TRUPANION, INC. 10-Q

Item 1. Financial Statements TRUPANION, INC. Condensed Consolidated Statements of Operations (in thousands, except share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue $ 392,934 $ 353,557 $ 776,983 $ 695,532 Cost of revenue: Veterinary invoice expense (1) 279,468 255,580 560,904 503,030 Other cost of revenue (1) 48,333 43,150 89,457 86,572 Total cost of revenue 327,801 298,730 650,361 589,602 Operating expenses: Technology and development (1) 12,754 8,586 24,048 16,658 General and administrative (1) 19,525 20,122 38,627 40,014 New pet acquisition expense (1) 22,805 19,843 45,416 40,359 Depreciation and amortization 3,673 3,962 7,379 7,753 Total operating expenses 58,757 52,513 115,470 104,784 Loss from investment in joint venture — — — ( 305 ) Operating income 6,376 2,314 11,152 841 Interest expense 1,832 3,682 3,707 6,893 Other (income), net ( 2,829 ) ( 11,914 ) ( 5,884 ) ( 15,154 ) Income before income taxes 7,373 10,546 13,329 9,102 Income tax expense 542 1,133 1,618 1,172 Net income $ 6,831 $ 9,413 $ 11,711 $ 7,930 Net income per share: Basic $ 0.16 $ 0.22 $ 0.27 $ 0.19 Diluted $ 0.16 $ 0.22 $ 0.27 $ 0.18 Weighted average shares of common stock outstanding: Basic 43,730,573 42,872,153 43,618,710 42,734,426 Diluted 43,821,061 43,325,704 43,751,785 43,544,325 (1) Includes stock-based compensation expense as follows: Veterinary invoice expense $ 505 $ 774 $ 1,065 $ 1,544 Other cost of revenue 620 605 1,189 1,094 Technology and development 2,865 1,470 4,372 2,621 General and administrative 4,738 5,047 9,631 9,575 New pet acquisition expense 1,241 1,560 2,712 4,452 See accompanying notes to the condensed consolidated financial statements. 1 TRUPANION, INC. Condensed Consolidated Statements of Comprehensive Income (in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net income $ 6,831 $ 9,413 $ 11,711 $ 7,930 Other comprehensive income (loss): Foreign currency translation adjustments ( 979 ) 3,202 ( 2,256 ) 4,554 Net unrealized gain (loss) on available-for-sale investments ( 946 ) 170 ( 2,459 ) 715 Other comprehensive income (loss), net of taxes ( 1,925 ) 3,372 ( 4,715 ) 5,269 Comprehensive income $ 4,906 $ 12,785 $ 6,996 $ 13,199 See accompanying notes to the condensed consolidated financial statements. 2 TRUPANION, INC. Condensed Consolidated Balance Sheets (in thousands, except share data) June 30, 2026 December 31, 2025 Assets (unaudited) Current assets: Cash and cash equivalents $ 149,360 $ 138,024 Short-term investments 249,131 232,706 Accounts and other receivables, net of allowance for credit losses of $ 2,886 at June 30, 2026 and $ 1,311 at December 31, 2025 302,191 301,945 Prepaid expenses and other assets 18,760 18,387 Total current assets 719,442 691,062 Restricted cash 28,939 33,434 Long-term investments 989 983 Property, equipment, and internal-use software, net 101,425 104,844 Intangible assets, net 23,344 24,102 Other long-term assets 18,047 21,237 Goodwill 38,625 39,382 Total assets $ 930,811 $ 915,044 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 11,965 $ 16,445 Accrued liabilities and other current liabilities 44,638 56,509 Reserve for veterinary invoices 51,722 55,921 Deferred revenue 287,156 270,935 Long-term debt - current portion 10,000 10,000 Total current liabilities 405,481 409,810 Long-term debt 96,909 101,784 Deferred tax liabilities 639 1,510 Other liabilities 18,112 18,004 Total liabilities 521,141 531,108 Stockholders’ equity: Common stock: $ 0.00001 par value per share, 100,000,000 shares authorized; 44,899,727 and 43,871,541 issued and outstanding at June 30, 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 623,566 604,828 Accumulated other comprehensive income (loss) ( 2,618 ) 2,097 Accumulated deficit ( 194,744 ) ( 206,455 ) Treasury stock, at cost: 1,028,186 shares at June 30, 2026 and December 31, 2025 ( 16,534 ) ( 16,534 ) Total stockholders’ equity 409,670 383,936 Total liabilities and stockholders’ equity $ 930,811 $ 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 Loss Accumulated Deficit Treasury Stock Total Stockholders' Equity Shares Amount Balance at April 1, 2026 43,620,614 $ — $ 613,624 $ ( 693 ) $ ( 201,575 ) $ ( 16,534 ) $ 394,822 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 250,927 — ( 72 ) — — — ( 72 ) Stock-based compensation expense — — 10,014 — — — 10,014 Other comprehensive loss — — — ( 1,925 ) — — ( 1,925 ) Net income — — — — 6,831 — 6,831 Balance at June 30, 2026 43,871,541 $ — $ 623,566 $ ( 2,618 ) $ ( 194,744 ) $ ( 16,534 ) $ 409,670 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Treasury Stock Total Stockholders' Equity Shares Amount Balance at April 1, 2025 42,775,955 $ — $ 578,293 $ ( 715 ) $ ( 227,371 ) $ ( 16,534 ) $ 333,673 Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings 211,817 — ( 469 ) — — — ( 469 ) Stock-based compensation expense — — 9,465 — — — 9,465 Other comprehensive income — — — 3,372 — — 3,372 Net income — — — — 9,413 — 9,413 Balance at June 30, 2025 42,987,772 $ — $ 587,289 $ 2,657 $ ( 217,958 ) $ ( 16,534 ) $ 355,454 4 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 469,460 — ( 308 ) — — — ( 308 ) Stock-based compensation expense — — 19,046 — — — 19,046 Other comprehensive loss — — — ( 4,715 ) — — ( 4,715 ) Net income — — — — 11,711 — 11,711 Balance at June 30, 2026 43,871,541 $ — $ 623,566 $ ( 2,618 ) $ ( 194,744 ) $ ( 16,534 ) $ 409,670 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (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 499,327 — ( 357 ) — — — ( 357 ) Stock-based compensation expense — — 19,344 — — — 19,344 Other comprehensive income — — — 5,269 — — 5,269 Net income — — — — 7,930 — 7,930 Balance at June 30, 2025 42,987,772 $ — $ 587,289 $ 2,657 $ ( 217,958 ) $ ( 16,534 ) $ 355,454 See accompanying notes to the condensed consolidated financial statements. 5 TRUPANION, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2026 2025 Operating activities Net income $ 11,711 $ 7,930 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 7,379 7,753 Stock-based compensation expense 18,969 19,286 Realized gain on nonmonetary exchange of preferred stock investment — ( 7,783 ) Other, net ( 378 ) 951 Changes in operating assets and liabilities: Accounts and other receivables ( 627 ) ( 18,015 ) Prepaid expenses and other assets 2,597 ( 584 ) Accounts payable, accrued liabilities, and other liabilities ( 16,797 ) 990 Reserve for veterinary invoices ( 4,048 ) 697 Deferred revenue 16,772 19,764 Net cash provided by operating activities 35,578 30,989 Investing activities Purchases of investment securities ( 119,977 ) ( 142,000 ) Maturities and sales of investment securities 100,236 94,264 Purchases of property, equipment, and internal-use software ( 2,672 ) ( 4,904 ) Other ( 17 ) 1,200 Net cash used in investing activities ( 22,430 ) ( 51,440 ) Financing activities Repayment of debt financing ( 5,000 ) ( 15,525 ) Proceeds from exercise of stock options 668 1,327 Shares withheld to satisfy tax withholding ( 976 ) ( 1,688 ) Other — ( 460 ) Net cash used in financing activities ( 5,308 ) ( 16,346 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net ( 999 ) 1,738 Net change in cash, cash equivalents, and restricted cash 6,841 ( 35,059 ) Cash, cash equivalents, and restricted cash at beginning of period 171,458 199,530 Cash, cash equivalents, and restricted cash at end of period $ 178,299 $ 164,471 Supplemental disclosures Noncash investing and financing activities: Purchases of property, equipment, and internal-use software included in accounts payable and accrued liabilities $ 605 $ 296 Purchase of intellectual property in exchange for preferred stock investment $ — $ 14,783 See accompanying notes to the condensed consolidated financial statements. 6 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 and six months ended June 30, 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 per Share Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income 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): 7 Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Basic earnings per share: Net income $ 6,831 $ 9,413 $ 11,711 $ 7,930 Shares used in computation: Weighted average shares of common stock outstanding 43,730,573 42,872,153 43,618,710 42,734,426 Basic earnings per share $ 0.16 $ 0.22 $ 0.27 $ 0.19 Diluted earnings per share: Net income $ 6,831 $ 9,413 $ 11,711 $ 7,930 Shares used in computation: Weighted average shares of common stock outstanding 43,730,573 42,872,153 43,618,710 42,734,426 Stock options 53,655 174,262 64,298 312,622 Restricted stock units 36,833 279,289 68,777 497,277 Weighted average number of shares 43,821,061 43,325,704 43,751,785 43,544,325 Diluted earnings per share $ 0.16 $ 0.22 $ 0.27 $ 0.18 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Stock options — — — — Restricted stock units 1,373,843 261,559 1,623,609 920,847 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 June 30, 2026 and December 31, 2025 (in thousands): 8 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value As of June 30, 2026 Long-term investments: Held-to-maturity investments U.S. treasury securities $ 989 $ — $ ( 4 ) $ 985 $ 989 $ — $ ( 4 ) $ 985 Short-term investments: Available-for-sale investments U.S. treasury securities $ 96,265 $ 5 $ ( 869 ) $ 95,401 Mortgage-backed securities and collateralized mortgage obligations 24,118 51 ( 98 ) 24,071 Other asset-backed securities 26,664 44 ( 46 ) 26,662 Corporate bonds 57,441 92 ( 261 ) 57,272 $ 204,488 $ 192 $ ( 1,274 ) $ 203,406 Held-to-maturity investments U.S. treasury securities $ 9,694 $ — $ ( 22 ) $ 9,672 Foreign treasury securities 35,506 21 ( 3 ) 35,524 Certificates of deposit 525 — — 525 $ 45,725 $ 21 $ ( 25 ) $ 45,721 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 9 Future maturities of investments classified as available-for-sale and held-to-maturity are as follows (in thousands): As of June 30, 2026 Amortized Cost Fair Value Available-for-sale: Due under one year $ 475 $ 479 Due after one year through five years 153,231 152,194 Due after five years through ten years — — Due after ten years — — $ 153,706 $ 152,673 Available-for-sale collateralized: Due under one year $ 8,315 $ 8,341 Due after one year through five years 31,624 31,605 Due after five years through ten years 10,636 10,573 Due after ten years 207 214 $ 50,782 $ 50,733 Held-to-maturity: Due under one year $ 45,725 $ 45,721 Due after one year through five years 989 985 $ 46,714 $ 46,706 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 June 30, 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 June 30, 2026 U.S. treasury securities $ 91,412 $ ( 869 ) $ — $ — $ 91,412 $ ( 869 ) Mortgage-backed securities and collateralized mortgage obligations 14,773 ( 79 ) 796 ( 19 ) 15,569 ( 98 ) Other asset-backed securities 9,721 ( 46 ) — — 9,721 ( 46 ) Corporate bonds 36,798 ( 261 ) — — 36,798 ( 261 ) Total $ 152,704 $ ( 1,255 ) $ 796 $ ( 19 ) $ 153,500 $ ( 1,274 ) 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 ) 10 As of June 30, 2026, 109 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 $ 78.4 million and $ 81.2 million during the six months ended June 30, 2026 and 2025, respectively. 4. Other Investments Preferred Stock Investment and Nonmonetary Exchange The Company invested $ 7.0 million in the preferred stock of a variable interest entity, Baystride, Inc. ("Baystride"), a U.S.-based privately held corporation operating in the pet food industry. The Company did not have power over the activities that most significantly impact the economic performance of the entity and was, therefore, not the primary beneficiary. The preferred stock investment in the entity was redeemable and, therefore, was accounted for as an available-for-sale debt security and measured at fair value at each balance sheet date and as of the transaction date. The estimated fair value of the preferred stock investment was a Level 3 measurement, and was based on certain unobservable inputs such as the value of the underlying enterprise, volatility, time to liquidity, and market interest rates. Significant changes in any of these unobservable inputs would result in a change in the fair value measurement. On June 3, 2025, the Company entered into a purchase agreement for intellectual property developed by Baystride. In exchange for this intellectual property, the Company transferred all of its Baystride preferred stock back to Baystride. The Company concluded that the transaction met the definition of a nonmonetary exchange and an asset acquisition. The Company determined that the cost to acquire the intellectual property was $ 14.9 million, which was comprised of the fair value of the Baystride preferred stock relinquished of $ 14.8 million and direct transaction costs of $ 0.1 million. The acquired intellectual property has been recorded as a patent within Intangible assets, net on the Company's Consolidated Balance Sheet and will be amortized over a 20-year useful life. The nonmonetary exchange resulted in a gain of $ 7.8 million, calculated as the difference between the Company's initial $ 7.0 million investment in Baystride's preferred stock and its $ 14.8 million fair value on the transaction date. This gain was recorded to Other (income), net within the Company's Consolidated Statements of Operations. 11 5. 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 June 30, 2026 Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 53,359 $ 53,359 $ — $ — Fixed maturities: Mortgage-backed securities and collateralized mortgage obligations 24,071 — 24,071 — Other asset-backed securities 26,662 — 26,662 — Corporate bonds 57,272 — 57,272 — U.S. treasury securities 95,401 — 95,401 — Total $ 256,765 $ 53,359 $ 203,406 $ — 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 six months ended June 30, 2026 and the year ended December 31, 2025. Fair Value Disclosures - Other Assets and Liabilities Notes receivable of $ 2.4 million were included in Prepaid expenses and other assets as of June 30, 2026, and $ 2.5 million were included in Other long-term assets as of December 31, 2025. Classification of notes receivable in the Company's Consolidated Balance Sheets is determined based on the expected maturity of each note. The Company records notes receivable at their estimated collectible amount and estimates that the carrying value of notes receivable approximates their 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. 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 June 30, 2026. 12 6. 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. 7. 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): Six Months Ended June 30, Subscription 2026 2025 Reserve at beginning of year $ 26,364 $ 23,084 Veterinary invoice expenses during the period related to: Current year 383,806 338,923 Prior years 2,411 2,132 Total veterinary invoice expense 386,217 341,055 Amounts paid during the period related to: Current year 360,156 315,253 Prior years 23,563 21,355 Total paid 383,719 336,608 Non-cash expenses 1,078 1,624 Reserve at end of period $ 27,784 $ 25,907 The Company had unfavorable development on veterinary invoice reserves of $ 2.4 million for the six months ended June 30, 2026, including favorable development of $0.5 million attributable to accident year 2025 and unfavorable development of $2.9 million attributable to accident year 2024 and prior. The favorable development for accident year 2025 was primarily driven by lower than expected frequency of claims. 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. 13 Summarized below are the changes in total liability for the Company's other business segment (in thousands): Six Months Ended June 30, Other Business 2026 2025 Reserve at beginning of year $ 29,557 $ 28,551 Veterinary invoice expenses during the period related to: Current year 171,494 167,448 Prior years 3,193 ( 5,473 ) Total veterinary invoice expense 174,687 161,975 Amounts paid during the period related to: Current year 151,301 143,726 Prior years 29,004 20,184 Total paid 180,305 163,910 Non-cash expenses 1 — Reserve at end of period $ 23,938 $ 26,616 The Company had unfavorable development on veterinary invoice reserves for the other business segment of $ 3.2 million for the six months ended June 30, 2026, including unfavorable development on veterinary invoice reserves of $2.5 million attributable to accident year 2025 and unfavorable development of $0.7 million attributable to accident year 2024 and prior. The unfavorable development for accident years 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 June 30, 2026 Year of Occurrence 2024 and prior $ 1,867 2025 3,345 2026 22,572 $ 27,784 Other Business As of June 30, 2026 Year of Occurrence 2024 and prior $ 1,315 2025 2,431 2026 20,192 $ 23,938 8. 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; 14 (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 originally drawn. Additionally, $1.5 million of borrowing capacity has been reserved for an irrevocable letter of credit pursuant to the Company's manufacturing facility lease. Remaining undrawn or uncommitted amounts 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 June 30, 2026, the Company was in compliance with all financial and other covenants. During the third quarter of 2026, the Company amended the PNC Facility to modify certain financial covenants, increasing the capacity for share repurchases under the Company's new share repurchase program. 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 June 30, 2026 was approximately 6.48 % 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 June 30, 2026 are as follows (in thousands): Year Ending December 31, As of June 30, 2026 2026 $ 5,000 2027 10,000 2028 92,500 Total $ 107,500 15 9. 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Veterinary invoice expense $ 505 $ 774 $ 1,065 $ 1,544 Other cost of revenue 620 605 1,189 1,094 Technology and development 2,865 1,470 4,372 2,621 General and administrative 4,738 5,047 9,631 9,575 New pet acquisition expense 1,241 1,560 2,712 4,452 Total expensed stock-based compensation 9,969 9,456 18,969 19,286 Capitalized stock-based compensation 45 9 77 58 Total stock-based compensation $ 10,014 $ 9,465 $ 19,046 $ 19,344 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 ( 53,346 ) 12.52 875 Forfeited ( 1,751 ) 10.18 — Outstanding as of June 30, 2026 142,135 17.65 1,011 Exercisable as of June 30, 2026 142,135 $ 17.65 $ 1,011 As of June 30, 2026, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 0.8 years. 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 907,403 27.89 Vested ( 457,011 ) 39.28 Forfeited ( 84,274 ) 43.15 Unvested shares as of June 30, 2026 1,380,892 $ 32.32 Stock-based compensation expenses of $ 42.5 million related to unvested restricted stock units are expected to be recognized over a weighted average period of approximately 1.9 years. 16 10. Stockholders' Equity Common Stock and Preferred Stock As of June 30, 2026, the Company had 100,000,000 shares of common stock authorized and 43,871,541 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. As of June 30, 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 was authorized to repurchase outstanding shares of its common stock, between May 2021 and May 2026. In June 2026, the Board approved a new share repurchase program, pursuant to which the Company is authorized to repurchase up to an aggregate of $ 100.0 million of its outstanding shares of common stock, with no expiration date. The Company is not obligated to repurchase any specific number or dollar amount of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including the Company’s compliance with the PNC Facility, available cash, cash flow from operations, stock price, general economic, business and market conditions, and alternative investment opportunities. The Company repurchased no shares during the six months ended June 30, 2026 and 2025, respectively. 11. Accumulated Comprehensive Income (Loss) A summary of the components of Accumulated other comprehensive income (loss) is as follows (in thousands): Three months ended June 30, 2026 Foreign Currency Translation Net Unrealized Gain (Loss) on Available-for-Sale Securities Total Balance as of April 1, 2026 $ ( 557 ) $ ( 136 ) $ ( 693 ) Other comprehensive loss ( 979 ) ( 946 ) ( 1,925 ) Balance as of June 30, 2026 $ ( 1,536 ) $ ( 1,082 ) $ ( 2,618 ) Three months ended June 30, 2025 Foreign Currency Translation Net Unrealized Gain on Available-for-Sale Securities Total Balance as of April 1, 2025 $ ( 1,761 ) $ 1,046 $ ( 715 ) Other comprehensive income 3,202 170 3,372 Balance as of June 30, 2025 $ 1,441 $ 1,216 $ 2,657 Six Months Ended June 30, 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 loss ( 2,256 ) ( 2,459 ) ( 4,715 ) Balance as of June 30, 2026 $ ( 1,536 ) $ ( 1,082 ) $ ( 2,618 ) Six Months Ended June 30, 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 4,554 715 5,269 Balance as of June 30, 2025 $ 1,441 $ 1,216 $ 2,657 In connection with the nonmonetary exchange discussed in Note 4, the Company reclassified $0.9 million of previously unrealized gain from Accumulated other comprehensive income (loss) to Other (income), net during the six months ended June 30, 2025. 17 12. 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 June 30, 2026 and December 31, 2025. Operating income (loss) of the Company’s segments was as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Subscription business: Revenue $ 276,690 $ 242,156 $ 546,144 $ 475,220 Veterinary invoice expense 194,803 172,874 386,217 341,055 Other cost of revenue 25,451 22,614 50,489 44,278 Technology and development 8,981 5,881 16,903 11,381 General and administrative 13,748 13,782 27,151 27,339 New pet acquisition expense 22,790 19,768 45,373 40,280 Depreciation and amortization 2,586 2,714 5,187 5,297 Subscription business operating income 8,331 4,523 14,824 5,590 Other business: Revenue 116,244 111,401 230,839 220,312 Veterinary invoice expense 84,665 82,706 174,687 161,975 Other cost of revenue 22,882 20,536 38,968 42,294 Technology and development 3,773 2,705 7,145 5,277 General and administrative 5,777 6,340 11,476 12,675 New pet acquisition expense 15 75 43 79 Depreciation and amortization 1,087 1,248 2,192 2,456 Other business operating loss (1,955) (2,209) (3,672) (4,444) Loss from investment in joint venture — — — ( 305 ) Operating income 6,376 2,314 11,152 841 Interest expense 1,832 3,682 3,707 6,893 Other (income), net ( 2,829 ) ( 11,914 ) ( 5,884 ) ( 15,154 ) Income before income taxes $ 7,373 $ 10,546 $ 13,329 $ 9,102 18 The following table presents the Company’s revenue by geographic region of the member (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 United States $ 325,918 $ 293,979 $ 644,096 $ 579,803 Canada and other 67,016 59,578 132,887 115,729 Total revenue $ 392,934 $ 353,557 $ 776,983 $ 695,532 13. Income Taxes The effective tax rate for the three months ended June 30, 2026 was 7.4 % compared to 10.7 % for the three months ended June 30, 2025, primarily due to the initial transfer of our Canadian insurance business to GPIC in 2025, which resulted in a true-up to the annual effective tax rate for the three months ended June 30, 2025. The effective tax rate for the six months ended June 30, 2026 was 12.1 % compared to 12.9 % for the six months ended June 30, 2025, primarily due to a change in the jurisdictional makeup of income and losses. 19