What changed in this filing

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Item 1. Financial Statements

2025-05-01 compared with 2024-11-01 · 145 added, 202 removed, 351 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share data)

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

2024 2023 2024 2023

Three Months Ended March 31,

Revenue $ 341,975 $ 306,121

7 unchanged sentences

Technology and development (1)

7,933 5,302 23,083 15,434

General and administrative (1)

4 unchanged sentences

Total operating expenses 52,271 42,261

Gain (loss) from investment in joint venture ( 34 ) 4 ( 184 ) ( 140 )

Operating income (loss) 1,746 ( 3,491 ) ( 9,862 ) ( 41,067 )

Loss from investment in joint venture ( 305 ) ( 103 )

Operating loss ( 1,473 ) ( 6,137 )

Interest expense 3,211 3,596

Other (income), net ( 3,240 ) ( 2,843 )

Income (loss) before income taxes 1,464 ( 4,079 ) ( 11,332 ) ( 43,002 )

Income tax expense (benefit) 39 ( 43 ) ( 43 ) ( 472 )

Net income (loss) $ 1,425 $ ( 4,036 ) $ ( 11,289 ) $ ( 42,530 )

Net income (loss) per share:

Basic $ 0.03 $ ( 0.10 ) $ ( 0.27 ) $ ( 1.03 )

Diluted $ 0.03 $ ( 0.10 ) $ ( 0.27 ) $ ( 1.03 )

Loss before income taxes ( 1,444 ) ( 6,890 )

Income tax (benefit) expense 39 ( 38 )

Net loss $ ( 1,483 ) $ ( 6,852 )

Net loss per share:

Basic and diluted $ ( 0.03 ) $ ( 0.16 )

Weighted average shares of common stock outstanding:

Basic 42,233,903 41,536,575 42,076,998 41,344,195

Diluted 42,822,505 41,536,575 42,076,998 41,344,195

Basic and diluted 42,775,955 41,917,094

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

8 unchanged sentences

(in thousands)

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

2024 2023 2024 2023

Net income (loss) $ 1,425 $ ( 4,036 ) $ ( 11,289 ) $ ( 42,530 )

Three Months Ended March 31,

Net loss $ ( 1,483 ) $ ( 6,852 )

Other comprehensive income (loss):

7 unchanged sentences

(in thousands, except share data)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Assets (unaudited)

2 unchanged sentences

Short-term investments 155,508 147,089

Accounts and other receivables, net of allowance for credit loss of $ 1,015 at September 30, 2024 and $ 1,085 at December 31, 2023

Accounts and other receivables, net of allowance for credit losses of $ 1,046 at March 31, 2025 and $ 1,117 at December 31, 2024

290,104 274,031

23 unchanged sentences

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

43,368,881 and 42,340,695 issued and outstanding at September 30, 2024;

43,804,141 and 42,775,955 issued and outstanding at March 31, 2025;

43,516,631 and 42,488,445 shares issued and outstanding at December 31, 2024

6 unchanged sentences

Treasury stock, at cost:

1,028,186 shares at September 30, 2024 and December 31, 2023

1,028,186 shares at March 31, 2025 and December 31, 2024

( 16,534 ) ( 16,534 )

5 unchanged sentences

(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 July 1, 2024 42,159,631 $ — $ 553,122 $ ( 228,969 ) $ ( 1,771 ) $ ( 16,534 ) $ 305,848

Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 181,064 — ( 545 ) — — — ( 545 )

Stock-based compensation expense — — 8,433 — — — 8,433

Other comprehensive income (loss) — — — — 5,014 — 5,014

Net Income — — — 1,425 — — 1,425

Balance at September 30, 2024 42,340,695 $ — $ 561,010 $ ( 227,544 ) $ 3,243 $ ( 16,534 ) $ 320,175

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

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 loss — — — ( 4,036 ) — — ( 4,036 )

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

See accompanying notes to the condensed consolidated financial statements.

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

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

Shares Amount

2 unchanged sentences

Stock-based compensation expense — — 9,879 — — — 9,879

Other comprehensive income (loss) — — — — 2,840 — 2,840

Other comprehensive income — — — 1,897 — — 1,897

Net loss — — — — ( 1,483 ) — ( 1,483 )

Balance at September 30, 2024 42,340,695 $ — $ 561,010 $ ( 227,544 ) $ 3,243 $ ( 16,534 ) $ 320,175

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

Balance at March 31, 2025 42,775,955 $ — $ 578,293 $ ( 715 ) $ ( 227,371 ) $ ( 16,534 ) $ 333,673

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

Shares Amount

2 unchanged sentences

Stock-based compensation expense — — 8,358 — — — 8,358

Other comprehensive income (loss) — — — — ( 807 ) — ( 807 )

Other comprehensive loss — — — ( 1,984 ) — — ( 1,984 )

Net 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 $ ( 1,581 ) $ ( 223,107 ) $ ( 16,534 ) $ 303,371

See accompanying notes to the condensed consolidated financial statements.

TRUPANION, INC.

1 unchanged sentence

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

10 unchanged sentences

Deferred revenue 15,712 13,998

Net cash provided by (used in) operating activities 24,585 1,131

Net cash provided by operating activities 15,964 2,434

Investing activities

3 unchanged sentences

Other 588 516

Net cash provided by (used in) investing activities ( 31,914 ) 25,086

Net cash used in investing activities ( 8,973 ) ( 2,737 )

Financing activities

Proceeds from debt financing, net of financing fees — 60,102

Repayment of debt financing ( 338 ) ( 338 )

Proceeds from exercise of stock options 1,024 372

Shares withheld to satisfy tax withholding ( 915 ) ( 245 )

Repayments of debt financing ( 1,013 ) ( 1,380 )

Other ( 230 ) ( 75 )

Net cash provided by (used in) financing activities ( 2,283 ) 58,557

Net cash used in financing activities ( 459 ) ( 286 )

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net ( 52 ) ( 313 )

11 unchanged sentences

Trupanion, Inc.

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

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.

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

Through its data-driven, vertically-integrated approach, the Company develops and offers high-value medical insurance products, priced to take into account each pet's unique characteristics and coverage level.

The financial data as of December 31, 2024 was derived from the Company's audited consolidated financial statements.

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The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2024 10-K.

Operating results for the nine months ended September 30, 2024 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, 2025 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.

Use of Estimates

3 unchanged sentences

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.

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, which improves and expands upon annual income tax disclosures, primarily relating to rate reconciliation and income taxes paid information.

The ASU is effective for the Company for the fiscal year ending December 31, 2025.

The Company is currently evaluating the impact of adopting ASU 2023-09.

In November 2024, the FASB issued ASU 2024-03, which requires public business entities disclose additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods.

The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

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

Net Income (Loss) per Share

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is calculated using the weighted average number of shares of common stock plus, when dilutive, potential shares of common stock outstanding using the treasury-stock method.

Potential shares of common stock outstanding include stock options, unvested restricted stock awards and restricted stock units.

The components of basic and diluted earnings per share were as follows (in thousands, except share and per share information):

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

2024 2023 2024 2023

Basic earnings per share:

Net income (loss) $ 1,425 $ ( 4,036 ) $ ( 11,289 ) $ ( 42,530 )

Shares used in computation:

Weighted average shares of common stock outstanding 42,233,903 41,536,575 42,076,998 41,344,195

Basic earnings per share $ 0.03 $ ( 0.10 ) $ ( 0.27 ) $ ( 1.03 )

Diluted earnings per share:

Net income (loss) $ 1,425 $ ( 4,036 ) $ ( 11,289 ) $ ( 42,530 )

Shares used in computation:

Weighted average shares of common stock outstanding 42,233,903 41,536,575 42,076,998 41,344,195

Stock options 242,254 — — —

Restricted stock awards and units 346,348 — — —

Weighted average number of shares 42,822,505 41,536,575 42,076,998 41,344,195

Diluted earnings per share $ 0.03 $ ( 0.10 ) $ ( 0.27 ) $ ( 1.03 )

Net Loss per Share

Basic net loss per share is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted net 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 unvested 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 September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Stock options 267,452 386,312

Restricted stock awards and restricted stock units 317,203 735,163 1,037,672 735,163

Restricted stock units 1,472,290 1,262,794

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.

All available-for-sale securities are considered short-term in nature, with the exception of certain long-term investments that are being held for statutory requirements.

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

As of September 30, 2024

Currently, all available-for-sale securities are considered short-term in nature.

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

The amortized cost, gross unrealized holding gains and losses, and estimated fair value of long-term and short-term investments by major security type and class of security were as follows as of March 31, 2025 and December 31, 2024 (in thousands):

As of March 31, 2025

Long-term investments:

Available-for-sale investments

Foreign deposits $ 14,051 $ — $ — $ 14,051

$ 14,051 $ — $ — $ 14,051

Held-to-maturity investments

14 unchanged sentences

Long-term investments:

Available-for-sale investments

Foreign deposits $ 11,869 $ — $ — $ 11,869

$ 11,869 $ — $ — $ 11,869

Held-to-maturity investments

12 unchanged sentences

$ 12,623 $ 16 $ ( 1 ) $ 12,638

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

As of September 30, 2024

Future maturities of investments classified as available-for-sale and held-to-maturity are as follows (in thousands):

As of March 31, 2025

Available-for-sale:

12 unchanged sentences

$ 20,019 $ 20,025

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 less than $ 0.1 million as of September 30, 2024, and $ 0.3 million as of December 31, 2023.

As of September 30, 2024, $ 8.2 million in available-for-sale investments have been in a loss position for more than twelve months, with total unrealized losses of less than $ 0.1 million.

As of September 30, 2024, $ 6.8 million available-for-sale investments have been in a loss position for less than twelve months, with total unrealized losses of less than $ 0.1 million.

As of December 31, 2023, $ 18.9 million in available-for-sale investments had 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 had been in a loss position for less than twelve months, with total unrealized losses of $ 0.1 million.

All losses relate to interest rate changes.

The Company does not expect any credit losses from its available-for-sale investments, considering the composition of the investment portfolio and the credit rating of these investments.

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 $ 59.2 million and $ 83.9 million during the nine months ended September 30, 2024 and 2023, respectively.

The following tables present the gross unrealized losses and related fair values for the Company's investment in available-for-sale securities, grouped by duration of time in a continuous unrealized loss position as of March 31, 2025 and December 31, 2024 (in thousands):

Less than 12 Months 12 Months or More Total

Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss

As of March 31, 2025

Treasury securities $ 11,763 $ ( 45 ) $ — $ — $ 11,763 $ ( 45 )

Mortgage-backed securities and collateralized mortgage obligations 962 ( 8 ) 1,255 ( 26 ) 2,217 ( 34 )

Other asset-backed securities 1,001 ( 2 ) 1,510 ( 4 ) 2,511 ( 6 )

Corporate bonds 2,008 ( 6 ) — — 2,008 ( 6 )

Total $ 15,734 $ ( 61 ) $ 2,765 $ ( 30 ) $ 18,499 $ ( 91 )

Less than 12 Months 12 Months or More Total

Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss

As of December 31, 2024

Treasury securities $ 27,769 $ ( 202 ) $ — $ — $ 27,769 $ ( 202 )

Mortgage-backed securities and collateralized mortgage obligations 1,538 ( 20 ) 1,359 ( 40 ) 2,897 ( 60 )

Other asset-backed securities 186 ( 1 ) 1,737 ( 7 ) 1,923 ( 8 )

Corporate bonds 6,461 ( 40 ) 736 ( 3 ) 7,197 ( 43 )

Total $ 35,954 $ ( 263 ) $ 3,832 $ ( 50 ) $ 39,786 $ ( 313 )

Unrealized losses on available-for-sale investments relate to interest rate changes.

The Company does not expect material credit losses from its available-for-sale investments, considering the composition of the investment portfolio and the credit rating of these investments.

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

The Company does not expect material credit losses from its held-to-maturity investments, considering the composition of the investment portfolio and the credit loss history of these investments.

Proceeds from the sales of fixed maturities classified as available-for-sale were $ 29.6 million and $ 15.1 million during the three months ended March 31, 2025 and 2024, respectively.

Other Investments

Preferred Stock Investment

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

1 unchanged sentence

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 Baystride in August 2027 at an amount approximating its expected fair value.

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.

2 unchanged sentences

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 $ 2.1 million and $ 4.0 million as of September 30, 2024 and December 31, 2023, respectively.

The outstanding loan balance under the line of credit, including accrued interest, was $ 1.0 million and $ 1.6 million as of March 31, 2025 and December 31, 2024, 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 $ 0.2 million and $ 0.3 million of these services for the nine months ended September 30, 2024 and 2023, respectively.

Allowance for Credit Loss

The Company provided $ 0.1 million of these services for each of the three months ended March 31, 2025 and 2024.

Allowance for Credit Losses

The Company regularly evaluates its investments for expected credit losses.

2 unchanged sentences

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.

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

2024 2023 2024 2023

Balance at beginning of period $ ( 1,674 ) $ — $ ( 1,674 ) $ —

(Addition to) allowance for credit losses — — — —

Balance at end of period $ ( 1,674 ) $ — $ ( 1,674 ) $ —

Based on these considerations, the Company established an allowance for credit losses in 2023 related to its investment in the Baystride preferred stock.

This credit loss allowance was reversed in the fourth quarter of 2024 as the fair value of the Company's investment in Baystride.

was determined to have recovered to an amount above the original investment amount.

The following table presents a rollforward of the allowance for credit losses for this investment (in thousands).

Three Months Ended March 31,

Balance at the beginning of the period $ — $ ( 1,674 )

Recovery of (addition to) allowance for credit losses — —

Balance as of the end of the period $ — $ ( 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, 2024

As of March 31, 2025

Fair Value Level 1 Level 2 Level 3

4 unchanged sentences

Corporate bonds 37,636 — 37,636 —

Foreign deposits 14,051 14,051 — —

Treasury securities 64,660 — 64,660 —

8 unchanged sentences

Corporate bonds 35,623 — 35,623 —

Foreign deposits 11,869 11,869 — —

Treasury securities 70,291 — 70,291 —

1 unchanged sentence

Total $ 233,916 $ 91,534 $ 134,466 $ 7,916

The Company measures the fair value of money market funds and foreign deposits, classified as Level 1, based on quoted prices in active markets for identical assets.

The Company's fixed maturity investments classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources, including pricing vendors, dealers/market makers, and exchange-quoted prices.

The fair value of the Company's fixed maturity investments classified as Level 2 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.

Held-to-maturity investments are carried at amortized cost and the fair value and changes in unrealized gains (losses) are disclosed in Note 3, Investments.

The Company measures the fair value of money market funds, classified as Level 1, based on quoted prices in active markets for identical assets.

The fair values of the Company's fixed maturity investments classified as Level 2 are 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.

Held-to-maturity investments are carried at amortized cost and the fair value and changes in unrealized gains and 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 are considered either a Level 1 or Level 2 measurement.

1 unchanged sentence

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 $ 5.3 million as of September 30, 2024, unchanged from December 31, 2023, and is recorded in other long-term assets on the Company's consolidated balance sheet.

Significant changes in any of these unobservable inputs would result in a change in the fair value measurement.

The estimated fair value was $ 7.9 million as of March 31, 2025, unchanged from December 31, 2024.

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, 2024 and the year ended December 31, 2023.

The following table presents the change in fair value of the Company’s preferred stock investment carried at fair value and classified as Level 3 as of September 30, 2024 and 2023 (in thousands):

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

2024 2023 2024 2023

Balance at beginning of period $ 5,326 $ 4,115 $ 5,326 $ 4,115

Changes in fair value included in earnings — — — —

Balance at end of period $ 5,326 $ 4,115 $ 5,326 $ 4,115

There were no transfers between levels for the three months ended March 31, 2025 and the year ended December 31, 2024.

There was no change in the fair value of the Company's preferred stock investment classified as Level 3 during the three months ended March 31, 2025 or 2024.

Fair Value Disclosures - Other Assets and Liabilities

The Company's other long-term assets balance also included notes receivable of $ 4.9 million and $ 6.8 million as of September 30, 2024 and December 31, 2023, respectively, recorded at their estimated collectible amount.

The Company's other long-term assets balance also included notes receivable of $ 3.7 million and $ 4.3 million as of March 31, 2025 and December 31, 2024, 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, 2024.

Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at March 31, 2025.

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 have not been processed or received but 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 insurance claims that have not been paid prior to the reporting date.

The reserve also includes the Company's estimate of related internal processing costs.

2 unchanged sentences

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.

Changes in management's assumptions and estimates may have a relatively large impact on 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):

Nine Months Ended September 30,

Three Months Ended March 31,

Subscription 2025 2024

10 unchanged sentences

Reserve at end of period $ 25,587 $ 30,016

The Company had unfavorable development on veterinary invoice reserves for the subscription business segment of $ 0.1 million for the nine months ended September 30, 2024, and unfavorable development on veterinary invoice reserves of $ 2.4 million for the nine months ended September 30, 2023, both of which were the result of ongoing analysis of recent payment trends.

Non-cash expenses are primarily comprised of stock-based compensation expense for employees performing claims processing related duties.

The Company had unfavorable development on veterinary invoice reserves of $ 1.7 million for the three months ended March 31, 2025, including unfavorable development of $1.2 million attributable to accident year 2024 and unfavorable development of $0.5 million attributable to accident year 2023 and prior.

The unfavorable development for accident year 2024 was primarily driven by a slower pattern of claims reported by members than initially anticipated.

The unfavorable development for accident year 2023 and prior was driven by higher than expected frequency of claims.

Non-cash expenses are primarily comprised of stock-based compensation for employees performing claims processing related duties.

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 2025 2024

10 unchanged sentences

Reserve at end of period $ 28,455 $ 32,259

The Company had favorable development on veterinary invoice reserves for the other business segment of $ 1.3 million for the nine months ended September 30, 2024, and unfavorable development on veterinary invoice reserves of $ 0.7 million for the nine months ended September 30, 2023, both of which were the result of ongoing analysis of recent payment trends.

The Company had favorable development on veterinary invoice reserves for the other business segment of $ 4.6 million for the three months ended March 31, 2025, including favorable development on veterinary invoice reserves of $4.4 million attributable to accident year 2024 and favorable development of $0.2 million attributable to accident year 2023 and prior.

The favorable development for all periods was driven by lower frequency and severity than expected.

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, 2024

Subscription As of March 31, 2025

Year of Occurrence

2023 and prior $ 541

Other Business As of September 30, 2024

Other Business As of March 31, 2025

Year of Occurrence

2 unchanged sentences

(a) an initial term loan in an aggregate principal amount of $ 60.0 million (Initial Term Loan), which was 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 were able to be drawn from time to time until September 25, 2023 .

(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 .

On December 29, 2022, February 17, 2023, and September 21, 2023, the Company borrowed Delayed Draw Term loans of $ 15.0 million, $ 35.0 million, and $ 25.0 million, respectively;

1 unchanged sentence

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

The stated interest rate as of September 30, 2024 was approximately 10.48 % for the $ 60.0 million Initial Term Loan and for the aggregate $ 75.0 million Delayed Draw Term Loans.

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

The stated interest rate as of March 31, 2025 was approximately 9.45 % 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.

The Credit Facility is secured by substantially all assets of the Company and its subsidiaries.

1 unchanged sentence

The Credit Agreement contains financial and other covenants .

As of September 30, 2024, the Company was in compliance with all financial and other covenants .

As of March 31, 2025, 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, 2024 are as follows (in thousands):

Year Ending December 31, September 30, 2024

Future principal payments on outstanding borrowings as of March 31, 2025 are as follows (in thousands):

Year Ending December 31, March 31, 2025

Total $ 131,600

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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,

2024 2023 2024 2023

Three Months Ended March 31,

Veterinary invoice expense $ 770 $ 924

6 unchanged sentences

Total stock-based compensation $ 9,879 $ 8,358

Stock Options

The following table presents information regarding stock options granted, exercised, and forfeited for the period presented:

Number of Options Weighted Average Exercise Price per Share Aggregate Intrinsic Value (in thousands)

Outstanding as of December 31, 2024 347,334 $ 14.30 $ 11,775

Granted — — —

Exercised ( 78,536 ) 13.09 1,626

Forfeited ( 1,346 ) 11.87 —

Outstanding as of March 31, 2025 267,452 14.67 6,038

Exercisable as of March 31, 2025 267,452 $ 14.67 $ 6,038

As of March 31, 2025, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 1.6 years.

The Company has not granted any new stock options since 2017 and all outstanding options vested prior to January 1, 2022.

Restricted Stock Units

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

The following table presents information regarding restricted stock units granted, exercised and forfeited for the period presented:

Shares Weighted Average

4 unchanged sentences

Forfeited ( 14,767 ) 36.78

Unvested shares as of September 30, 2024 1,037,672 37.91

As of September 30, 2024, the Company had 1,037,672 unvested restricted stock units.

Unvested shares as of March 31, 2025 1,472,290 $ 40.88

Stock-based compensation expenses of $ 58.3 million related to unvested restricted stock units are expected to be recognized over a weighted average period of approximately 2.0 years.

In March 2023, two executives terminated employment with the Company and one executive signed a separation agreement effective June 1, 2023.

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.

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, 2023 408,970 $ 14.09 $ 6,715

Granted — — —

Exercised ( 55,445 ) 13.14 1,352

Forfeited ( 500 ) 14.93 —

Outstanding as of September 30, 2024 353,025 14.24 9,793

Exercisable as of September 30, 2024 353,025 14.24 9,793

As of September 30, 2024, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 1.9 years.

The Company has not granted any new stock options since 2017.

Stockholders' Equity

Common Stock and Preferred Stock

As of September 30, 2024, the Company had 100,000,000 shares of common stock authorized and 42,340,695 shares of common stock outstanding.

As of March 31, 2025, the Company had 100,000,000 shares of common stock authorized and 42,775,955 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, 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.

At March 31, 2025, 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.

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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 nine months ended September 30, 2024 and 2023, respectively.

The Company repurchased no shares during the three months ended March 31, 2025 and 2024, 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, 2024 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of July 1, 2024 $ ( 1,593 ) $ ( 178 ) $ ( 1,771 )

Other comprehensive income (loss) 2,805 2,209 5,014

Balance as of September 30, 2024 $ 1,212 $ 2,031 $ 3,243

For the three months 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 nine months ended September 30, 2024 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

For the three months ended March 31, 2025 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total

Balance as of January 1, 2025 $ ( 3,113 ) $ 501 $ ( 2,612 )

Other comprehensive income (loss) 1,288 1,552 2,840

Balance as of September 30, 2024 $ 1,212 $ 2,031 $ 3,243

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

Other comprehensive income 1,352 545 1,897

Balance as of March 31, 2025 $ ( 1,761 ) $ 1,046 $ ( 715 )

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) 48 ( 855 ) ( 807 )

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

The Company has two aggregated reporting segments:

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

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

The Company has two reporting segments:

subscription business and other business.

The subscription business segment consists of products that have been created to meet the needs of their distribution channels and have similar target margin profiles.

This segment generates revenue primarily from subscription fees related to the Company's direct-to-consumer products.

The other business segment generates revenue primarily by underwriting policies on behalf of third parties.

The subscription business segment generates revenue primarily from subscription payments related to the Company's direct-to-consumer products.

The other business segment generates revenue from other product offerings, primarily by underwriting policies on behalf of third parties with whom the Company has a business-to-business relationship.

The other business segment has, and targets, a lower margin profile than the Company's subscription business segment.

The Company does not undertake marketing efforts for these policies and has a business-to-business relationship with these third-parties.

The other business segment also includes other products and insurance software solutions that have a different margin profile from the Company’s subscription business segment.

The Company's chief operating decision maker is its Chief Executive Officer.

The chief operating decision maker reviews revenue and operating income (loss) to evaluate segment performance.

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The Company does not analyze discrete segment balance sheet information related to long-term assets.

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

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

2024 2023 2024 2023

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

Three Months Ended March 31,

Subscription business:

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Depreciation and amortization 1,207 1,298

Other business operating income (loss) ( 2,044 ) 2,214 ( 5,569 ) ( 3,633 )

Gain (loss) from investment in joint venture ( 34 ) 4 ( 184 ) ( 140 )

Operating income (loss) 1,746 ( 3,491 ) ( 9,862 ) ( 41,067 )

Other business operating loss ( 2,233 ) ( 1,509 )

Loss from investment in joint venture ( 305 ) ( 103 )

Operating loss ( 1,473 ) ( 6,137 )

Interest expense 3,211 3,596

Other income, net ( 3,240 ) ( 2,843 )

Income (loss) before income taxes $ 1,464 $ ( 4,079 ) $ ( 11,332 ) $ ( 43,002 )

Loss before income taxes $ ( 1,444 ) $ ( 6,890 )

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,

2024 2023 2024 2023

Three Months Ended March 31,

United States $ 285,824 $ 255,974

1 unchanged sentence

Total revenue $ 341,975 $ 306,121

Substantially all of the Company’s long-lived assets were located in the United States as of September 30, 2024 and December 31, 2023.

Substantially all of the Company’s long-lived assets were located in the United States as of March 31, 2025 and December 31, 2024.

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