What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-03 · 176 added, 75 removed, 410 unchanged (38% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We provide medical insurance for cats and dogs in the United States, Canada, Continental Europe, and Australia.

We provide medical insurance for cats and dogs in the United States, Canada, Continental Europe, Australia, and Puerto Rico.

Through our data-driven, vertically-integrated approach, we develop and offer high value medical insurance products, priced specifically for each pet’s unique characteristics and coverage level.

4 unchanged sentences

We operate our subscription business segment similar to other subscription-based businesses, with a focus on achieving a target margin prior to our new pet acquisition expense and acquiring as many pets as possible at our targeted average estimated internal rate of return.

Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties and, in Canada, low and medium average revenue per pet ("ARPU") products marketed under the brand names, Furkin and PHI Direct.

Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties and, in Canada, low and medium average revenue per pet products marketed under the brand names, Furkin and PHI Direct.

We are the underwriter and provide a full suite of services and support for these products.

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Key Operating Metrics

The following table sets forth total pets enrolled and key operating metrics for our subscription business for each of the last eight fiscal quarters.

The following tables set forth total pets enrolled and key operating metrics for our subscription business for year to date values as well as each of the last eight fiscal quarters.

Six Months Ended June 30,

Total Business:

Total pets enrolled (at period end) 1,699,643 1,679,659

Subscription Business:

Total subscription pets enrolled (at period end) 1,020,934 943,958

Monthly average revenue per pet $ 70.76 $ 64.00

Lifetime value of a pet, including fixed expenses $ 450 $ 470

Average pet acquisition cost (PAC) $ 219 $ 241

Average monthly retention 98.34 % 98.61 %

Three Months Ended

30, 2024 Mar.

31, 2024 Dec.

31, 2023 Sept.

31, 2023 Sep.

30, 2023 Jun.

2 unchanged sentences

31, 2022 Sep.

30, 2022 Jun.

Total Business:

9 unchanged sentences

Total pets enrolled.

Total pets enrolled reflects the number of subscription pets or pets enrolled in one of the insurance products offered in our other business segment at the end of each period presented.

Total pets enrolled reflects the number of subscription pets and pets enrolled in one of the insurance products offered in our other business segment at the end of each period presented.

We monitor total pets enrolled because it provides an indication of the growth of our consolidated business.

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Average monthly retention is measured as the monthly retention rate of enrolled subscription pets for each applicable period averaged over the 12 months prior to the period end date.

As such, our average monthly retention rate as of March 31, 2024 is an average of each month’s retention from April 1, 2023 through March 31, 2024.

As such, our average monthly retention rate as of June 30, 2024 is an average of each month’s retention from July 1, 2023 through June 30, 2024.

We calculate monthly retention as the number of pets that remain after subtracting all pets that cancel during a month, including pets that enroll and cancel within that month, divided by the total pets enrolled at the beginning of that month.

13 unchanged sentences

The following tables present the reconciliation of our non-GAAP financial measures from corresponding GAAP measures for the periods presented (in thousands):

Six Months Ended June 30,

Veterinary invoice expense $ 464,671 $ 400,875

Stock-based compensation expense (1)

(1,705) (1,695)

Other business cost of paying veterinary invoices (4)

(156,836) (137,592)

Subscription cost of paying veterinary invoices (non-GAAP) $ 306,130 $ 261,588

% of subscription revenue 74.7 % 77.3 %

Other cost of revenue $ 79,754 $ 70,301

Stock-based compensation expense (1)

Other business variable expenses (4)

(39,589) (35,973)

Subscription variable expenses (non-GAAP) $ 39,222 $ 33,452

% of subscription revenue 9.6 % 9.9 %

Technology and development expense $ 15,150 $ 10,132

General and administrative expense 29,926 34,153

Stock-based compensation expense (1)

(9,208) (12,318)

Non-recurring transaction or restructuring expenses (2)

Development expenses (3)

(2,832) (1,823)

Fixed expenses (non-GAAP) $ 33,036 $ 25,977

% of total revenue 5.3 % 4.9 %

New pet acquisition expense $ 34,717 $ 42,411

Stock-based compensation expense (1)

(3,923) (3,754)

Other business pet acquisition expense (4)

Subscription acquisition cost (non-GAAP) $ 30,771 $ 38,544

% of subscription revenue 7.5 % 11.4 %

(1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses.

We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments.

Stock-based compensation associated with bonuses was approximately $1.1 million for the six months ended June 30, 2024.

(2) Consists of business acquisition transaction expenses, severance and legal costs due to certain executive departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.

(3) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant.

(4) Excludes the portion of stock-based compensation expense attributable to the other business segment.

Three Months Ended

30, 2024 Mar.

31, 2024 Dec.

31, 2023 Sept.

31, 2023 Sep.

30, 2023 Jun.

2 unchanged sentences

31, 2022 Sep.

30, 2022 Jun.

Veterinary invoice expense $ 231,102 $ 233,569 $ 217,739 $ 212,441 $ 206,738 $ 194,137 $ 176,083 $ 171,112

31 unchanged sentences

We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments.

Stock-based compensation associated with bonuses was approximately $0.8 million for the three months ended March 31, 2024.

Stock-based compensation associated with bonuses was approximately $0.3 million for the three months ended June 30, 2024.

(3) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant.

(4) Excluding the portion of stock-based compensation expense attributable to the other business segment.

(4) Excludes the portion of stock-based compensation expense attributable to the other business segment.

When determining our PAC, we calculate net acquisition cost for a more comparable metric across periods.

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We offset sign-up fee revenue because it is a one-time charge to new members collected at the time of enrollment used to partially offset initial setup costs, which are included in new pet acquisition expenses.

The following table reconciles GAAP new pet acquisition expense to non-GAAP net acquisition cost (in thousands) for each of the last eight fiscal quarters:

The following table reconciles GAAP new pet acquisition expense to non-GAAP net acquisition cost (in thousands) for the six months ended June 30, 2024 and 2023 and for each of the last eight fiscal quarters:

Six Months Ended June 30,

New pet acquisition expense $ 34,717 $ 42,411

Net of sign-up fee revenue (2,055) (2,408)

Stock-based compensation expense (3,923) (3,754)

Other business pet acquisition expense (23) (113)

Pet acquisition expense for commission-based policies (1,586) (1,815)

Net acquisition cost $ 27,130 $ 34,321

Three Months Ended

30, 2024 Mar.

31, 2024 Dec.

31, 2023 Sept.

31, 2023 Sep.

30, 2023 Jun.

2 unchanged sentences

31, 2022 Sep.

30, 2022 Jun.

New pet acquisition expense $ 17,874 $ 16,843 $ 17,189 $ 17,772 $ 20,769 $ 21,642 $ 22,457 $ 22,434

9 unchanged sentences

We operate our subscription business segment similar to other subscription-based businesses, with a focus on achieving a target margin prior to our pet acquisition expense and acquiring as many pets as possible at our targeted average estimated internal rate of return.

Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties and, in Canada, low and medium ARPU products marketed under the brand names Furkin and PHI Direct.

Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties and, in Canada, low and medium average revenue per pet products marketed under the brand names Furkin and PHI Direct.

We provide a full suite of services and support for these products and they are designed to align with the target margin profile of our subscription business segment.

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Other cost of revenue

Other cost of revenue for the subscription business segment includes direct and indirect member service expenses, Territory Partner renewal fees, payment processing fees and premium tax expenses.

Other cost of revenue for the subscription business segment includes direct and indirect member service expenses, Territory Partner fees upon policy renewals, payment processing fees and premium tax expenses.

Other cost of revenue for the other business segment includes the commissions we pay to unaffiliated general agents, costs to administer the programs in the other business segment and premium taxes on the sales in this segment.

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Our other business segment primarily includes other product offerings that have been materially different from those in our subscription business segment.

In addition, we expect the growth rate of this segment to be materially different from our subscription business segment.

In addition, we expect the growth rate and margin profile of this segment to be materially different from our subscription business segment.

We do not undertake marketing efforts for and are not the primary interface with the customers of the third parties for whom we underwrite other business segment policies.

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The period-to-period comparison of financial results is not necessarily indicative of future results.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(in thousands)

4 unchanged sentences

Subscription business 175,740 151,520 347,871 297,611

172,132 146,091

Other business 98,791 89,673 196,554 173,565

Total cost of revenue (1)

274,531 241,193 544,425 471,176

Operating expenses:

Technology and development (1)

8,190 5,232 15,150 10,132

General and administrative (1)

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(1) Includes stock-based compensation expense as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(in thousands)

4 unchanged sentences

Total stock-based compensation expense $ 8,646 $ 6,637 $ 16,798 $ 18,968

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(as a percentage of revenue)

15 unchanged sentences

Stock-based compensation expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(as a percentage of revenue)

4 unchanged sentences

Total stock-based compensation expense 3 % 2 % 3 % 4 %

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(as a percentage of subscription revenue)

1 unchanged sentence

Subscription business cost of revenue 84 87 85 88

Comparison of the Three Months Ended March 31, 2024 and 2023

Three Months Ended March 31, % Change

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands, except percentages, pet and per pet data)

10 unchanged sentences

Average monthly retention 98.34 % 98.61 % 98.34 % 98.61 %

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

Total revenue increased by $49.8 million, or 19%, to $306.1 million for the three months ended March 31, 2024.

Revenue from our subscription business segment increased by $35.9 million, or 22%, to $201.1 million for the three months ended March 31, 2024.

This increase was primarily due to an 11% increase in subscription pet months (the sum of pets enrolled for each month during a period) for policies underwritten by Trupanion during the respective periods and a 10% increase in monthly average revenue per pet.

Revenue from our other business segment increased by $13.9 million, or 15%, to $105.0 million for the three months ended March 31, 2024.

This increase was primarily driven by a 2% increase in pet months and a 14% increase in monthly average revenue per pet in this segment.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

Total revenue increased by $44.2 million, or 16%, to $314.8 million for the three months ended June 30, 2024.

Revenue from our subscription business segment increased by $35.4 million, or 20%, to $208.6 million for the three months ended June 30, 2024.

This increase was primarily driven by an 8% increase in total subscription pet months (the sum of pet months for each month during a period) for policies underwritten by Trupanion and a 11% increase in monthly average revenue per pet.

Revenue from our other business segment increased by $8.9 million, or 9%, to $106.2 million, for the three months ended June 30, 2024.

This increase was primarily driven by a 16% increase in monthly average revenue per pet in this segment, offset by a 6% decrease in pet months in this segment.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

Total revenue increased by $94.0 million, or 18%, to $620.9 million for the six months ended June 30, 2024.

Revenue from our subscription business segment increased by $71.3 million, or 21%, to $409.8 million for the six months ended June 30, 2024.

This increase was primarily due to an 10% increase in subscription pet months (the sum of pets enrolled for each month during a period) for policies underwritten by Trupanion and a 11% increase in monthly average revenue per pet.

Revenue from our other business segment increased by $22.7 million, or 12%, to $211.2 million for the six months ended June 30, 2024.

This increase was primarily driven by a 15% increase in monthly average revenue per pet in this segment, offset by a 2% decrease in pet months in this segment.

Cost of Revenue

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands, except percentages, pet and per pet data)

19 unchanged sentences

Total subscription pets enrolled (at period end) 1,020,934 943,958 8 1,020,934 943,958 8

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

Total cost of revenue for our subscription business segment increased $26.0 million, or 18%, to $172.1 million, for the three months ended March 31, 2024.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

Total cost of revenue for our subscription business segment increased $24.2 million, or 16%, to $175.7 million, for the three months ended June 30, 2024.

This increase was driven by a $21.2 million, or 16%, increase in veterinary invoice expense and a $3.0 million, or 18%, increase in other cost of revenue.

2 unchanged sentences

Subscription business cost of revenue decreased from 87% to 84% of revenue year-over-year.

Total cost of revenue for our other business segment increased by $13.9 million, or 17%, to $97.8 million for the three months ended March 31, 2024.

The increase was primarily driven by a $16.1 million, or 25%, increase in veterinary invoice expense offset by a $2.2 million, or 12%, decrease in other cost of revenue.

The 25% increase in veterinary invoice expense was primarily driven by a 2% increase in pet months in this segment and a 23% increase in veterinary invoice expense per pet month.

The 12% decrease in other cost of revenue was primarily driven by lower commissions due to third-party general agents.

Total cost of revenue for our other business segment increased by $9.1 million, or 10%, to $98.8 million for the three months ended June 30, 2024.

The increase was primarily driven by a $5.9 million, or 34%, increase in other cost of revenue as well as a $3.2 million, or 4%, increase in veterinary invoice expense.

The 34% increase in other cost of revenue was primarily driven by increases in managing general agent ("MGA") and underwriting fees, which reflects higher earned premium and lower loss ratio in the other business segment.

The 4% increase in veterinary invoice expense was primarily driven by a 10% increase in veterinary invoice expense per pet, offset by a 6% decrease in pet months in this segment.

Cost of revenue for the other business segment increased from 92% to 93% of revenue year-over-year.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

Total cost of revenue for our subscription business segment increased by $50.3 million, or 17%, to $347.9 million, for the six months ended June 30, 2024.

This increase was driven by a $44.6 million, or 17%, increase in veterinary invoice expense and a $5.7 million, or 17%, increase in other cost of revenue.

The 17% increase in veterinary invoice expense was driven by a 10% increase in total subscription pet months for policies underwritten by Trupanion and a 7% increase in veterinary invoice expense per pet month.

The 17% increase in other cost of revenue was primarily due to general increases in costs attributable to growth in our membership.

Subscription business cost of revenue decreased from 88% to 85% of revenue year-over-year.

Total cost of revenue for our other business segment increased by $23.0 million, or 13%, to $196.6 million for the six months ended June 30, 2024.

The increase was primarily driven by a $19.2 million, or 14%, increase in veterinary invoice expense as well as a $3.7 million, or 10%, increase in other cost of revenue.

The 14% increase in veterinary invoice expense was primarily driven by a 16% increase in veterinary invoice expense per pet, offset by a 2% decrease in pet months.

The 10% increase in other cost of revenue was primarily driven by increases in MGA and underwriting fees.

Cost of revenue for the other business segment increased from 92% to 93% of revenue year-over-year.

Technology and Development Expenses

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands, except percentages)

1 unchanged sentence

Percentage of total revenue 3 % 2 % 2 % 2 %

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

Technology and development expenses increased by $2.1 million, or 42%, to $7.0 million for the three months ended March 31, 2024.

This increase was primarily due to increases of $0.9 million in general compensation and other employee-related expenses, $0.6 million in infrastructure related expenses, and $0.4 million in development expense .

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

Technology and development expenses increased by $3.0 million, or 57%, to $8.2 million for the three months ended June 30, 2024, primarily due a $1.8 million reduction in capitalized expenditures related to internally-developed software projects launched in early 2024, a $0.9 million increase in development expense, and a $0.4 million increase in infrastructure-related expenses.

Technology and development expenses increased from 2% to 3% of total revenue year over year.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

Technology and development expenses increased by $5.0 million, or 50%, to $15.2 million for the six months ended June 30, 2024, primarily due to a $3.5 million reduction in capitalized expenditures related to internally-developed software projects launched in early 2024 and a $1.2 million increase in development expense.

Technology and development expenses remained constant at 2% of total revenue year-over-year.

General and Administrative Expenses

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands, except percentages)

1 unchanged sentence

Percentage of total revenue 5 % 5 % 5 % 6 %

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

General and administrative expenses decreased by $6.3 million, or 30%, to $14.7 million for the three months ended March 31, 2024.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

General and administrative expenses increased by $2.1 million, or 16%, to $15.3 million for the three months ended June 30, 2024.

The increase was primarily due to $1.2 million in property and sales taxes and discretionary related expenses, $0.5 million in underwriting fees related to our Canadian business, and $0.5 million in professional services.

General and administrative expenses remained constant at 5% of total revenue year over year.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

General and administrative expenses decreased by $4.2 million, or 12%, to $29.9 million for the six months ended June 30, 2024.

The decrease in expense when comparing periods was driven primarily by two charges recorded during the first quarter of 2023, a $4.8 million stock-based compensation charge following certain executive departures and a $3.8 million charge related to the negotiated settlement of uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.

These decreases in expense period over period were partially offset by increases of $0.7 million in general compensation and other employee-related expenses and a $0.5 million increase in professional services.

General and administrative expenses decreased from 8% to 5% of total revenue year-over-year, partially due to certain non-recurring expenses.

These decreases in expense period over period were partially offset by increases of $1.8 million in property and sales taxes and discretionary related expenses, $1.1 million in underwriting fees related to our Canadian business, $1.1 million in professional services, and $0.5 million in general compensation and other employee-related expenses.

General and administrative expenses decreased from 6% to 5% of total revenue year-over-year.

New Pet Acquisition Expense

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands, except percentages, pet and per pet data)

4 unchanged sentences

Average pet acquisition cost (PAC) $ 231 $ 236 (2) $ 219 $ 241 (9)

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

New pet acquisition expenses decreased by $4.8 million, or 22%, to $16.8 million for the three months ended March 31, 2024.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

New pet acquisition expenses decreased by $2.9 million, or 14%, to $17.9 million for the three months ended June 30, 2024.

The decrease was primarily due to a decrease in expenses related to generating leads and driving conversion, as we focused on growth in our more efficient channels.

New pet acquisition as a percentage of revenue was 6% for the three months ended June 30, 2024 compared to 8% in the same period last year, as we were able to stay disciplined with our discretionary pet acquisition spend, while still managing to grow total enrolled subscription pets by 8%.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

New pet acquisition expenses decreased by $7.7 million, or 18%, to $34.7 million for the six months ended June 30, 2024.

This decrease was primarily due to a decrease in expenses related to generating leads and driving conversion, as we focused on growth in our more efficient channels.

New pet acquisition expenses as a percentage of revenue was 6% for the three months ended March 31, 2024 compared to 8% in the same period last year, as we were able to stay disciplined with our discretionary pet acquisition spend, while still managing to grow total enrolled subscription pets, excluding those related to managing general agent policies in continental Europe operations, by 10%.

New pet acquisition expenses as a percentage of revenue was 6% for the six months ended June 30, 2024 compared to 8% in the same period last year, as we were able to stay disciplined with our discretionary pet acquisition spend, while still managing to grow total enrolled subscription pets by 8%.

Depreciation and Amortization

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands, except percentages)

1 unchanged sentence

Percentage of total revenue 1 % 1 % 1 % 1 %

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

Depreciation and amortization expense increased by $0.6 million, or 18%, to $3.8 million for the three months ended March 31, 2024 primarily driven by an increase in in-service internally developed software projects during the period.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

Depreciation and amortization expense increased by $1.1 million, or 35%, to $4.4 million for the three months ended June 30, 2024 primarily driven by an increase in in-service internally developed software projects during the period.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

Depreciation and amortization expense increased by $1.7 million, or 26%, to $8.2 million for the six months ended June 30, 2024 primarily driven by an increase in in-service internally developed software projects during the period.

Total Other (Income) Expense, Net

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

2024 2023 2024 2023

(in thousands)

3 unchanged sentences

Percentage of total revenue — % — % — % — %

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

Total other (income) expense, net increased by $0.3 million to $0.8 million for the three months ended March 31, 2024 primarily due to an increase in interest expense incurred on the Credit Facility partially offset by an increase in interest earned on our investment portfolio.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

Total other (income) expense, net decreased by $0.4 million to $0.4 million for the three months ended June 30, 2024 primarily due to an increase in interest income from our investments partially offset by an increase in interest expense.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

Total other (income) expense, net decreased by $0.2 million to $1.2 million for the six months ended June 30, 2024 primarily due to an increase in interest income from our investments partially offset by an increase in interest expense.

Stock-Based Compensation

Stock-based compensation is included in the cost and expense line items in the consolidated statements of operations, discussed above.

Three months ended March 31, 2024 compared to three months ended March 31, 2023.

Stock-based compensation decreased by $4.2 million, or 34%, to $8.2 million for the three months ended March 31, 2024.

The three months ended March 31, 2023 included $4.8 million in stock-based compensation as a result of charges after certain executive departures.

Three months ended June 30, 2024 compared to three months ended June 30, 2023.

Stock-based compensation increased by $2.0 million, or 30%, to $8.6 million for the three months ended June 30, 2024.

The amount of stock-based compensation recognized largely reflects the timing and vesting of our annual performance grants, calculated according to our equity incentive plan.

Six months ended June 30, 2024 compared to six months ended June 30, 2023.

Stock-based compensation decreased by $2.2 million, or 11%, to $16.8 million for the six months ended June 30, 2024.

The amount of stock-based compensation recognized largely reflects the timing and vesting of our annual performance grants, calculated according to our equity incentive plan.

Additionally, the six months ended June 30, 2023 included $4.8 million in stock-based compensation as a result of charges after certain executive departures.

Liquidity and Capital Resources

The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by (used in) operating activities $ 9,290 $ (10,267)

12 unchanged sentences

As our capital surplus grows relative to the rate of growth of our business, we may also generate cash, via dividends or other methods, from one or more of our underwriting entities.

As of March 31, 2024, the Company had $275.2 million in cash, cash equivalents and short-term investments, of which $237.1 million was held by the Company's insurance entities.

As of June 30, 2024, the Company had $277.2 million in cash, cash equivalents and short-term investments, of which $244.1 million was held by the Company's insurance entities.

Outside of our insurance entities, we held $33.2 million in cash, cash equivalents and short-term investments with an additional $15.0 million available under our Credit Facility.

3 unchanged sentences

While our board of directors has approved the program, any repurchase activity is subject to quarterly assessment and board approval, based on various factors including available cash, our stock price relative to our estimated intrinsic value, forecasted operating results, and available opportunities to deploy capital.

We repurchased no shares under this program during the three months ended March 31, 2024.

We repurchased no shares under this program during the six months ended June 30, 2024.

Operating Cash Flows

Net cash provided by operating activities was $2.4 million for the three months ended March 31, 2024, compared to $6.9 million net cash used in operating activities for the three months ended March 31, 2023.

This increase was primarily driven by an increase in premium collection from members as our pricing actions flow through, a decrease in acquisition costs, and timing differences in other working capital activities.

Net cash provided by operating activities was $9.3 million for the six months ended June 30, 2024, compared to $10.3 million net cash used in operating activities for the six months ended June 30, 2023.

This increase was primarily driven by an increase in premium collection from members as our pricing actions flow through and a decrease in acquisition costs offset by timing differences in other working capital activities.

Changes in accounts receivable and deferred revenue were primarily related to annual policies with annual payment terms within our other business segment.

Investing Cash Flows

Net cash used by investing activities was $2.7 million for the three months ended March 31, 2024, primarily consisting of $3.1 million of capital expenditures mainly related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements.

Net cash provided by investing activities was $33.9 million for the three months ended March 31, 2023, primarily consisting of $39.0 million in sales and maturities of investment securities, net of purchases, offset by $5.2 million of capital expenditures mainly related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements.

Net cash used in investing activities was $30.5 million for the six months ended June 30, 2024, primarily consisting of purchases of investment securities of $81.2 million as well as $5.9 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements, partially offset by $55.7 million in sales and maturities of investment securities.

Net cash provided by investing activities was $28.4 million for the six months ended June 30, 2023, primarily consisting of $117.7 million in sales and maturities of investment securities, offset by $79.9 million of purchases of investments and $9.9 million of capital expenditures.

Financing Cash Flows

Net cash used by financing activities was $0.3 million for the three months ended March 31, 2024, primarily consisting of $0.3 million in repayments on the Credit Facility.

Net cash provided by financing activities was $33.8 million for the three months ended March 31, 2023, primarily consisting of $35.1 million in proceeds from the Credit Facility, partially offset by $0.9 million in shares withheld to satisfy tax withholdings.

Net cash used in financing activities was $1.2 million for the six months ended June 30, 2024, primarily consisting of $0.7 million in repayments on the Credit Facility.

Net cash provided by financing activities was $33.7 million for the six months ended June 30, 2023, primarily consisting of $35.1 million in proceeds from the Credit Facility.

Long-Term Debt

Our Credit Facility provides us with up to $ 150.0 million of credit.

As of March 31, 2024, we issued term loans totaling $135.0 million under the Credit Facility.

As of June 30, 2024, we issued term loans totaling $135.0 million under the Credit Facility.

The Credit Facility is secured by substantially all of our assets and those of our subsidiaries.

Refer to Note 8, Debt, included in Item 1 of Part I of this report, for further details.

As of March 31, 2024, our insurance entities collectively held $108.4 million in cash and cash equivalents, to be used for operating expenses for our insurance entities, $128.7 million in short-term investments and $277.5 million in other current assets.

As of June 30, 2024, our insurance entities collectively held $91.2 million in cash and cash equivalents, to be used for operating expenses for our insurance entities, $152.8 million in short-term investments and $284.4 million in other current assets.

Most of the assets in our insurance entities are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate.

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Recently, our other business segment growth has slowed and, currently, we expect that to continue, which would reduce capital requirements.

APIC was required to maintain at least $120.1 million and $137.6 million of risk-based capital as of March 31, 2024 and December 31, 2023, respectively.

APIC was required to maintain at least $99.0 million and $137.6 million of risk-based capital as of June 30, 2024 and December 31, 2023, respectively.

In July 2024, APIC distributed an ordinary dividend of $4.1 million to Trupanion, Inc.

ZPIC Insurance Company ("ZPIC"), QPIC Insurance Company ("QPIC"), and GPIC Insurance Company ("GPIC")

In 2021, we established two new wholly-owned insurance subsidiaries, ZPIC and QPIC, domiciled in Missouri and Nebraska, respectively, and in 2022, we established a new wholly-owned insurance subsidiary, GPIC, domiciled in Canada.

In 2021, we established two new wholly-owned U.S.

insurance subsidiaries, ZPIC and QPIC, domiciled in Missouri and Nebraska, respectively, and in 2022, we established a new wholly-owned insurance subsidiary, GPIC, domiciled in Canada.

We have funded required statutory capital to each of these new subsidiaries.

As of March 31, 2024, neither ZPIC, QPIC nor GPIC have begun underwriting any insurance policies, accordingly, each of these entities are currently overcapitalized relative to traditional risk-based capital requirements.

As of June 30, 2024, neither ZPIC, QPIC nor GPIC have begun underwriting any insurance policies, accordingly, each of these entities are currently overcapitalized relative to traditional risk-based capital requirements.

We formed these insurance subsidiaries to provide us flexibility as to the insurance entity we use to market and write policies.

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As required by the Office of the Superintendent of Financial Institutions regulations related to our reinsurance agreement with Accelerant Insurance Company of Canada, we are required to maintain a Canadian Trust account with the greater of CAD $2.0 million or 120% of unearned Canadian premium plus 20% of outstanding Canadian claims, including all incurred but not reported claims.

As of March 31, 2024, the account held CAD $12.0 million.

As of June 30, 2024, the account held CAD $17.9 million.

Though we are not directly regulated by the Bermuda Monetary Authority ("BMA"), WICL's regulation and compliance impacts us as it could have an adverse impact on the ability of WICL Segregated Account AX to pay dividends.

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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 2. Management’s Discussion and Analysis