021 and the year ended December 31, 2020. 6. Commitments and Contingencies Certain state insurance regulators in the United States have contacted the Company regarding whether employees who had helped prospective members enroll by telephone in prior years were required to have an insurance license to conduct such telephone conversations. To date, the Company has resolved each of these matters in non-material amounts and believes it is compliant with the applicable regulations. The Company is currently engaged with a limited number of state insurance regulators to resolve this same legacy issue and believes it has adequately reserved for these matters. In addition, from time to time the Company is or may become subject to various legal proceedings arising in the ordinary course of business, including proceedings against members, other entities or regulatory bodies. Estimated liabilities are recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. At this time, the Company does not believe any such matters to be material individually or in the aggregate. These views are subject to change following the outcome of future events or the results of future developments. 7. Reserve for Veterinary Invoices The reserve for veterinary invoices is an estimate of the future amount the Company will pay for veterinary invoices that are dated as of, or prior to, its balance sheet date. The reserve also includes the Company's estimate of related internal processing costs. The reserve estimate involves actuarial projections, and is based on management's assessment of facts and circumstances currently known, and assumptions about anticipated patterns. The Company uses generally accepted actuarial methodologies, such as paid loss development methods, in estimating the amount of the reserve for veterinary invoices. The reserve is made for each of the Company's segments, subscription and other business, and is continually refined as the Company receives and pays veterinary invoices. Changes in management's assumptions and estimates may have a relatively large impact to the reserve and associated expense. 9 Reserve for veterinary invoices Summarized below are the changes in the total liability for the Company's subscription business segment (in thousands): Three Months Ended March 31, Subscription 2021 2020 Reserve at beginning of year $ 19,925 $ 15,541 Veterinary invoices during the period related to: Current year 84,216 64,816 Prior years ( 490 ) 372 Total veterinary invoice expense 83,726 65,188 Amounts paid during the period related to: Current year 68,214 54,000 Prior years 12,468 10,765 Total paid 80,682 64,765 Non-cash expenses 2,369 226 Reserve at end of period $ 20,600 $ 15,738 The Company's reserve for the subscription business segment increased from $ 19.9 million at December 31, 2020 to $ 20.6 million at March 31, 2021. This change was comprised of $ 83.7 million in expense recorded during the period less $ 80.7 million in payments of veterinary invoices. The $ 83.7 million in veterinary invoice expense incurred included a reduction of $ 0.5 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. For the three months ended March 31, 2020, the Company increased prior year reserves by $ 0.4 million as a result of analysis of payment trends. Summarized below are the changes in total liability for the Company's other business segment (in thousands): Three Months Ended March 31, Other Business 2021 2020 Reserve at beginning of year $ 9,004 $ 5,653 Veterinary invoices during the period related to: Current year 26,414 14,323 Prior years ( 270 ) 129 Total veterinary invoice expense 26,144 14,452 Amounts paid during the period related to: Current year 18,031 8,180 Prior years 7,582 4,801 Total paid 25,613 12,981 Non-cash expenses — — Reserve at end of period $ 9,535 $ 7,124 The Company’s reserve for the other business segment increased from $ 9.0 million at December 31, 2020 to $ 9.5 million at March 31, 2021. This change was comprised of $ 26.1 million in expense recorded during the period less $ 25.6 million in payments of veterinary invoices. The $ 26.1 million in veterinary invoice expense incurred included a reduction of $ 0.3 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. For the three months ended March 31, 2020, the Company increased prior year reserves by $ 0.1 million as a result of analysis of payment trends. 10 Reserve for veterinary invoices, by year of occurrence In the following tables, the reserve for veterinary invoices for each segment is presented as the amount (in thousands) by the year to which the veterinary invoice relates, referred to as the year of occurrence. Subscription As of March 31, 2021 Year of Occurrence 2019 and prior $ 1,758 2020 5,209 2021 13,633 $ 20,600 Other Business As of March 31, 2021 Year of Occurrence 2019 and prior $ 1 2020 1,151 2021 8,383 $ 9,535 8. Stock-Based Compensation Stock-based compensation expense includes stock options and restricted stock units granted to employees and other service providers and has been reported in the Company’s consolidated statements of operations depending on the function performed by the employee or other service provider. Stock-based compensation expense recognized in each category of the consolidated statements of operations was as follows (in thousands): Three Months Ended March 31, 2021 2020 Veterinary invoice expense $ 2,299 $ 178 Other cost of revenue 935 90 Technology and development 664 100 General and administrative 1,819 729 Sales and marketing 2,731 556 Total expensed stock-based compensation 8,448 1,653 Capitalized stock-based compensation 162 53 Total stock-based compensation $ 8,610 $ 1,706 As of March 31, 2021, the Company had 16,795 unvested stock options and 1,232,549 unvested restricted stock units that are expected to vest. Stock-based compensation expenses of $ 0.1 million related to unvested stock options and $ 82.1 million related to unvested restricted stock units are expected to be recognized over a weighted average period of approximately 0.1 years and 3.2 years, respectively. 11 Stock Options A summary of the Company's stock option activity is as follows: Number of Options Weighted Average Exercise Price per Share Aggregate Intrinsic Value (in thousands) Outstanding as of December 31, 2020 1,459,290 $ 9.93 $ 160,200 Granted — — — Exercised ( 431,056 ) 2.87 40,965 Forfeited ( 1,629 ) 15.71 — Outstanding as of March 31, 2021 1,026,605 12.88 65,010 Exercisable as of March 31, 2021 1,009,810 $ 12.79 $ 64,038 As of March 31, 2021, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 4.9 years and 4.9 years, respectively. Restricted Stock Units A summary of the Company’s restricted stock unit activity is as follows: Number of Shares Weighted Average Grant Date Fair Value per Share Unvested shares as of December 31, 2020 782,755 $ 34.81 Granted 651,321 101.93 Vested ( 195,178 ) 42.68 Forfeited ( 6,349 ) 61.96 Unvested shares as of March 31, 2021 1,232,549 $ 68.89 9. Stockholders' Equity Common Stock and Preferred Stock As of March 31, 2021, the Company had 100,000,000 shares of common stock authorized and 40,056,406 shares of common stock outstanding. Holders of common stock are entitled to one vote on each matter properly submitted to the stockholders of the Company except those related to matters concerning possible outstanding preferred stock. At March 31, 2021, the Company had 10,000,000 shares of undesignated preferred stock authorized for future issuance and did not have any outstanding shares of preferred stock. The holders of common stock are also entitled to receive dividends as and when declared by the board of directors of the Company, whenever funds are legally available. These rights are subordinate to the dividend rights of holders of any senior classes of stock outstanding at the time. The Company does not intend to declare or pay any cash dividends in the foreseeable future. 10. Segments The Company has two reporting segments: subscription business and other business. The subscription business segment currently includes revenue from subscription fees related the Company's "Trupanion" branded products, while the other business segment is comprised of revenue from other product offerings that generally have a business-to-business relationship and a different margin profile than our subscription segment, including revenue from writing policies on behalf of third parties and revenue from other products and software solutions. The chief operating decision maker reviews revenue and operating income (loss) to evaluate segment performance. Revenue, veterinary invoice expense, other cost of revenue, and sales and marketing expenses are generally directly attributed to each segment. Other operating expenses, such as technology and development expense, general and administrative expense, and depreciation and amortization, are allocated proportionately based on revenue in each segment. Interest and other expenses and income taxes are not allocated to the segments, nor included in the measure of segment profit or loss. The Company does not analyze discrete segment balance sheet information related to long-term assets. 12 Operating income (loss) of the Company’s segments were as follows (in thousands): Three Months Ended March 31, 2021 2020 Subscription business: Revenue $ 113,292 $ 89,484 Veterinary invoice expense 83,726 65,188 Other cost of revenue 11,811 8,234 Technology and development 2,733 1,704 General and administrative 5,285 3,907 Sales and marketing 19,533 10,279 Depreciation and amortization 2,265 1,111 Subscription business operating income (loss) ( 12,061 ) ( 939 ) Other business: Revenue 41,393 21,817 Veterinary invoice expense 26,144 14,452 Other cost of revenue 11,904 5,575 Technology and development 998 416 General and administrative 1,931 953 Sales and marketing 171 163 Depreciation and amortization 828 270 Other business operating income (loss) ( 583 ) ( 12 ) Gain (loss) from investment in joint venture ( 85 ) ( 59 ) Total operating income (loss) $ ( 12,729 ) $ ( 1,010 ) The following table presents the Company’s revenue by geographic region of the member (in thousands): Three Months Ended March 31, 2021 2020 United States $ 127,759 $ 92,524 Canada and other 26,926 18,777 Total revenue $ 154,685 $ 111,301 Substantially all of the Company’s long-lived assets were located in the United States as of March 31, 2021 and December 31, 2020. 13 11. Business Combination On October 30, 2020, the Company completed an acquisition of 100% of the equity of Aquarium Software Limited (Aquarium), a U.K.-based insurance software provider, for approximately $ 48.3 million in net cash. The acquired technology from Aquarium focuses on the pet space and, along with the acquired personnel, is intended to enable the Company to improve its back-end software to help facilitate growth opportunities. The Company incurred $ 0.6 million acquisition-related costs that were recorded in general and administrative expenses. The acquisition is recorded using the purchase method of accounting in accordance with ASC 805, Business Combinations, which requires that the assets acquired and liabilities assumed to be recorded at their respective fair values at the acquisition date. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands): October 30, 2020 Current assets, net of cash acquired $ 1,469 Property and equipment 171 Amortizable intangible assets 19,512 Goodwill 31,352 Other long-term assets 1,421 Current liabilities ( 1,269 ) Deferred tax liability and other liabilities ( 4,361 ) Total Consideration Transferred, net of cash acquired $ 48,295 The results of Aquarium’s operations have been included in the consolidated financial statements since the acquisition date, but have been immaterial to the Company's consolidated financial statements. 12. Related Parties In August 2018, the Company invested $ 0.3 million in a limited liability entity in exchange for a 17.5 % ownership interest. The investee is considered to be a related party, as the Company has the ability to exercise significant influence over the investee. In February 2020, the Company entered into a service agreement with the investee, under which the Company incurred $ 0.8 million of expenses for consulting services provided by the investee during the three months ended March 31, 2021. 14