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, 2022 2021 Revenue $ 205,999 $ 154,685 Cost of revenue: Veterinary invoice expense (1) 144,926 109,870 Other cost of revenue (1) 31,179 23,715 Total cost of revenue 176,105 133,585 Operating expenses: Technology and development (1) 5,229 3,731 General and administrative (1) 9,366 7,216 New pet acquisition expense (1) 21,627 19,704 Depreciation and amortization 2,717 3,093 Total operating expenses 38,939 33,744 Loss from investment in joint venture ( 69 ) ( 85 ) Operating loss ( 9,114 ) ( 12,729 ) Interest expense 79 ( 2 ) Other income, net ( 314 ) ( 62 ) Loss before income taxes ( 8,879 ) ( 12,665 ) Income tax benefit ( 24 ) ( 217 ) Net loss $ ( 8,855 ) $ ( 12,448 ) Net loss per share: Basic and diluted $ ( 0.22 ) $ ( 0.31 ) Weighted average shares of common stock outstanding: Basic and diluted 40,581,989 39,700,454 (1) Includes stock-based compensation expense as follows: Veterinary invoice expense $ 1,187 $ 2,299 Other cost of revenue 649 935 Technology and development 908 664 General and administrative 2,423 1,819 New pet acquisition expense 2,382 2,731 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, 2022 2021 Net loss $ ( 8,855 ) $ ( 12,448 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 898 ) 618 Net unrealized gain (loss) on available-for-sale debt securities — — Other comprehensive income (loss), net of taxes ( 898 ) 618 Comprehensive loss $ ( 9,753 ) $ ( 11,830 ) See accompanying notes to the consolidated financial statements. 2 TRUPANION, INC. Consolidated Balance Sheets (in thousands, except share data) March 31, 2022 December 31, 2021 Assets (unaudited) Current assets: Cash and cash equivalents $ 122,462 $ 87,400 Short-term investments 136,571 126,012 Accounts and other receivables, net of allowance for doubtful accounts of $ 358 at March 31, 2022 and $ 342 at December 31, 2021 189,035 165,217 Prepaid expenses and other assets 14,488 12,325 Total current assets 462,556 390,954 Restricted cash 13,470 13,469 Long-term investments, at fair value 7,384 7,061 Property and equipment, net 80,368 77,950 Intangible assets, net 21,317 22,663 Other long-term assets 17,722 17,776 Goodwill 31,794 32,709 Total assets $ 634,611 $ 562,582 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 5,795 $ 8,952 Accrued liabilities and other current liabilities 29,746 28,162 Reserve for veterinary invoices 38,524 39,671 Deferred revenue 170,990 146,911 Long-term debt - current portion 609 — Total current liabilities 245,664 223,696 Long-term debt 53,662 — Deferred tax liabilities 2,690 2,827 Other liabilities 4,062 3,859 Total liabilities 306,078 230,382 Stockholders’ equity: Common stock: $ 0.00001 par value per share, 100,000,000 shares authorized; 41,644,656 and 40,711,491 issued and outstanding at March 31, 2022; 41,408,350 and 40,475,185 shares issued and outstanding at December 31, 2021 — — Preferred stock: $ 0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding — — Additional paid-in capital 472,878 466,792 Accumulated other comprehensive income 2,179 3,077 Accumulated deficit ( 135,745 ) ( 126,890 ) Treasury stock, at cost: 933,165 shares at March 31, 2022 and December 31, 2021 ( 10,779 ) ( 10,779 ) Total stockholders’ equity 328,533 332,200 Total liabilities and stockholders’ equity $ 634,611 $ 562,582 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, 2022 40,475,185 $ — $ 466,792 $ ( 126,890 ) $ 3,077 $ ( 10,779 ) $ 332,200 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 236,306 — ( 1,699 ) — — — ( 1,699 ) Stock-based compensation expense — — 7,785 — — — 7,785 Other comprehensive income (loss) — — — — ( 898 ) — ( 898 ) Net income (loss) — — — ( 8,855 ) — — ( 8,855 ) Balance at March 31, 2022 40,711,491 $ — $ 472,878 $ ( 135,745 ) $ 2,179 $ ( 10,779 ) $ 328,533 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 See accompanying notes to the consolidated financial statements. 4 TRUPANION, INC. Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2022 2021 Operating activities Net loss $ ( 8,855 ) $ ( 12,448 ) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 2,717 3,093 Stock-based compensation expense 7,549 8,448 Other, net ( 79 ) ( 230 ) Changes in operating assets and liabilities: Accounts and other receivables ( 23,815 ) ( 18,805 ) Prepaid expenses and other assets ( 2,060 ) ( 1,331 ) Accounts payable, accrued liabilities, and other liabilities ( 1,806 ) 35 Reserve for veterinary invoices ( 1,213 ) 1,179 Deferred revenue 23,972 18,324 Net cash used in operating activities ( 3,590 ) ( 1,735 ) Investing activities Purchases of investment securities ( 22,892 ) ( 12,157 ) Maturities of investment securities 12,199 10,478 Purchases of property and equipment ( 3,553 ) ( 2,883 ) Other ( 5 ) ( 40 ) Net cash used in investing activities ( 14,251 ) ( 4,602 ) Financing activities Proceeds from debt financing, net of financing fees 54,463 — Proceeds from exercise of stock options 600 1,238 Shares withheld to satisfy tax withholding ( 2,298 ) ( 1,881 ) Net cash provided by (used in) financing activities 52,765 ( 643 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net 139 230 Net change in cash, cash equivalents, and restricted cash 35,063 ( 6,750 ) Cash, cash equivalents, and restricted cash at beginning of period 100,869 146,197 Cash, cash equivalents, and restricted cash at end of period $ 135,932 $ 139,447 Supplemental disclosures Noncash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 945 $ 753 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, 2021 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 17, 2022 (the 2021 10-K). The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2021 10-K. Operating results for the three months ended March 31, 2022 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 2021 10-K for additional discussion of these estimates and assumptions. 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 and restricted stock units. 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, 2022 2021 Stock options 759,719 1,026,605 Restricted stock units 1,366,507 1,232,549 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, 2022 and December 31, 2021 (in thousands): Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of March 31, 2022 Long-term investments: Foreign deposits $ 6,373 $ — $ — $ 6,373 Municipal bond 1,000 11 — 1,011 $ 7,373 $ 11 $ — $ 7,384 Short-term investments: U.S. Treasury securities $ 8,773 $ — $ ( 30 ) $ 8,743 Certificates of deposit 3,355 — — 3,355 U.S. government funds 124,443 — — 124,443 $ 136,571 $ — $ ( 30 ) $ 136,541 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of December 31, 2021 Long-term investments: Foreign deposits $ 6,050 $ — $ — $ 6,050 Municipal bond 1,000 11 — 1,011 $ 7,050 $ 11 $ — $ 7,061 Short-term investments: U.S. Treasury securities $ 8,671 $ — $ ( 9 ) $ 8,662 Certificates of deposit 3,295 — — 3,295 U.S. government funds 114,046 — — 114,046 $ 126,012 $ — $ ( 9 ) $ 126,003 Maturities of debt securities classified as available-for-sale were as follows (in thousands): As of March 31, 2022 Amortized Cost Fair Value Available-for-sale: Due after one year through five years $ 7,373 $ 7,384 $ 7,373 $ 7,384 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 there were no unrealized losses. 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 The Company has invested $ 7.0 million in preferred stock of a variable interest entity, Baystride, Inc., a U.S.-based privately held corporation operating in the pet food industry. 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 $ 4.1 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, including accrued interest, was $ 4.5 million as of March 31, 2022 and December 31, 2021. The Company has also entered into a series of agreements to provide ancillary services to, and receive reimbursement from, the variable interest entity at cost. The Company provided $ 0.2 million of these services for the three months ended March 31, 2022 and 2021. 5. Fair Value Investments The following tables summarize, 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, 2022 Fair Value Level 1 Level 2 Level 3 Assets Money market funds 75,758 75,758 — — Fixed maturities: Foreign deposits 6,373 6,373 — — Municipal bond 1,011 — 1,011 — Preferred shares in variable interest entity 8,442 — — 8,442 Total $ 91,584 $ 82,131 $ 1,011 $ 8,442 As of December 31, 2021 Fair Value Level 1 Level 2 Level 3 Assets Money market funds 32,255 32,255 — — Fixed maturities: Foreign deposits 6,050 6,050 — — Municipal bond 1,011 — 1,011 — Preferred shares in variable interest entity 8,442 — — 8,442 Total $ 47,758 $ 38,305 $ 1,011 $ 8,442 The Company measures the fair value of 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 available-for-sale securities and is considered a Level 1 measurement. 8 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 $ 8.4 million as of March 31, 2022, unchanged from December 31, 2021, 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 $ 7.6 million as of March 31, 2022 and December 31, 2021, 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, 2022. 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, 2022 and the year ended December 31, 2021. 6. Commitments and Contingencies 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. 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 2022 2021 Reserve at beginning of year $ 22,407 $ 19,925 Veterinary invoices during the period related to: Current year 101,078 84,216 Prior years ( 488 ) ( 490 ) Total veterinary invoice expense 100,590 83,726 Amounts paid during the period related to: Current year 85,993 68,214 Prior years 13,922 12,468 Total paid 99,915 80,682 Non-cash expenses 1,234 2,369 Reserve at end of period $ 21,848 $ 20,600 9 The Company's reserve for the subscription business segment decreased $ 0.6 million from $ 22.4 million at December 31, 2021 to $ 21.8 million at March 31, 2022. This change was comprised of $ 100.6 million in expense recorded during the period less $ 99.9 million in payments of veterinary invoices. The $ 100.6 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, 2021, the Company's adjustment to prior year reserves was a reduction of $ 0.5 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 2022 2021 Reserve at beginning of year $ 17,264 $ 9,004 Veterinary invoices during the period related to: Current year 43,735 26,414 Prior years 601 ( 270 ) Total veterinary invoice expense 44,336 26,144 Amounts paid during the period related to: Current year 29,426 18,031 Prior years 15,498 7,582 Total paid 44,924 25,613 Non-cash expenses — — Reserve at end of period $ 16,676 $ 9,535 The Company’s reserve for the other business segment decreased $ 0.6 million from $ 17.3 million at December 31, 2021 to $ 16.7 million at March 31, 2022. This change was comprised of $ 44.3 million in expense recorded during the period less $ 44.9 million in payments of veterinary invoices. The $ 44.3 million in veterinary invoice expense incurred included an increase of $ 0.6 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, 2021, the Company's adjustment to decrease prior year reserves was $ 0.3 million as a result of analysis of payment trends. 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, 2022 Year of Occurrence 2020 and prior $ 1,584 2021 6,413 2022 13,851 $ 21,848 Other Business As of March 31, 2022 Year of Occurrence 2020 and prior $ 11 2021 2,357 2022 14,308 $ 16,676 10 8. Debt On March 25, 2022 , the Company entered into a $ 150.0 million credit agreement (the “Credit Facility”) that provides for: (a) an initial term loan in an aggregate principal amount of $ 60.0 million (“Initial Term Loan”), which funded at closing; (b) commitments for delayed draw term loans in an aggregate principal amount not in excess of $ 75.0 million (“Delayed Draw Term Loans”, and together with the Initial Term Loan, the “Term Loans”), which may be drawn from time to time until September 25, 2023 ; and (c) commitments for revolving loans in an aggregate principal amount at any time outstanding not in excess of $ 15.0 million (“Revolving Loans”), which may be drawn at any time prior to March 25, 2027 . The Credit Facility bears interest at a base rate plus an applicable margin. The interest rate as of March 31, 2022 was approximately 5.76 %. The Company incurred total debt issuance cost of approximately $ 5.7 million at closing, which is reported in the Consolidated Balance Sheet as a direct deduction from the carrying amount of the Credit Facility, and is amortized as interest expense over the term of five years. The Credit Facility is secured by substantially all assets of the Company and its subsidiaries. Proceeds from the Credit Facility may be used for permitted acquisitions and investments, working capital and other general corporate purposes. The credit agreement contains financial and other covenants . As of March 31, 2022, the Company was in compliance with all financial and non-financial covenants . To the extent not previously paid, the Initial Term Loan is due and payable on March 25, 2027 , the Delayed Draw Term Loans are due and payable on the earlier of the five-year anniversary of their initial funding or March 25, 2028 , and Revolving Loans are due and payable on March 25, 2027 . The Credit Facility are secured by substantially all assets of the Company and its subsidiaries. The Company must repay 0.25 % of any then-outstanding Term Loans, together with accrued and unpaid interest, on a quarterly basis. Future principal payments on outstanding borrowings as of March 31, 2022 are as follows (in thousands): Year Ending December 31, March 31, 2022 2022 $ 461 2023 593 2024 587 2025 581 2026 576 Thereafter 57,202 Total $ 60,000 9. 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, 2022 2021 Veterinary invoice expense $ 1,187 $ 2,299 Other cost of revenue 649 935 Technology and development 908 664 General and administrative 2,423 1,819 New pet acquisition expense 2,382 2,731 Total expensed stock-based compensation 7,549 8,448 Capitalized stock-based compensation 236 162 Total stock-based compensation $ 7,785 $ 8,610 11 As of March 31, 2022, the Company had 1,366,507 unvested restricted stock units. Stock-based compensation expenses of $ 108.1 million related to unvested restricted stock units are expected to be recognized over a weighted average period of approximately 3 years. 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, 2021 807,205 $ 13.39 $ 95,765 Granted — — — Exercised ( 47,204 ) 12.51 4,555 Forfeited ( 282 ) 10.23 — Outstanding as of March 31, 2022 759,719 13.45 57,490 Exercisable as of March 31, 2022 759,719 $ 13.45 $ 57,490 As of March 31, 2022, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 4 years. 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, 2021 1,087,627 $ 78.94 Granted 512,284 89.42 Vested ( 214,922 ) 81.97 Forfeited ( 18,482 ) 82.70 Unvested shares as of March 31, 2022 1,366,507 $ 82.34 10. Stockholders' Equity Common Stock and Preferred Stock As of March 31, 2022, the Company had 100,000,000 shares of common stock authorized and 40,711,491 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, 2022, 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 (the Board), 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. Share Repurchase Program In April 2021, the Board approved a share repurchase program, pursuant to which the Company may, between May 2021 and May 2026, repurchase outstanding shares of the Company’s common stock. The Company has not repurchased any shares under this program. 12 11. Accumulated Comprehensive Income (Loss) A summary of the components of accumulated other comprehensive income (loss) is as follows (in thousands): Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total Balance as of December 31, 2021 $ 1,624 $ 1,453 $ 3,077 Other comprehensive income (loss) ( 898 ) — ( 898 ) Balance as of March 31, 2022 $ 726 $ 1,453 $ 2,179 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total Balance as of December 31, 2020 $ 2,120 $ 951 $ 3,071 Other comprehensive income (loss) 618 — 618 Balance as of March 31, 2021 $ 2,738 $ 951 $ 3,689 12. Segments The Company has two reporting segments: subscription business and other business. The subscription business segment generates revenue primarily from subscription fees related to the Company's direct-to-consumer 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 new pet acquisition 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. 13 Operating income (loss) of the Company’s segments were as follows (in thousands): Three Months Ended March 31, 2022 2021 Subscription business: Revenue $ 139,839 $ 113,292 Veterinary invoice expense 100,590 83,726 Other cost of revenue 14,673 11,811 Technology and development 3,550 2,733 General and administrative 6,358 5,285 New pet acquisition expense 21,518 19,533 Depreciation and amortization 1,844 2,265 Subscription business operating loss ( 8,694 ) ( 12,061 ) Other business: Revenue 66,160 41,393 Veterinary invoice expense 44,336 26,144 Other cost of revenue 16,506 11,904 Technology and development 1,679 998 General and administrative 3,008 1,931 New pet acquisition expense 109 171 Depreciation and amortization 873 828 Other business operating income (loss) ( 351 ) ( 583 ) Gain (loss) from investment in joint venture ( 69 ) ( 85 ) Total operating loss $ ( 9,114 ) $ ( 12,729 ) The following table presents the Company’s revenue by geographic region of the member (in thousands): Three Months Ended March 31, 2022 2021 United States $ 172,748 $ 127,759 Canada and other 33,251 26,926 Total revenue $ 205,999 $ 154,685 Substantially all of the Company’s long-lived assets were located in the United States as of March 31, 2022 and December 31, 2021. 13. 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 $ 1.0 million and $ 0.8 million of expenses for consulting services provided by the investee related to pet acquisition during the three months ended March 31, 2022 and 2021, respectively, recorded as new pet acquisition expense on the Company's consolidated statement of operations. 14