TRUPANION, INC. 10-Q

Item 1. Financial Statements TRUPANION, INC. Condensed Consolidated Statements of Operations (in thousands, except share data) (unaudited) Three Months Ended March 31, 2026 2025 Revenue $ 384,049 $ 341,975 Cost of revenue: Veterinary invoice expense (1) 281,436 247,450 Other cost of revenue (1) 41,124 43,422 Total cost of revenue 322,560 290,872 Operating expenses: Technology and development (1) 11,294 8,072 General and administrative (1) 19,102 19,892 New pet acquisition expense (1) 22,611 20,516 Depreciation and amortization 3,706 3,791 Total operating expenses 56,713 52,271 Loss from investment in joint venture — ( 305 ) Operating income (loss) 4,776 ( 1,473 ) Interest expense 1,875 3,211 Other (income), net ( 3,055 ) ( 3,240 ) Income (loss) before income taxes 5,956 ( 1,444 ) Income tax expense 1,076 39 Net income (loss) $ 4,880 $ ( 1,483 ) Net income (loss) per share: Basic $ 0.11 $ ( 0.03 ) Diluted $ 0.11 $ ( 0.03 ) Weighted average shares of common stock outstanding: Basic 43,505,604 42,775,955 Diluted 43,681,740 42,775,955 (1) Includes stock-based compensation expense as follows: Veterinary invoice expense $ 560 $ 770 Other cost of revenue 569 489 Technology and development 1,507 1,151 General and administrative 4,893 4,528 New pet acquisition expense 1,471 2,892 See accompanying notes to the condensed consolidated financial statements. 1 TRUPANION, INC. Condensed Consolidated Statements of Comprehensive Income (in thousands) (unaudited) Three Months Ended March 31, 2026 2025 Net income (loss) $ 4,880 $ ( 1,483 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 1,277 ) 1,352 Net unrealized gain (loss) on available-for-sale investments ( 1,513 ) 545 Other comprehensive income (loss), net of taxes ( 2,790 ) 1,897 Comprehensive income $ 2,090 $ 414 See accompanying notes to the condensed consolidated financial statements. 2 TRUPANION, INC. Condensed Consolidated Balance Sheets (in thousands, except share data) March 31, 2026 December 31, 2025 Assets (unaudited) Current assets: Cash and cash equivalents $ 153,456 $ 138,024 Short-term investments 230,205 232,706 Accounts and other receivables, net of allowance for credit losses of $ 2,419 at March 31, 2026 and $ 1,311 at December 31, 2025 304,796 301,945 Prepaid expenses and other assets 16,709 18,387 Total current assets 705,166 691,062 Restricted cash 29,416 33,434 Long-term investments 986 983 Property, equipment, and internal-use software, net 102,612 104,844 Intangible assets, net 23,684 24,102 Other long-term assets 21,095 21,237 Goodwill 38,621 39,382 Total assets $ 921,580 $ 915,044 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 12,828 $ 16,445 Accrued liabilities and other current liabilities 42,329 56,509 Reserve for veterinary invoices 56,701 55,921 Deferred revenue 286,508 270,935 Long-term debt - current portion 10,000 10,000 Total current liabilities 408,366 409,810 Long-term debt 99,346 101,784 Deferred tax liabilities 955 1,510 Other liabilities 18,091 18,004 Total liabilities 526,758 531,108 Stockholders’ equity: Common stock: $ 0.00001 par value per share, 100,000,000 shares authorized; 44,648,800 and 43,620,614 issued and outstanding at March 31, 2026; 44,430,267 and 43,402,081 shares issued and outstanding at December 31, 2025 — — Preferred stock: $ 0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding — — Additional paid-in capital 613,624 604,828 Accumulated other comprehensive income (loss) ( 693 ) 2,097 Accumulated deficit ( 201,575 ) ( 206,455 ) Treasury stock, at cost: 1,028,186 shares at March 31, 2026 and December 31, 2025 ( 16,534 ) ( 16,534 ) Total stockholders’ equity 394,822 383,936 Total liabilities and stockholders’ equity $ 921,580 $ 915,044 See accompanying notes to the condensed consolidated financial statements. 3 Trupanion, Inc. Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) (unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Treasury Stock Total Stockholders' Equity Shares Amount Balance at January 1, 2026 43,402,081 $ — $ 604,828 $ 2,097 $ ( 206,455 ) $ ( 16,534 ) $ 383,936 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 218,533 — ( 236 ) — — — ( 236 ) Stock-based compensation expense — — 9,032 — — — 9,032 Other comprehensive loss — — — ( 2,790 ) — — ( 2,790 ) Net income — — — — 4,880 — 4,880 Balance at March 31, 2026 43,620,614 $ — $ 613,624 $ ( 693 ) $ ( 201,575 ) $ ( 16,534 ) $ 394,822 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders' Equity Shares Amount Balance at January 1, 2025 42,488,445 $ — $ 568,302 $ ( 2,612 ) $ ( 225,888 ) $ ( 16,534 ) $ 323,268 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 287,510 — 112 — — — 112 Stock-based compensation expense — — 9,879 — — — 9,879 Other comprehensive income — — — 1,897 — — 1,897 Net loss — — — — ( 1,483 ) — ( 1,483 ) Balance at March 31, 2025 42,775,955 $ — $ 578,293 $ ( 715 ) $ ( 227,371 ) $ ( 16,534 ) $ 333,673 See accompanying notes to the condensed consolidated financial statements. 4 TRUPANION, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2026 2025 Operating activities Net income (loss) $ 4,880 $ ( 1,483 ) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 3,706 3,791 Stock-based compensation expense 9,000 9,830 Other, net ( 213 ) 349 Changes in operating assets and liabilities: Accounts and other receivables ( 3,035 ) ( 15,965 ) Prepaid expenses and other assets 1,954 ( 204 ) Accounts payable, accrued liabilities, and other liabilities ( 18,326 ) 1,527 Reserve for veterinary invoices 842 2,407 Deferred revenue 15,786 15,712 Net cash provided by operating activities 14,594 15,964 Investing activities Purchases of investment securities ( 47,883 ) ( 40,875 ) Maturities and sales of investment securities 48,878 33,242 Purchases of property, equipment, and internal-use software ( 847 ) ( 1,928 ) Other ( 35 ) 588 Net cash provided by (used in) investing activities 113 ( 8,973 ) Financing activities Repayment of debt financing ( 2,500 ) ( 338 ) Proceeds from exercise of stock options 260 1,024 Shares withheld to satisfy tax withholding ( 496 ) ( 915 ) Other — ( 230 ) Net cash used in financing activities ( 2,736 ) ( 459 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net ( 557 ) ( 52 ) Net change in cash, cash equivalents, and restricted cash 11,414 6,480 Cash, cash equivalents, and restricted cash at beginning of period 171,458 199,530 Cash, cash equivalents, and restricted cash at end of period $ 182,872 $ 206,010 Supplemental disclosures Noncash investing and financing activities: Purchases of property, equipment, and internal-use software included in accounts payable and accrued liabilities $ 340 $ 803 See accompanying notes to the condensed consolidated financial statements. 5 TRUPANION, INC. Notes to the Condensed Consolidated Financial Statements (unaudited) 1. Nature of Operations and Significant Accounting Policies Description of Business and Basis of Presentation Trupanion, Inc. (collectively with its wholly-owned subsidiaries, the "Company") provides medical insurance for cats and dogs 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, 2025 was derived from the Company's audited consolidated financial statements. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations, comprehensive income, stockholders' equity and cash flows for the interim periods. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission ("SEC") on February 13, 2026 (the "2025 10-K"). The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2025 10-K. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates. See Note 1 to the audited financial statements included in the 2025 10-K for additional discussion of these estimates and assumptions. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, which requires public business entities to 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 evaluating the impact of this ASU on its consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, which modernizes the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software. The ASU is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of adopting ASU 2025-06. 2. Net Income (Loss) per Share Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is calculated using the weighted average number of shares of common stock plus, when dilutive, potential shares of common stock outstanding using the treasury-stock method. Potential shares of common stock outstanding include stock options, and unvested restricted stock units. The components of basic and diluted earnings per share were as follows (in thousands, except share and per share information): 6 Three Months Ended March 31, 2026 2025 Basic earnings per share: Net income (loss) $ 4,880 $ ( 1,483 ) Shares used in computation: Weighted average shares of common stock outstanding 43,505,604 42,775,955 Basic earnings per share $ 0.11 $ ( 0.03 ) Diluted earnings per share: Net income (loss) $ 4,880 $ ( 1,483 ) Shares used in computation: Weighted average shares of common stock outstanding 43,505,604 42,775,955 Stock options 77,240 — Restricted stock units 98,896 — Weighted average number of shares 43,681,740 42,775,955 Diluted earnings per share $ 0.11 $ ( 0.03 ) The following potentially dilutive equity securities were not included in the diluted earnings per share of common stock calculation because they would have had an antidilutive effect: Three Months Ended March 31, 2026 2025 Stock options — 267,452 Restricted stock units 682,623 1,472,290 3. Investments 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. 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, 2026 and December 31, 2025 (in thousands): 7 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of March 31, 2026 Long-term investments: Held-to-maturity investments U.S. treasury securities $ 986 $ — $ — $ 986 $ 986 $ — $ — $ 986 Short-term investments: Available-for-sale investments U.S. treasury securities $ 98,342 $ 77 $ ( 367 ) $ 98,052 Mortgage-backed securities and collateralized mortgage obligations 25,279 98 ( 46 ) 25,331 Other asset-backed securities 26,221 88 ( 27 ) 26,282 Corporate bonds 52,055 191 ( 150 ) 52,096 $ 201,897 $ 454 $ ( 590 ) $ 201,761 Held-to-maturity investments U.S. treasury securities $ 9,779 $ 1 $ ( 4 ) $ 9,776 Foreign treasury securities 18,140 — ( 16 ) 18,124 Certificates of deposit 525 — — 525 $ 28,444 $ 1 $ ( 20 ) $ 28,425 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of December 31, 2025 Long-term investments: Held-to-maturity investments U.S. treasury securities $ 983 $ 5 $ — $ 988 $ 983 $ 5 $ — $ 988 Short-term investments: Available-for-sale investments U.S. treasury securities $ 103,643 $ 523 $ ( 8 ) $ 104,158 Mortgage-backed securities and collateralized mortgage obligations 24,501 201 ( 15 ) 24,687 Other asset-backed securities 23,685 152 — 23,837 Corporate bonds 47,311 527 ( 3 ) 47,835 $ 199,140 $ 1,403 $ ( 26 ) $ 200,517 Held-to-maturity investments U.S. treasury securities $ 9,757 $ 10 $ — $ 9,767 Foreign treasury securities 18,263 — — 18,263 Certificates of deposit 4,169 — — 4,169 $ 32,189 $ 10 $ — $ 32,199 8 Future maturities of investments classified as available-for-sale and held-to-maturity are as follows (in thousands): As of March 31, 2026 Amortized Cost Fair Value Available-for-sale: Due under one year $ 5 $ 5 Due after one year through five years 150,392 150,143 Due after five years through ten years — — Due after ten years — — $ 150,397 $ 150,148 Available-for-sale collateralized: Due under one year $ 9,785 $ 9,823 Due after one year through five years 31,495 31,584 Due after five years through ten years 10,003 9,981 Due after ten years 217 225 $ 51,500 $ 51,613 Held-to-maturity: Due under one year $ 28,444 $ 28,425 Due after one year through five years 986 986 $ 29,430 $ 29,411 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, 2026 and December 31, 2025 (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, 2026 U.S. treasury securities $ 72,873 $ ( 367 ) $ — $ — $ 72,873 $ ( 367 ) Mortgage-backed securities and collateralized mortgage obligations 10,432 ( 29 ) 877 ( 17 ) 11,309 ( 46 ) Other asset-backed securities 6,778 ( 27 ) — — 6,778 ( 27 ) Corporate bonds 22,150 ( 150 ) — — 22,150 ( 150 ) Total $ 112,233 $ ( 573 ) $ 877 $ ( 17 ) $ 113,110 $ ( 590 ) 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, 2025 U.S. treasury securities $ 5,139 $ ( 8 ) $ — $ — $ 5,139 $ ( 8 ) Mortgage-backed securities and collateralized mortgage obligations 2,893 ( 3 ) 967 ( 12 ) 3,860 ( 15 ) Other asset-backed securities — — — — — — Corporate bonds 2,700 ( 3 ) — — 2,700 ( 3 ) Total $ 10,732 $ ( 14 ) $ 967 $ ( 12 ) $ 11,699 $ ( 26 ) 9 As of March 31, 2026, 70 of the securities held were in an unrealized loss position. 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. The Company determined it is not likely to, and does not intend to, sell securities currently in a loss position prior to a potential recovery of their 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 maturity investments classified as available-for-sale were $ 39.3 million and $ 29.6 million during the three months ended March 31, 2026 and 2025, respectively. 4. Fair Value Fair Value Disclosures The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis, and placement within the fair value hierarchy (in thousands): As of March 31, 2026 Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 51,524 $ 51,524 $ — $ — Fixed maturities: Mortgage-backed securities and collateralized mortgage obligations 25,331 — 25,331 — Other asset-backed securities 26,282 — 26,282 — Corporate bonds 52,096 — 52,096 — U.S. treasury securities 98,052 — 98,052 — Total $ 253,285 $ 51,524 $ 201,761 $ — As of December 31, 2025 Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 46,818 $ 46,818 $ — $ — Fixed maturities: Mortgage-backed securities and collateralized mortgage obligations 24,687 — 24,687 — Other asset-backed securities 23,837 — 23,837 — Corporate bonds 47,835 — 47,835 — U.S. treasury securities 104,158 — 104,158 — Total $ 247,335 $ 46,818 $ 200,517 $ — 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. 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, 2026 and the year ended December 31, 2025. Fair Value Disclosures - Other Assets and Liabilities The Company's other long-term assets balance also included notes receivable of $ 2.4 million and $ 2.5 million as of March 31, 2026 and December 31, 2025, respectively, recorded at their estimated collectible amount. The Company estimates that the carrying value of the notes receivable approximates the fair value. The estimated fair value represents a Level 3 measurement within the fair value hierarchy, and is based on market interest rates and the assessed creditworthiness of the third party. 10 The Company estimates the fair value of long-term debt based upon rates currently available to the Company for debt with similar terms and remaining maturities. This is a Level 3 measurement. Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at March 31, 2026. 5. Commitments and Contingencies Legal Proceedings From time to time the Company is or may become subject to various legal proceedings arising in the ordinary course of business, including proceedings involving members, other entities or regulatory bodies. Estimated liabilities are recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. At this time, the Company does not believe any such matters to be material individually or in the aggregate. These views are subject to change following the outcome of future events or the results of future developments. 6. Reserve for Veterinary Invoices 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. The reserve estimate involves actuarial projections and is based on management's assessment of facts and circumstances currently known, and assumptions about anticipated claims development patterns. The Company uses generally accepted actuarial methodologies, such as paid loss development methods, in estimating the amount of the reserve for veterinary invoices. The reserve is made for each of the Company's segments, subscription and other business, and is continually refined as the Company receives and pays veterinary invoices. Changes in management's assumptions and estimates may have a relatively large impact on the reserve and associated expense. Reserve for veterinary invoices Summarized below are the changes in total liability for the Company's subscription business segment (in thousands): Three Months Ended March 31, Subscription 2026 2025 Reserve at beginning of year $ 26,364 $ 23,084 Veterinary invoices during the period related to: Current year 188,274 166,452 Prior years 3,140 1,729 Total veterinary invoice expense 191,414 168,181 Amounts paid during the period related to: Current year 168,898 146,976 Prior years 19,865 17,870 Total paid 188,763 164,846 Non-cash expenses 577 832 Reserve at end of period $ 28,438 $ 25,587 The Company had unfavorable development on veterinary invoice reserves of $ 3.1 million for the three months ended March 31, 2026, including unfavorable development of $0.1 million attributable to accident year 2025 and unfavorable development of $3.0 million attributable to accident year 2024 and prior. The unfavorable development for accident year 2024 and prior was primarily 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. 11 Summarized below are the changes in total liability for the Company's other business segment (in thousands): Three Months Ended March 31, Other Business 2026 2025 Reserve at beginning of year $ 29,557 $ 28,551 Veterinary invoices during the period related to: Current year 86,276 83,822 Prior years 3,746 ( 4,553 ) Total veterinary invoice expense 90,022 79,269 Amounts paid during the period related to: Current year 64,692 61,307 Prior years 26,624 18,058 Total paid 91,316 79,365 Non-cash expenses — — Reserve at end of period $ 28,263 $ 28,455 The Company had unfavorable development on veterinary invoice reserves for the other business segment of $ 3.7 million for the three months ended March 31, 2026, including unfavorable development on veterinary invoice reserves of $2.9 million attributable to accident year 2025 and unfavorable development of $0.8 million attributable to accident year 2024 and prior. The unfavorable development for accident year 2025 and prior was primarily driven by higher than expected frequency of claims. Reserve for veterinary invoices, by year of occurrence In the following tables, the reserve for veterinary invoices for each segment is presented as the amount (in thousands) by the year to which the veterinary invoice relates, referred to as the year of occurrence. Subscription As of March 31, 2026 Year of Occurrence 2024 and prior $ 2,962 2025 6,678 2026 18,798 $ 28,438 Other Business As of March 31, 2026 Year of Occurrence 2024 and prior $ 1,729 2025 4,950 2026 21,584 $ 28,263 7. Debt Prior Credit Facility On March 25, 2022 , the Company entered into a credit agreement with Piper Sandler Finance, LLC, acting as the administrative agent, that provided the Company with $ 150.0 million in credit (the "Prior Credit Facility"). The Prior Credit Facility obligated the Company to repay 0.25 % of any then-outstanding Term Loans, together with accrued and unpaid interest, on a quarterly basis. In November 2025, the Company repaid the Prior Credit Facility in full utilizing proceeds from the PNC Facility. PNC Facility On November 4, 2025, the Company entered into a credit agreement with PNC Bank, National Association acting as the administrative agent, that provides the Company with $ 120.0 million in credit (the "PNC Facility") consisting of: (a) an initial term loan in an aggregate principal amount of $ 100.0 million ("PNC Initial Term Loan"), which was funded at closing; 12 (b) commitments for revolving loans in an aggregate principal amount at any time outstanding not in excess of $ 20.0 million (PNC Revolving Loans), of which $ 15.0 million was drawn and the rest may be drawn at any time prior to maturity. The PNC Facility is secured by substantially all assets of the Company and its subsidiaries. Proceeds from the PNC Facility were utilized to pay off the Prior Credit Facility. The credit agreement with PNC Bank contains financial and other covenants. As of March 31, 2026, the Company was in compliance with all financial and other covenants. To the extent not previously paid, the PNC Facility is due and payable on November 4, 2028. The Company will make quarterly principal payments of $ 2.5 million on the PNC Initial Term Loan. The Company may voluntarily prepay loans or reduce revolving commitments under the PNC Facility at any time without premium or penalty. Loans under the PNC Facility bear interest at a reference rate plus an applicable margin, which will generally be the SOFR reference rate plus 2.75% per annum. The stated interest rate as of March 31, 2026 was approximately 6.45 % fo r the aggregate outstanding term loans. The Company incurred total debt issuance cost of approximat ely $ 0.8 million, wh ich is reported in the Consolidated Balance Sheet as a direct reduction from the carrying amount of the PNC Facility, and is amortized as interest expense over the term of three years. Future principal payments on outstanding borrowings as of March 31, 2026 are as follows (in thousands): Year Ending December 31, As of March 31, 2026 2026 $ 7,500 2027 10,000 2028 92,500 Total $ 110,000 13 8. Stock-Based Compensation Stock-based compensation expense includes restricted stock units granted to employees and other service providers and has been reported in the Company’s Consolidated Statements of Operations depending on the function performed by the employee or other service provider. Stock-based compensation expense recognized in each category of the Consolidated Statements of Operations was as follows (in thousands): Three Months Ended March 31, 2026 2025 Veterinary invoice expense $ 560 $ 770 Other cost of revenue 569 489 Technology and development 1,507 1,151 General and administrative 4,893 4,528 New pet acquisition expense 1,471 2,892 Total expensed stock-based compensation 9,000 9,830 Capitalized stock-based compensation 32 49 Total stock-based compensation $ 9,032 $ 9,879 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, 2025 197,232 $ 16.20 $ 4,175 Granted — — — Exercised ( 27,233 ) 9.53 690 Forfeited ( 1,476 ) 9.36 — Outstanding as of March 31, 2026 168,523 17.34 1,394 Exercisable as of March 31, 2026 168,523 $ 17.34 $ 1,394 As of March 31, 2026, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 1.0 year. The Company has not granted any new stock options since 2017 and all outstanding options vested prior to January 1, 2022. The Company issues authorized shares upon the exercise of stock options. Restricted Stock Units The following table presents information regarding restricted stock units granted, vested and forfeited for the period presented: Number of Shares Weighted Average Grant Date Fair Value per Share Unvested shares as of December 31, 2025 1,014,774 $ 40.32 Granted 761,415 28.73 Vested ( 210,356 ) 42.00 Forfeited ( 18,305 ) 41.29 Unvested shares as of March 31, 2026 1,547,528 $ 34.37 Stock-based compensation expenses of $ 49.9 million related to unvested restricted stock units are expected to be recognized over a weighted average period of approximately 2.0 years. 14 9. Stockholders' Equity Common Stock and Preferred Stock As of March 31, 2026, the Company had 100,000,000 shares of common stock authorized and 43,620,614 shares of common stock outstanding. Holders of common stock are entitled to one vote on each matter properly submitted to the stockholders of the Company except those related to matters concerning possible outstanding preferred stock. At March 31, 2026, the Company had 10,000,000 shares of undesignated preferred stock authorized for future issuance and did not have any outstanding shares of preferred stock. The holders of common stock are also entitled to receive dividends as and when declared by the board of directors of the Company (the Board), whenever funds are legally available. These rights are subordinate to the dividend rights of holders of any senior classes of stock outstanding at the time. The Company does not intend to declare or pay any cash dividends in the foreseeable future. Share Repurchase Program In April 2021, the Board approved a share repurchase program, pursuant to which the Company may, between May 2021 and May 2026, repurchase outstanding shares of the Company's common stock. The Company repurchased no shares during the three months ended March 31, 2026 and 2025, respectively. 10. Accumulated Comprehensive Income (Loss) A summary of the components of Accumulated other comprehensive income (loss) is as follows (in thousands): Three months ended March 31, 2026 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total Balance as of January 1, 2026 $ 720 $ 1,377 $ 2,097 Other comprehensive income ( 1,277 ) ( 1,513 ) ( 2,790 ) Balance as of March 31, 2026 $ ( 557 ) $ ( 136 ) $ ( 693 ) Three months ended March 31, 2025 Foreign Currency Translation Net Unrealized Gain on Available-for-Sale Securities Total Balance as of January 1, 2025 $ ( 3,113 ) $ 501 $ ( 2,612 ) Other comprehensive income 1,352 545 1,897 Balance as of March 31, 2025 $ ( 1,761 ) $ 1,046 $ ( 715 ) 15 11. Segments The Company has two reporting segments: subscription business and other business. 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 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. Revenue, veterinary invoice expense, other cost of revenue, and new pet acquisition expenses are generally directly attributed to each segment. Other operating expenses, such as technology and development expense, general and administrative expense, and depreciation and amortization, are generally allocated proportionately based on revenue in each segment. Interest and other expenses and income taxes are not allocated to the segments, nor included in the measure of segment profit or loss. The Company does not analyze discrete segment balance sheet information related to long-term assets. Substantially all of the Company’s long-lived assets were located in the United States as of March 31, 2026 and December 31, 2025. Operating income (loss) of the Company’s segments was as follows (in thousands): Three Months Ended March 31, 2026 2025 Subscription business: Revenue $ 269,454 $ 233,064 Veterinary invoice expense 191,414 168,181 Other cost of revenue 25,038 21,664 Technology and development 7,924 5,501 General and administrative 13,402 13,557 New pet acquisition expense 22,583 20,512 Depreciation and amortization 2,600 2,584 Subscription business operating income 6,493 1,065 Other business: Revenue 114,595 108,911 Veterinary invoice expense 90,022 79,269 Other cost of revenue 16,086 21,758 Technology and development 3,370 2,571 General and administrative 5,700 6,335 New pet acquisition expense 28 4 Depreciation and amortization 1,106 1,207 Other business operating loss (1,717) (2,233) Loss from investment in joint venture — ( 305 ) Operating income (loss) 4,776 ( 1,473 ) Interest expense 1,875 3,211 Other (income), net ( 3,055 ) ( 3,240 ) Income (loss) before income taxes $ 5,956 $ ( 1,444 ) 16 The following table presents the Company’s revenue by geographic region of the member (in thousands): Three Months Ended March 31, 2026 2025 United States $ 318,178 $ 285,824 Canada and other 65,871 56,150 Total revenue $ 384,049 $ 341,975 12. Income Taxes The effective tax rate for the quarter ended March 31, 2026 was 18.1 % compared to ( 2.7 )% for the quarter ended March 31, 2025, primarily due to the transfer of our Canadian insurance business to GPIC, resulting in an increase in taxable income in Canada . 17