What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 118 added, 140 removed, 382 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share data)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Revenue $ 306,121 $ 256,329

7 unchanged sentences

Technology and development (1)

5,302 6,553 15,434 18,178

General and administrative (1)

4 unchanged sentences

Total operating expenses 42,261 50,761

Gain (loss) from investment in joint venture 4 ( 57 ) ( 140 ) ( 168 )

Loss from investment in joint venture ( 103 ) ( 71 )

Operating loss ( 6,137 ) ( 24,486 )

2 unchanged sentences

Loss before income taxes ( 6,890 ) ( 24,971 )

Income tax expense (benefit) ( 43 ) 496 ( 472 ) 491

Income tax benefit ( 38 ) ( 191 )

Net loss $ ( 6,852 ) $ ( 24,780 )

13 unchanged sentences

(in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Net loss $ ( 6,852 ) $ ( 24,780 )

8 unchanged sentences

(in thousands, except share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Assets (unaudited)

2 unchanged sentences

Short-term investments 128,734 129,667

Accounts and other receivables, net of allowance for doubtful accounts of $ 690 at September 30, 2023 and $ 540 at December 31, 2022

Accounts and other receivables, net of allowance for doubtful accounts of $ 1,093 at March 31, 2024 and $ 1,085 at December 31, 2023

278,492 267,899

23 unchanged sentences

$ 0.00001 par value per share, 100,000,000 shares authorized;

42,655,394 and 41,627,208 issued and outstanding at September 30, 2023;

43,032,805 and 42,004,619 issued and outstanding at March 31, 2024;

42,887,052 and 41,858,866 shares issued and outstanding at December 31, 2023

6 unchanged sentences

Treasury stock, at cost:

1,028,186 shares at September 30, 2023 and December 31, 2022

1,028,186 shares at March 31, 2024 and December 31, 2023

( 16,534 ) ( 16,534 )

7 unchanged sentences

Shares Amount

Balance at July 1, 2023 41,470,738 $ — $ 519,450 $ ( 210,056 ) $ ( 4,102 ) $ ( 16,534 ) $ 288,758

Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 156,470 — 356 — — — 356

Stock-based compensation expense — — 7,393 — — — 7,393

Other comprehensive income (loss) — — — — ( 3,006 ) — ( 3,006 )

Net income (loss) — — — ( 4,036 ) — — ( 4,036 )

Balance at September 30, 2023 41,627,208 $ — $ 527,199 $ ( 214,092 ) $ ( 7,108 ) $ ( 16,534 ) $ 289,465

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity

Shares Amount

Balance at July 1, 2022 40,745,298 $ — $ 481,818 $ ( 149,363 ) $ ( 1,171 ) $ ( 16,530 ) $ 314,754

Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 128,126 — ( 437 ) — — — ( 437 )

Stock-based compensation expense — — 9,185 — — — 9,185

Repurchases of common stock ( 62 ) — — — — ( 4 ) ( 4 )

Other comprehensive income (loss) — — — — ( 4,846 ) — ( 4,846 )

Net income (loss) — — — ( 12,914 ) — — ( 12,914 )

Balance at September 30, 2022 40,873,362 $ — $ 490,566 $ ( 162,277 ) $ ( 6,017 ) $ ( 16,534 ) $ 305,738

Trupanion, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity

Shares Amount

Balance at January 1, 2024 41,858,866 $ — $ 536,108 $ ( 216,255 ) $ 403 $ ( 16,534 ) $ 303,722

3 unchanged sentences

Net income (loss) — — — ( 6,852 ) — — ( 6,852 )

Balance at September 30, 2023 41,627,208 $ — $ 527,199 $ ( 214,092 ) $ ( 7,108 ) $ ( 16,534 ) $ 289,465

Balance at March 31, 2024 42,004,619 $ — $ 544,593 $ ( 223,107 ) $ ( 1,581 ) $ ( 16,534 ) $ 303,371

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity

3 unchanged sentences

Stock-based compensation expense — — 12,959 — — — 12,959

Repurchases of common stock ( 95,021 ) — — — — ( 5,755 ) ( 5,755 )

Other comprehensive income (loss) — — — — 2,046 — 2,046

Net income (loss) — — — ( 24,780 ) — — ( 24,780 )

Balance at September 30, 2022 40,873,362 $ — $ 490,566 $ ( 162,277 ) $ ( 6,017 ) $ ( 16,534 ) $ 305,738

Balance at March 31, 2023 41,327,702 $ — $ 511,940 $ ( 196,342 ) $ ( 4,255 ) $ ( 16,534 ) $ 294,809

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

14 unchanged sentences

Maturities and sales of investment securities 19,005 73,793

Cash paid in business acquisition, net of cash acquired — ( 2,755 )

Purchases of property, equipment, and internal-use software ( 3,065 ) ( 5,184 )

4 unchanged sentences

Repayment of debt financing ( 338 ) ( 607 )

Repurchases of common stock — ( 5,755 )

Proceeds from exercise of stock options 372 140

15 unchanged sentences

Trupanion, Inc.

(collectively with its wholly-owned subsidiaries, the "Company") provides medical insurance for cats and dogs throughout the United States, Canada, Europe, Puerto Rico, and Australia.

(collectively with its wholly-owned subsidiaries, the "Company") provides medical insurance for cats and dogs in the United States, Canada, Continental Europe, 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.

5 unchanged sentences

The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2023 10-K.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.

Use of Estimates

2 unchanged sentences

See Note 1 to the audited financial statements included in the 2023 10-K for additional discussion of these estimates and assumptions.

Accounts and Other Receivabl es

Accounts and other receivables are comprised of trade receivables and other miscellaneous receivables and are carried at their estimated collectible amounts.

Trade receivables are primarily related to the Company’s other business segment where the Company generates revenue from underwriting policies through unaffiliated general agents.

During the nine months ended September 30, 2023, the Company incurred a non-recurring $ 3.8 million settlement of accounts receivable due to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 related to improving segment disclosures.

This ASU enhances disclosures about significant segment expenses, allows for multiple measures of a segment's profit or loss, and requires additional disclosures about the chief operating decision maker.

This ASU is effective for annual periods beginning after December 15, 2023, with early adoption permitted.

The Company is still evaluating the impact of this ASU on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 which expands upon the income tax disclosures through changes to the rate reconciliation and income taxes paid information.

This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is still evaluating the impact of this ASU on its consolidated financial statements.

Net Loss per Share

3 unchanged sentences

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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Stock options 386,312 615,913

Restricted stock awards and restricted stock units 1,262,794 813,718

Goodwill arises from business acquisitions in which the purchase price exceeds the fair value of tangible and intangible assets acquired less assumed liabilities.

The following is a summary of goodwill by reportable segment for the nine months ended September 30, 2023 (in thousands):

Subscription Business Other Business Total

Balance as of December 31, 2022 $ 41,983 $ — $ 41,983

Acquisitions — — —

Effects of foreign currency 22 — 22

Balance as of September 30, 2023 $ 42,005 $ — $ 42,005

Available-for sale securities are classified as short-term versus long-term investments based on whether they represent the investment of funds available for current operations.

1 unchanged sentence

Held-to-maturity securities are classified as short-term versus long-term investments based on the effective maturity dates.

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 September 30, 2023 and December 31, 2022 (in thousands):

As of September 30, 2023

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, 2024 and December 31, 2023 (in thousands):

As of March 31, 2024

Long-term investments:

29 unchanged sentences

Other asset-backed securities 12,422 67 ( 53 ) 12,436

Municipal bond 1,000 — ( 6 ) 994

Corporate bonds 36,404 332 ( 123 ) 36,613

3 unchanged sentences

Certificates of deposit 12,298 — — 12,298

government funds 41,192 — — 41,192

$ 25,477 $ 21 $ ( 15 ) $ 25,483

Maturities of investments classified as available-for-sale and held-to-maturity were as follows (in thousands):

As of September 30, 2023

As of March 31, 2024

Available-for-sale:

2 unchanged sentences

$ 91,524 $ 91,438

Held-to-maturity:

Due under one year $ 16,485 $ 16,356

Due after one year through five years 997 993

$ 17,482 $ 17,349

Available-for-sale collateralized:

2 unchanged sentences

$ 24,476 $ 24,388

Held-to-maturity:

Due under one year $ 24,917 $ 24,911

Due after one year through five years 998 998

$ 25,915 $ 25,909

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 investments, the Company determined that there were unrealized losses of $ 1.5 million and $ 0.6 million as of September 30, 2023 and December 31, 2022, res pectively.

As of September 30, 2023, $ 20.1 million in available-for-sale investments have been in a loss position for more than twelve months, with total unrealized losses of $ 0.5 million .

As of September 30, 2023, $ 72.4 million available-for-sale investments have been in a loss position for less than twelve months, with total unrealized losses of $ 1.0 million .

For available-for-sale investments, the Company determined that there were unrealized losses of $ 0.5 million and $ 0.3 million as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024, $ 24.9 million in available-for-sale investments have been in a loss position for more than twelve months, with total unrealized losses of $ 0.3 million.

As of March 31, 2024, $ 39.4 million available-for-sale investments have been in a loss position for less than twelve months, with total unrealized losses of $ 0.2 million.

As of December 31, 2023, $ 18.9 million in available-for-sale investments have been in a loss position for more than twelve months, with total unrealized losses of $ 0.2 million.

As of December 31, 2023, $ 25.9 million available-for-sale investments have been in a loss position for less than twelve months, with total unrealized losses of $ 0.1 million.

These losses relate to interest rate changes.

1 unchanged sentence

For those securities, the Company determined it is not likely to, and does not intend to, sell prior to a potential recovery.

Proceeds from the sales of fixed maturities classified as available-for-sale were $ 83.9 million and $ 5.9 million during the nine months ended September 30, 2023 and 2022, respectively.

Proceeds from the sales of fixed maturities classified as available-for-sale were $ 15.1 million and $ 24.0 million during the three months ended March 31, 2024 and 2023, respectively.

Other Investments

The Company has invested $ 7.0 million in the 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 stock issued by the variable interest entity in August 2027 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 — see Note 6.

Additionally, the Company has extended a $ 7.0 million revolving line of credit to the variable interest entity to fund its inventory purchases, which will increase annually by $ 2.0 million until the note’s maturity in 2027.

The Company has invested $ 7.0 million in the preferred stock of a variable interest entity, Baystride, Inc.

("Baystride"), 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 entity and is, therefore, not the primary beneficiary.

The Company has the option to purchase all of the outstanding common stock issued by the entity in August 2027 at an amount approximating its expected fair value.

The preferred stock investment in the entity is redeemable, and therefore, is accounted for as an available-for-sale debt security, and measured at fair value at each balance sheet date — see Note 5.

Additionally, the Company has extended a $ 7.0 million revolving line of credit to Baystride to fund its inventory purchases, which will increase annually by $ 2.0 million until the note’s maturity in 2027.

Borrowing amounts are subject to limitations based on Baystride’s forecasted revenues and inventory balances.

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 $ 4.6 million and $ 6.3 million as of September 30, 2023 and December 31, 2022, respectively.

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 $ 0.3 million and $ 0.6 million of these services for the nine months ended September 30, 2023 and 2022, respectively.

The outstanding loan balance under the line of credit, including accrued interest, was $ 3.3 million and $ 4.0 million as of March 31, 2024 and December 31, 2023, respectively.

The Company has also entered into a series of agreements to provide ancillary services to, and receive reimbursement from, Baystride at cost.

The Company provided $ 0.1 million and $ 0.2 million of these services for the three months ended March 31, 2024 and 2023, respectively.

Allowance for Credit Loss

The Company regularly evaluates its investments for expected credit losses.

The Company considers past events, current conditions, and reasonable and supportable forecasts in estimating an allowance for credit losses.

Additionally, the Company considers the ultimate collection of cash flows from its investments and whether the Company has the intent to sell, or if it is more likely than not the Company would be required to sell the security prior to recovery of its amortized cost.

Such evaluations are revised as conditions change and new information becomes available.

Based on these considerations, the Company has established an allowance for credit losses related to its preferred stock investment.

The following table presents a rollforward of the allowance for credit losses for this investment.

Balance as of January 1, 2023 $ —

(Addition to) allowance for credit losses —

Balance as of March 31, 2023 $ —

Balance as of January 1, 2024 $ ( 1,674 )

(Addition to) allowance for credit losses —

Balance as of March 31, 2024 $ ( 1,674 )

Fair Value Disclosures - 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 September 30, 2023

As of March 31, 2024

Fair Value Level 1 Level 2 Level 3

6 unchanged sentences

Treasury securities 43,285 — 43,285 —

Preferred stock in variable interest entity 4,115 — — 4,115

Preferred stock investment 5,326 — — 5,326

Total $ 203,058 $ 93,915 $ 103,817 $ 5,326

7 unchanged sentences

Foreign deposits 11,869 11,869 — —

Municipal bond 994 — 994 —

Treasury securities 44,687 — 44,687 —

Preferred stock in variable interest entity 4,115 — — 4,115

Preferred stock investment 5,326 — — 5,326

Total $ 188,745 $ 79,229 $ 104,190 $ 5,326

4 unchanged sentences

The fair value of these investments is determined in the same manner as available-for-sale securities and are considered either a Level 1 or Level 2 measurement.

The Company's preferred stock investment in the variable interest entity (see Note 5) is accounted for as an available-for-sale debt security, and measured at fair value at each balance sheet date.

The Company's preferred stock investment (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.

The estimated fair value was $ 4.1 million as of September 30, 2023, unchanged from December 31, 2022, and is recorded in other long-term assets on the Company's consolidated balance sheet.

This investment has maintained an unrealized loss position of $ 2.9 million for less than twelve months.

The estimated fair value was $ 5.3 million as of March 31, 2024, unchanged from December 31, 2023, and is recorded in other long-term assets on the Company's consolidated balance sheet.

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, 2024 and the year ended December 31, 2023.

The following table presents the change in fair value of the Company’s investment carried at fair value and classified as Level 3 as of March 31, 2024 and 2023 (in thousands):

Preferred Stock Investment

Balance as of January 1, 2024 $ 5,326

Changes in fair value included in earnings —

Balance as of March 31, 2024 $ 5,326

Preferred Stock Investment

Balance as of January 1, 2023 $ 4,115

Changes in fair value included in earnings —

Balance as of March 31, 2023 $ 4,115

Fair Value Disclosures - Other Assets and Liabilities

The Company's other long-term assets balance also included notes receivable of $ 7.5 million and $ 9.3 million as of September 30, 2023 and December 31, 2022, respectively, recorded at their estimated collectible amount.

The Company's other long-term assets balance also included notes receivable of $ 6.1 million and $ 6.8 million as of March 31, 2024 and December 31, 2023, respectively, recorded at their estimated collectible amount.

The Company estimates that the carrying value of the notes receivable approximates the fair value.

2 unchanged sentences

This is a Level 3 measurement.

Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at September 30, 2023.

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 nine months ended September 30, 2023 and the year ended December 31, 2022.

Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at March 31, 2024.

Commitments and Contingencies

5 unchanged sentences

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 for veterinary invoices is an estimate of the future amount the Company will pay for veterinary invoices that have not been processed or received but 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.

5 unchanged sentences

Summarized below are the changes in the total liability for the Company's subscription business segment (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Subscription 2024 2023

10 unchanged sentences

Reserve at end of period $ 30,016 $ 23,642

The Company had an unfavorable development on veterinary invoice reserves for the subscription business segment of $ 2.4 million for the nine months ended September 30, 2023, and a favorable development on veterinary invoice reserves of $ 3.0 million for the nine months ended September 30, 2022, both of which were the result of ongoing analysis of recent payment trends.

The Company had unfavorable development on veterinary invoice reserves for the subscription business segment of $ 0.6 million for the three months ended March 31, 2024, and unfavorable development on veterinary invoice reserves of $ 1.6 million for the three months ended March 31, 2023, both of which were the result of ongoing analysis of recent payment trends.

Summarized below are the changes in total liability for the Company's other business segment (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Other Business 2024 2023

10 unchanged sentences

Reserve at end of period $ 32,259 $ 24,653

The Company had an unfavorable development on veterinary invoice reserves for the other business segment of $ 0.7 million for the nine months ended September 30, 2023, and an unfavorable development on veterinary invoice reserves of $ 0.6 million for the nine months ended September 30, 2022, both of which were the result of ongoing analysis of recent payment trends.

The Company had unfavorable development on veterinary invoice reserves for the other business segment of $ 0.3 million for the three months ended March 31, 2024, and unfavorable development on veterinary invoice reserves of $ 1.2 million for the three months ended March 31, 2023, both of which were the result of ongoing analysis of recent 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 September 30, 2023

Subscription As of March 31, 2024

Year of Occurrence

2022 and prior $ 698

Other Business As of September 30, 2023

Other Business As of March 31, 2024

Year of Occurrence

6 unchanged sentences

The Credit Facility bears interest at a floating base rate plus an applicable margin.

The stated interest rate as of September 30, 2023 was approximately 10.54 % for the original $ 60.0 million term loan and for the aggregate $ 75.0 million term loans.

The stated interest rate as of March 31, 2024 was approximately 10.46 % for the original $ 60.0 million term loan and for the aggregate $ 75.0 million term loans.

The Company incurred total debt issuance cost of approximately $ 5.9 million, which is reported in the consolidated balance sheet as a direct reduction from the carrying amount of the Credit Facility, and is amortized as interest expense over the term of five years.

2 unchanged sentences

The Credit Agreement contains financial and other covenants .

As of September 30, 2023, the Company was in compliance with all financial and other covenants .

As of March 31, 2024, the Company was in compliance with all financial and other 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 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 September 30, 2023 are as follows (in thousands):

Year Ending December 31, September 30, 2023

Thereafter 57,188

Future principal payments on outstanding borrowings as of March 31, 2024 are as follows (in thousands):

Year Ending December 31, March 31, 2024

Total $ 132,950

2 unchanged sentences

Stock-based compensation expense recognized in each category of the consolidated statements of operations was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Veterinary invoice expense $ 924 $ 853

6 unchanged sentences

Total stock-based compensation $ 8,358 $ 12,959

As of September 30, 2023, the Company had 735,163 unvested restricted stock units.

Restricted Stock Awards and Restricted Stock Units

A summary of the Company’s restricted stock award and restricted stock unit activity is as follows:

Shares Weighted Average

Grant Date Fair Value per Share

Unvested shares as of December 31, 2023 714,382 $ 66.64

Granted 761,553 26.92

Vested ( 200,289 ) 69.84

Forfeited ( 12,852 ) 56.94

Unvested shares as of March 31, 2024 1,262,794 $ 42.28

As of March 31, 2024, the Company had 1,262,794 unvested restricted stock units.

Stock-based compensation expenses of $ 56.1 million related to unvested restricted stock units are expected to be recognized over a weighted average period of approximately 2.4 years.

1 unchanged sentence

In conjunction with these departures, the Company accelerated the vesting of certain RSUs as of the termination date and extended the purchase date of certain vested options from 90 to 365 days.

These award modifications resulted in the recognition of $ 4.8 million share-based compensation expense during the nine months ended September 30, 2023.

These award modifications resulted in the recognition of $ 4.8 million share-based compensation expense during the quarter ended March 31, 2023.

Stock Options

5 unchanged sentences

Forfeited — —

Outstanding as of September 30, 2023 522,830 13.70 7,579

Exercisable as of September 30, 2023 522,830 $ 13.70 $ 7,579

As of September 30, 2023, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 2.3 years.

Restricted Stock Awards and Restricted Stock Units

A summary of the Company’s restricted stock award and restricted stock unit activity is as follows:

Shares Weighted Average

Grant Date Fair Value per Share

Unvested shares as of December 31, 2022 1,112,552 $ 84.46

Granted 236,964 29.99

Vested ( 540,651 ) 76.55

Forfeited ( 73,702 ) 83.51

Unvested shares as of September 30, 2023 735,163 $ 72.78

Outstanding as of March 31, 2024 386,312 13.95 5,275

Exercisable as of March 31, 2024 386,312 $ 13.95 $ 5,275

As of March 31, 2024, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 2.4 years.

Stockholders' Equity

Common Stock and Preferred Stock

As of September 30, 2023, the Company had 100,000,000 shares of common stock authorized and 41,627,208 shares of common stock outstanding.

As of March 31, 2024, the Company had 100,000,000 shares of common stock authorized and 42,004,619 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 September 30, 2023, 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.

At March 31, 2024, 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.

3 unchanged sentences

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 repurchased no shares during the three and nine months ended September 30, 2023 and 62 and 95,021 shares during the three and nine months ended September 30, 2022, respectively.

The Company repurchased no shares during the three months ended March 31, 2024 and 2023, respectively.

Accumulated Comprehensive Income (Loss)

A summary of the components of accumulated other comprehensive income (loss) is as follows (in thousands):

For the three months ended September 30, 2023 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of July 1, 2023 $ 23 $ ( 4,125 ) $ ( 4,102 )

Other comprehensive income (loss) ( 2,763 ) ( 243 ) ( 3,006 )

Balance as of September 30, 2023 $ ( 2,740 ) $ ( 4,368 ) $ ( 7,108 )

For the three months September 30, 2022 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of July 1, 2022 $ ( 2,623 ) $ 1,452 $ ( 1,171 )

Other comprehensive income (loss) ( 3,946 ) ( 900 ) ( 4,846 )

Balance as of September 30, 2022 $ ( 6,569 ) $ 552 $ ( 6,017 )

For the nine months ended September 30, 2023 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

For the three months ended March 31, 2024 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of January 1, 2024 $ ( 76 ) $ 479 $ 403

Other comprehensive income (loss) ( 1,332 ) ( 652 ) ( 1,984 )

Balance as of September 30, 2023 $ ( 2,740 ) $ ( 4,368 ) $ ( 7,108 )

For the nine months ended September 30, 2022 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of March 31, 2024 $ ( 1,408 ) $ ( 173 ) $ ( 1,581 )

For the three months ended March 31, 2023 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of January 1, 2023 $ ( 2,788 ) $ ( 3,513 ) $ ( 6,301 )

Other comprehensive income (loss) 1,555 491 2,046

Balance as of September 30, 2022 $ ( 6,569 ) $ 552 $ ( 6,017 )

The Company has two reporting segments:

Balance as of March 31, 2023 $ ( 1,233 ) $ ( 3,022 ) $ ( 4,255 )

The Company has two aggregated reporting segments:

subscription business and other business.

10 unchanged sentences

Operating income (loss) of the Company’s segments were as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Subscription business:

15 unchanged sentences

Depreciation and amortization 1,298 1,138

Other business operating income (loss) 2,214 ( 1,141 ) ( 3,633 ) ( 2,612 )

Gain (loss) from investment in joint venture 4 ( 57 ) ( 140 ) ( 168 )

Total operating loss $ ( 3,491 ) $ ( 11,899 ) $ ( 41,067 ) $ ( 33,784 )

Other business operating loss ( 1,509 ) ( 5,648 )

Loss from investment in joint venture ( 103 ) ( 71 )

Operating loss ( 6,137 ) ( 24,486 )

Interest expense 3,596 2,387

Other income, net ( 2,843 ) ( 1,902 )

Loss before income taxes $ ( 6,890 ) $ ( 24,971 )

The following table presents the Company’s revenue by geographic region of the member (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

United States $ 255,974 $ 216,925

1 unchanged sentence

Total revenue $ 306,121 $ 256,329

Substantially all of the Company’s long-lived assets were located in the United States as of September 30, 2023 and December 31, 2022.

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 $ 1.9 million and $ 2.5 million of expenses for consulting services provided by the investee related to pet acquisition during the nine months ended September 30, 2023 and 2022, respectively, recorded as new pet acquisition expense on the Company's consolidated statement of operations.

Substantially all of the Company’s long-lived assets were located in the United States as of March 31, 2024 and December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements