Delaware
|
|
83-0480694
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification Number)
|
|
6100 4th Avenue S, Suite 200
|
|
||
|
Seattle,
|
Washington
|
98108
|
|
|
(855)
|
727 - 9079
|
|
Title of Each Class
|
Trading Symbol
|
Name of Exchange on Which Registered
|
Common stock, $0.00001 par value per share
|
TRUP
|
The NASDAQ Stock Market LLC
|
Large accelerated filer
|
☒
|
|
Accelerated filer
|
☐
|
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
|
|
|
Emerging growth company
|
☐
|
|
|
|
Page
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
|
|
|
|
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
|
|
|
|
|
Item 15.
|
||
Item 16.
|
||
|
||
|
•
|
improve our market penetration through cost-efficient and effective sales and marketing programs to attract new members;
|
•
|
convert leads into enrollments;
|
•
|
maintain high retention rates;
|
•
|
increase the lifetime value per pet;
|
•
|
maintain positive relationships with veterinarians and other lead sources;
|
•
|
maintain positive relationships with and increase the number and efficiency of Territory Partners;
|
•
|
continue to offer a superior value with competitive features and rates;
|
•
|
price our subscriptions in relation to actual operating expenses and achieve required regulatory approval for pricing changes;
|
•
|
recruit, integrate and retain skilled, qualified and experienced sales department professionals who can demonstrate our value proposition to new and existing members;
|
•
|
provide our members with superior member service, including timely and efficient payment of veterinary invoices, and by recruiting, integrating and retaining skilled and experienced personnel who can efficiently review veterinary invoices and process payments;
|
•
|
generate new and maintain existing relationships and programs in our other business segment;
|
•
|
react to existing and new competitors;
|
•
|
increase awareness of and positive associations with our brand; and
|
•
|
successfully respond to and comply with regulations affecting our business and defend or prosecute any litigation.
|
•
|
the competitiveness of our subscription, including its perceived value, simplicity, and fairness;
|
•
|
changes in consumer shopping behaviors due to circumstances outside of our control, such as economic conditions and consumers’ ability or willingness to pay for our product;
|
•
|
regulatory requirements, including those that make the experience on our website cumbersome or difficult to navigate or that hinder our ability to speak with potential members quickly and in a way that is conducive to conversion;
|
•
|
system failures or interruptions in our website or contact center; and
|
•
|
changes in the mix of consumers who learn about us through various member acquisition channels.
|
•
|
the efficacy and viability of our sales and marketing programs;
|
•
|
the perceived value of our subscription;
|
•
|
the quality of service provided, including the fairness, ease and timeliness of reviewing and paying veterinary invoices;
|
•
|
actions of our competitors, Territory Partners, veterinarians and others;
|
•
|
positive or negative publicity, including regulatory pronouncements and material on the Internet or social media;
|
•
|
regulatory and other government-related developments; and
|
•
|
litigation-related developments.
|
•
|
we may be unable to maintain or secure favorable relationships with strategic partners;
|
•
|
our strategic partners may not be successful in creating leads;
|
•
|
we may be unable to convert leads from our strategic partners into enrolled pets;
|
•
|
our strategic partners could terminate their relationships with us;
|
•
|
our strategic partners may acquire or form alliances with our competitors, thereby reducing their business with us;
|
•
|
we may not experience a consistent correlation between revenues and expenditures related to the partnership; and
|
•
|
bad publicity and other issues faced by our strategic partners could negatively impact us.
|
•
|
reducing the availability of our cash flow for our operations, capital expenditures, future business opportunities and other purposes;
|
•
|
limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, which could place us at a competitive disadvantage compared to our competitors that may have less debt;
|
•
|
limiting our ability to borrow additional funds; and
|
•
|
increasing our vulnerability to general adverse economic and industry conditions.
|
•
|
regulatory rules and practices, foreign exchange controls, tariffs, tax laws and treaties that are different than those we operate under currently;
|
•
|
the costs and resources required to modify our subscription appropriately to suit the needs and expectations of residents and veterinarians in such foreign countries;
|
•
|
our data analytics platform may have limited applicability in foreign countries, which may impact our ability to develop adequate underwriting criteria and accurately price subscriptions in such countries;
|
•
|
increased expenses incurred in establishing and maintaining office space and equipment for our international operations;
|
•
|
technological incompatibility between our patented proprietary software and software used by veterinarians;
|
•
|
difficulties in modifying our business model or subscription in a manner suitable for any particular foreign country, including any modifications to our Territory Partner model to the extent we determine that our existing model is not suitable for use in foreign countries;
|
•
|
our lack of experience in marketing to consumers and veterinarians and online marketing in foreign countries;
|
•
|
our relative lack of industry connections in many foreign countries;
|
•
|
difficulties in managing operations due to language barriers, distance and time zone differences, staffing, cultural differences and business infrastructure constraints, including difficulty in obtaining foreign and domestic visas;
|
•
|
the uncertainty of protection for intellectual property rights in some countries; and
|
•
|
general economic and political conditions in these foreign markets.
|
•
|
grant and revoke licenses to transact insurance business;
|
•
|
conduct inquiries into the insurance-related activities and conduct of agents and agencies and others in the sales, marketing and promotional channels;
|
•
|
require and regulate disclosure in connection with the sale and solicitation of insurance policies;
|
•
|
authorize how, by which personnel and under what circumstances insurance premiums can be quoted and published and an insurance policy sold;
|
•
|
regulate how sales incentives may be structured;
|
•
|
regulate the content of insurance-related advertisements, including web pages, and other marketing practices;
|
•
|
approve policy forms, require specific benefits and benefit levels;
|
•
|
regulate premium rates;
|
•
|
impose fines and other penalties; and
|
•
|
impose continuing education requirements.
|
•
|
variations in our operating results, earnings per share, cash flows from operating activities, and key operating metrics, and how those results compare to analyst expectations;
|
•
|
forward-looking guidance that we provide to the public and industry and financial analysts related to future revenue and profitability, and any change in that guidance or our failure to achieve the results reflected in that guidance;
|
•
|
the net increases in the number of members, either independently or as compared with published expectations of industry, financial or other analysts that cover our company;
|
•
|
announcements of changes to our subscription, strategic alliances, acquisitions or significant agreements by us or by our competitors;
|
•
|
recruitment or departure of key personnel;
|
•
|
the economy as a whole and market conditions in our industry;
|
•
|
trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock;
|
•
|
the number of shares of our stock trading on a regular basis; and
|
•
|
any other factors discussed in these risk factors.
|
•
|
establish a classified board of directors so that not all members of our board are elected at one time;
|
•
|
permit only the board of directors to establish the number of directors and fill vacancies on the board;
|
•
|
provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
|
•
|
require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;
|
•
|
authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”);
|
•
|
eliminate the ability of our stockholders to call special meetings of stockholders;
|
•
|
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
|
•
|
prohibit cumulative voting; and
|
•
|
establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
|
|
12/31/2014
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2017
|
|
12/31/2018
|
|
12/31/2019
|
||||||||||||
Trupanion Inc.
|
$
|
60.79
|
|
|
$
|
85.61
|
|
|
$
|
136.14
|
|
|
$
|
256.75
|
|
|
$
|
223.33
|
|
|
$
|
322.46
|
|
S&P Small Cap 600 Index
|
$
|
104.67
|
|
|
$
|
101.16
|
|
|
$
|
126.19
|
|
|
$
|
140.99
|
|
|
$
|
127.24
|
|
|
$
|
153.78
|
|
NASDAQ-100 Technology Sector Index
|
$
|
108.80
|
|
|
$
|
106.25
|
|
|
$
|
131.81
|
|
|
$
|
180.16
|
|
|
$
|
170.27
|
|
|
$
|
250.03
|
|
Russell 2000 Index
|
$
|
104.61
|
|
|
$
|
98.63
|
|
|
$
|
117.85
|
|
|
$
|
133.34
|
|
|
$
|
117.10
|
|
|
$
|
144.51
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Subscription business
|
|
$
|
321,163
|
|
|
$
|
263,738
|
|
|
$
|
218,354
|
|
|
$
|
173,356
|
|
|
$
|
133,406
|
|
Other business
|
|
62,773
|
|
|
40,218
|
|
|
24,313
|
|
|
14,874
|
|
|
13,557
|
|
|||||
Total revenue
|
|
383,936
|
|
|
303,956
|
|
|
242,667
|
|
|
188,230
|
|
|
146,963
|
|
|||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Subscription business(1)
|
|
262,139
|
|
|
215,992
|
|
|
176,883
|
|
|
141,321
|
|
|
109,428
|
|
|||||
Other business
|
|
56,873
|
|
|
36,598
|
|
|
22,734
|
|
|
13,621
|
|
|
12,306
|
|
|||||
Total cost of revenue
|
|
319,012
|
|
|
252,590
|
|
|
199,617
|
|
|
154,942
|
|
|
121,734
|
|
|||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Subscription business
|
|
59,024
|
|
|
47,746
|
|
|
41,471
|
|
|
32,035
|
|
|
23,978
|
|
|||||
Other business
|
|
5,900
|
|
|
3,620
|
|
|
1,579
|
|
|
1,253
|
|
|
1,251
|
|
|||||
Total gross profit
|
|
64,924
|
|
|
51,366
|
|
|
43,050
|
|
|
33,288
|
|
|
25,229
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Technology and development(1)
|
|
10,074
|
|
|
9,248
|
|
|
9,768
|
|
|
9,534
|
|
|
11,215
|
|
|||||
General and administrative(1)
|
|
20,967
|
|
|
18,164
|
|
|
16,820
|
|
|
15,205
|
|
|
15,558
|
|
|||||
Sales and marketing(1)
|
|
35,451
|
|
|
24,999
|
|
|
19,104
|
|
|
15,247
|
|
|
15,231
|
|
|||||
Total operating expenses
|
|
66,492
|
|
|
52,411
|
|
|
45,692
|
|
|
39,986
|
|
|
42,004
|
|
|||||
Gain (loss) from investment in joint venture
|
|
(352
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating loss
|
|
(1,920
|
)
|
|
(1,045
|
)
|
|
(2,642
|
)
|
|
(6,698
|
)
|
|
(16,775
|
)
|
|||||
Interest expense
|
|
1,349
|
|
|
1,198
|
|
|
533
|
|
|
218
|
|
|
325
|
|
|||||
Other (income) expense, net
|
|
(1,629
|
)
|
|
(1,309
|
)
|
|
(1,244
|
)
|
|
(58
|
)
|
|
(9
|
)
|
|||||
Loss before income taxes
|
|
(1,640
|
)
|
|
(934
|
)
|
|
(1,931
|
)
|
|
(6,858
|
)
|
|
(17,091
|
)
|
|||||
Income tax expense (benefit)
|
|
169
|
|
|
(7
|
)
|
|
(428
|
)
|
|
38
|
|
|
114
|
|
|||||
Net loss
|
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
|
$
|
(6,896
|
)
|
|
$
|
(17,205
|
)
|
(1)
|
Includes stock-based compensation expense as follows:
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Cost of revenue
|
|
$
|
1,050
|
|
|
$
|
927
|
|
|
$
|
594
|
|
|
$
|
275
|
|
|
$
|
263
|
|
Technology and development
|
|
364
|
|
|
209
|
|
|
216
|
|
|
246
|
|
|
404
|
|
|||||
General and administrative
|
|
3,312
|
|
|
2,304
|
|
|
1,887
|
|
|
1,893
|
|
|
1,889
|
|
|||||
Sales and marketing
|
|
2,120
|
|
|
1,335
|
|
|
722
|
|
|
532
|
|
|
446
|
|
|||||
Total stock-based compensation expense
|
|
$
|
6,846
|
|
|
$
|
4,775
|
|
|
$
|
3,419
|
|
|
$
|
2,946
|
|
|
$
|
3,002
|
|
|
|
December 31,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
29,168
|
|
|
$
|
26,552
|
|
|
$
|
25,706
|
|
|
$
|
23,637
|
|
|
$
|
17,956
|
|
Short-term investments
|
|
69,732
|
|
|
54,559
|
|
|
37,590
|
|
|
29,570
|
|
|
25,288
|
|
|||||
Working capital
|
|
67,196
|
|
|
54,773
|
|
|
40,692
|
|
|
34,729
|
|
|
30,016
|
|
|||||
Total assets
|
|
257,200
|
|
|
207,510
|
|
|
105,859
|
|
|
82,345
|
|
|
70,917
|
|
|||||
Current and long-term debt
|
|
26,086
|
|
|
12,862
|
|
|
9,324
|
|
|
4,767
|
|
|
—
|
|
|||||
Total liabilities
|
|
120,440
|
|
|
78,337
|
|
|
57,425
|
|
|
37,630
|
|
|
25,561
|
|
|||||
Common stock and additional paid-in capital
|
|
232,731
|
|
|
219,838
|
|
|
134,511
|
|
|
129,574
|
|
|
122,844
|
|
|||||
Accumulated deficit
|
|
(85,520
|
)
|
|
(83,711
|
)
|
|
(82,784
|
)
|
|
(81,281
|
)
|
|
(74,385
|
)
|
|||||
Total stockholders' equity
|
|
136,760
|
|
|
129,173
|
|
|
48,434
|
|
|
44,715
|
|
|
45,356
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Other operational data(1):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Business:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total pets enrolled (at period end)
|
|
646,728
|
|
|
521,326
|
|
|
423,194
|
|
|
343,649
|
|
|
291,818
|
|
|||||
Subscription Business:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total subscription pets enrolled
|
|
494,026
|
|
|
430,770
|
|
|
371,683
|
|
|
323,233
|
|
|
272,636
|
|
|||||
Monthly average revenue per pet
|
|
$
|
57.52
|
|
|
$
|
54.34
|
|
|
$
|
52.07
|
|
|
$
|
47.82
|
|
|
$
|
45.04
|
|
Lifetime value of a pet, including fixed expenses
|
|
$
|
523
|
|
|
$
|
449
|
|
|
$
|
409
|
|
|
$
|
290
|
|
|
$
|
95
|
|
Average pet acquisition cost (PAC)(2)
|
|
$
|
212
|
|
|
$
|
164
|
|
|
$
|
152
|
|
|
$
|
123
|
|
|
$
|
132
|
|
Average monthly retention
|
|
98.58
|
%
|
|
98.60
|
%
|
|
98.63
|
%
|
|
98.60
|
%
|
|
98.64
|
%
|
|
|
|
|
|
(1) For more information about how we calculate total pets enrolled, total subscription pets enrolled, monthly average revenue per pet, lifetime value of a pet, including fixed expenses, average pet acquisition cost and average monthly retention, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics.”
(2) Average pet acquisition cost is calculated in part based on net acquisition cost, a non-GAAP financial measure. For more information about net acquisition cost and a reconciliation of sales and marketing expenses to net acquisition cost, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Total Business:
|
|
|
|
|
|
|
||||||
Total pets enrolled (at period end)
|
|
646,728
|
|
|
521,326
|
|
|
423,194
|
|
|||
Subscription Business:
|
|
|
|
|
|
|
||||||
Total subscription pets enrolled (at period end)
|
|
494,026
|
|
|
430,770
|
|
|
371,683
|
|
|||
Monthly average revenue per pet
|
|
$
|
57.52
|
|
|
$
|
54.34
|
|
|
$
|
52.07
|
|
Lifetime value of a pet, including fixed expenses
|
|
$
|
523
|
|
|
$
|
449
|
|
|
$
|
409
|
|
Average pet acquisition cost (PAC)
|
|
$
|
212
|
|
|
$
|
164
|
|
|
$
|
152
|
|
Average monthly retention
|
|
98.58
|
%
|
|
98.60
|
%
|
|
98.63
|
%
|
|
Period Ended
|
||||||||||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||||||||||
Total Business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total pets enrolled (at period end)
|
646,728
|
|
|
613,694
|
|
|
577,686
|
|
|
548,002
|
|
|
521,326
|
|
|
497,942
|
|
|
472,480
|
|
|
446,533
|
|
||||||||
Subscription Business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total subscription pets enrolled (at period end)
|
494,026
|
|
|
479,427
|
|
|
461,314
|
|
|
445,148
|
|
|
430,770
|
|
|
416,527
|
|
|
401,033
|
|
|
385,640
|
|
||||||||
Monthly average revenue per pet
|
$
|
58.58
|
|
|
$
|
58.12
|
|
|
$
|
57.11
|
|
|
$
|
56.13
|
|
|
$
|
55.15
|
|
|
$
|
54.55
|
|
|
$
|
53.96
|
|
|
$
|
53.62
|
|
Lifetime value of a pet, including fixed expenses
|
$
|
523
|
|
|
$
|
511
|
|
|
$
|
482
|
|
|
$
|
471
|
|
|
$
|
449
|
|
|
$
|
435
|
|
|
$
|
431
|
|
|
$
|
419
|
|
Average pet acquisition cost (PAC)
|
$
|
222
|
|
|
$
|
208
|
|
|
$
|
213
|
|
|
$
|
205
|
|
|
$
|
186
|
|
|
$
|
155
|
|
|
$
|
150
|
|
|
$
|
165
|
|
Average monthly retention
|
98.58
|
%
|
|
98.59
|
%
|
|
98.57
|
%
|
|
98.58
|
%
|
|
98.60
|
%
|
|
98.61
|
%
|
|
98.64
|
%
|
|
98.63
|
%
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Lifetime value of a pet (LVP)
|
|
$
|
753
|
|
|
$
|
710
|
|
|
$
|
727
|
|
Minus: fixed expenses per pet
|
|
230
|
|
|
261
|
|
|
318
|
|
|||
Lifetime value of a pet, including fixed expenses
|
|
$
|
523
|
|
|
$
|
449
|
|
|
$
|
409
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Sales and marketing expense
|
|
$
|
35,451
|
|
|
$
|
24,999
|
|
|
$
|
19,104
|
|
Net of sign-up fee revenue
|
|
(2,957
|
)
|
|
(2,587
|
)
|
|
(2,169
|
)
|
|||
Excluding:
|
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
|
(2,120
|
)
|
|
(1,335
|
)
|
|
(722
|
)
|
|||
Other business segment sales and marketing expense
|
|
(414
|
)
|
|
(377
|
)
|
|
(218
|
)
|
|||
Net acquisition cost
|
|
$
|
29,960
|
|
|
$
|
20,700
|
|
|
$
|
15,995
|
|
|
Period Ended
|
||||||||||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||||||||||
Sales and marketing expense
|
$
|
9,212
|
|
|
$
|
9,255
|
|
|
$
|
8,757
|
|
|
$
|
8,227
|
|
|
$
|
6,994
|
|
|
$
|
6,365
|
|
|
$
|
5,702
|
|
|
$
|
5,938
|
|
Net of sign-up fee revenue
|
(730
|
)
|
|
(790
|
)
|
|
(734
|
)
|
|
(703
|
)
|
|
(655
|
)
|
|
(693
|
)
|
|
(624
|
)
|
|
(616
|
)
|
||||||||
Excluding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Stock-based compensation expense
|
(547
|
)
|
|
(577
|
)
|
|
(567
|
)
|
|
(429
|
)
|
|
(355
|
)
|
|
(358
|
)
|
|
(349
|
)
|
|
(273
|
)
|
||||||||
Other business segment sales and marketing expense
|
(152
|
)
|
|
(94
|
)
|
|
(38
|
)
|
|
(130
|
)
|
|
(102
|
)
|
|
(99
|
)
|
|
(88
|
)
|
|
(87
|
)
|
||||||||
Net acquisition cost
|
$
|
7,783
|
|
|
$
|
7,794
|
|
|
$
|
7,418
|
|
|
$
|
6,965
|
|
|
$
|
5,882
|
|
|
$
|
5,215
|
|
|
$
|
4,641
|
|
|
$
|
4,962
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in thousands)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Subscription business
|
$
|
321,163
|
|
|
$
|
263,738
|
|
|
$
|
218,354
|
|
Other business
|
62,773
|
|
|
40,218
|
|
|
24,313
|
|
|||
Total revenue
|
383,936
|
|
|
303,956
|
|
|
242,667
|
|
|||
Cost of revenue:
|
|
|
|
|
|
||||||
Subscription business(1)
|
262,139
|
|
|
215,992
|
|
|
176,883
|
|
|||
Other business
|
56,873
|
|
|
36,598
|
|
|
22,734
|
|
|||
Total cost of revenue
|
319,012
|
|
|
252,590
|
|
|
199,617
|
|
|||
Gross profit:
|
|
|
|
|
|
||||||
Subscription business
|
59,024
|
|
|
47,746
|
|
|
41,471
|
|
|||
Other business
|
5,900
|
|
|
3,620
|
|
|
1,579
|
|
|||
Total gross profit
|
64,924
|
|
|
51,366
|
|
|
43,050
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Technology and development(1)
|
10,074
|
|
|
9,248
|
|
|
9,768
|
|
|||
General and administrative(1)
|
20,967
|
|
|
18,164
|
|
|
16,820
|
|
|||
Sales and marketing(1)
|
35,451
|
|
|
24,999
|
|
|
19,104
|
|
|||
Total operating expenses
|
66,492
|
|
|
52,411
|
|
|
45,692
|
|
|||
Gain (loss) from investment in joint venture
|
(352
|
)
|
|
—
|
|
|
—
|
|
|||
Operating loss
|
(1,920
|
)
|
|
(1,045
|
)
|
|
(2,642
|
)
|
|||
Interest expense
|
1,349
|
|
|
1,198
|
|
|
533
|
|
|||
Other income, net
|
(1,629
|
)
|
|
(1,309
|
)
|
|
(1,244
|
)
|
|||
Loss before income taxes
|
(1,640
|
)
|
|
(934
|
)
|
|
(1,931
|
)
|
|||
Income tax expense (benefit)
|
169
|
|
|
(7
|
)
|
|
(428
|
)
|
|||
Net loss
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
|
|
|
|
|
(1) Includes stock-based compensation expense as follows:
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in thousands)
|
||||||||||
Cost of revenue
|
$
|
1,050
|
|
|
$
|
927
|
|
|
$
|
594
|
|
Technology and development
|
364
|
|
|
209
|
|
|
216
|
|
|||
General and administrative
|
3,312
|
|
|
2,304
|
|
|
1,887
|
|
|||
Sales and marketing
|
2,120
|
|
|
1,335
|
|
|
722
|
|
|||
Total stock-based compensation expense
|
$
|
6,846
|
|
|
$
|
4,775
|
|
|
$
|
3,419
|
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
|
(as a percentage of revenue)
|
|||||||
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Cost of revenue
|
83
|
|
|
83
|
|
|
82
|
|
Gross profit
|
17
|
|
|
17
|
|
|
18
|
|
Operating expenses:
|
|
|
|
|
|
|||
Technology and development
|
3
|
|
|
3
|
|
|
4
|
|
General and administrative
|
5
|
|
|
6
|
|
|
7
|
|
Sales and marketing
|
9
|
|
|
8
|
|
|
8
|
|
Total operating expenses
|
17
|
|
|
17
|
|
|
19
|
|
Operating loss
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
Other (income) expense, net
|
—
|
|
|
—
|
|
|
(1
|
)
|
Loss before income taxes
|
—
|
|
|
—
|
|
|
(1
|
)
|
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
—
|
|
Net loss
|
—
|
%
|
|
—
|
%
|
|
(1
|
)%
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
|
(as a percentage of subscription revenue)
|
|||||||
Subscription business revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Subscription business cost of revenue
|
82
|
|
|
82
|
|
|
81
|
|
Subscription business gross profit
|
18
|
%
|
|
18
|
%
|
|
19
|
%
|
|
Year Ended December 31,
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
|
(in thousands, except percentages, pet and per pet data)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||
Subscription business
|
$
|
321,163
|
|
|
$
|
263,738
|
|
|
$
|
218,354
|
|
|
22%
|
|
21%
|
Other business
|
62,773
|
|
|
40,218
|
|
|
24,313
|
|
|
56
|
|
65
|
|||
Total revenue
|
$
|
383,936
|
|
|
$
|
303,956
|
|
|
$
|
242,667
|
|
|
26
|
|
25
|
Percentage of Revenue by Segment:
|
|
|
|
|
|
|
|
|
|
||||||
Subscription business
|
84
|
%
|
|
87
|
%
|
|
90
|
%
|
|
|
|
|
|||
Other business
|
16
|
|
|
13
|
|
|
10
|
|
|
|
|
|
|||
Total revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
||||||
Total pets enrolled (at period end)
|
646,728
|
|
|
521,326
|
|
|
423,194
|
|
|
24
|
|
23
|
|||
Total subscription pets enrolled (at period end)
|
494,026
|
|
|
430,770
|
|
|
371,683
|
|
|
15
|
|
16
|
|||
Monthly average revenue per pet
|
$
|
57.52
|
|
|
$
|
54.34
|
|
|
$
|
52.07
|
|
|
6
|
|
4
|
Average monthly retention
|
98.58
|
%
|
|
98.60
|
%
|
|
98.63
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
|
(in thousands, except percentages, pet and per pet data)
|
||||||||||||||
Cost of Revenue:
|
|
|
|
|
|
|
|
|
|
||||||
Subscription business:
|
|
|
|
|
|
|
|
|
|
||||||
Veterinary invoice expense
|
$
|
232,415
|
|
|
$
|
191,051
|
|
|
$
|
155,554
|
|
|
22%
|
|
23%
|
Other cost of revenue
|
29,724
|
|
|
24,941
|
|
|
21,329
|
|
|
19
|
|
17
|
|||
Total cost of revenue
|
262,139
|
|
|
215,992
|
|
|
176,883
|
|
|
21
|
|
22
|
|||
Gross profit
|
59,024
|
|
|
47,746
|
|
|
41,471
|
|
|
24
|
|
15
|
|||
Other business:
|
|
|
|
|
|
|
|
|
|
||||||
Veterinary invoice expense
|
38,532
|
|
|
23,488
|
|
|
14,568
|
|
|
64
|
|
61
|
|||
Other cost of revenue
|
18,341
|
|
|
13,110
|
|
|
8,166
|
|
|
40
|
|
61
|
|||
Total cost of revenue
|
56,873
|
|
|
36,598
|
|
|
22,734
|
|
|
55
|
|
61
|
|||
Gross profit
|
$
|
5,900
|
|
|
$
|
3,620
|
|
|
$
|
1,579
|
|
|
63
|
|
129
|
|
|
|
|
|
|
|
|
|
|
||||||
Percentage of Revenue by Segment:
|
|
|
|
|
|
|
|
|
|
||||||
Subscription business:
|
|
|
|
|
|
|
|
|
|
||||||
Veterinary invoice expense
|
72
|
%
|
|
72
|
%
|
|
71
|
%
|
|
|
|
|
|||
Other cost of revenue
|
9
|
|
|
9
|
|
|
10
|
|
|
|
|
|
|||
Total cost of revenue
|
82
|
|
|
82
|
|
|
81
|
|
|
|
|
|
|||
Gross profit
|
18
|
|
|
18
|
|
|
19
|
|
|
|
|
|
|||
Other business:
|
|
|
|
|
|
|
|
|
|
||||||
Veterinary invoice expense
|
61
|
|
|
58
|
|
|
60
|
|
|
|
|
|
|||
Other cost of revenue
|
29
|
|
|
33
|
|
|
34
|
|
|
|
|
|
|||
Total cost of revenue
|
91
|
|
|
91
|
|
|
94
|
|
|
|
|
|
|||
Gross profit
|
9
|
|
|
9
|
|
|
6
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
||||||
Total pets enrolled (at period end)
|
646,728
|
|
|
521,326
|
|
|
423,194
|
|
|
24
|
|
23
|
|||
Total subscription pets enrolled (at period end)
|
494,026
|
|
|
430,770
|
|
|
371,683
|
|
|
15
|
|
16
|
|||
Monthly average revenue per pet
|
$
|
57.52
|
|
|
$
|
54.34
|
|
|
$
|
52.07
|
|
|
6
|
|
4
|
|
Year Ended December 31,
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
|
(in thousands, except percentages)
|
||||||||||||||
Technology and development
|
$
|
10,074
|
|
|
$
|
9,248
|
|
|
$
|
9,768
|
|
|
9%
|
|
(5)%
|
Percentage of total revenue
|
3
|
%
|
|
3
|
%
|
|
4
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
|
(in thousands, except percentages)
|
||||||||||||||
General and administrative
|
$
|
20,967
|
|
|
$
|
18,164
|
|
|
$
|
16,820
|
|
|
15%
|
|
8%
|
Percentage of total revenue
|
5
|
%
|
|
6
|
%
|
|
7
|
%
|
|
|
|
|
|
Year Ended December 31,
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
|
(in thousands, except pet and per pet data)
|
||||||||||||||
Sales and marketing
|
$
|
35,451
|
|
|
$
|
24,999
|
|
|
$
|
19,104
|
|
|
42%
|
|
31%
|
Percentage of total revenue
|
9
|
%
|
|
8
|
%
|
|
8
|
%
|
|
|
|
|
|||
Subscription Business:
|
|
|
|
|
|
|
|
|
|
||||||
Total subscription pets enrolled (at period end)
|
494,026
|
|
|
430,770
|
|
|
371,683
|
|
|
15
|
|
16
|
|||
Average pet acquisition cost (PAC)
|
$
|
212
|
|
|
$
|
164
|
|
|
$
|
152
|
|
|
29
|
|
8
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(in thousands)
|
||||||||||
Interest expense
|
|
$
|
1,349
|
|
|
$
|
1,198
|
|
|
$
|
533
|
|
Other income, net
|
|
(1,629
|
)
|
|
(1,309
|
)
|
|
(1,244
|
)
|
|||
Total other (income) expense, net
|
|
$
|
(280
|
)
|
|
$
|
(111
|
)
|
|
$
|
(711
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(in thousands, except percentages)
|
||||||||||
Income tax expense (benefit)
|
|
$
|
169
|
|
|
$
|
(7
|
)
|
|
$
|
(428
|
)
|
Effective tax rate
|
|
(10.3
|
)%
|
|
0.8
|
%
|
|
22.2
|
%
|
Consolidated Statements of Operations Data:
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Subscription business
|
$
|
86,592
|
|
|
$
|
82,613
|
|
|
$
|
77,736
|
|
|
$
|
74,222
|
|
|
$
|
70,933
|
|
|
$
|
67,421
|
|
|
$
|
63,867
|
|
|
$
|
61,517
|
|
Other business
|
18,891
|
|
|
16,663
|
|
|
14,463
|
|
|
12,756
|
|
|
11,707
|
|
|
10,743
|
|
|
9,525
|
|
|
8,243
|
|
||||||||
Total revenue
|
105,483
|
|
|
99,276
|
|
|
92,199
|
|
|
86,978
|
|
|
82,640
|
|
|
78,164
|
|
|
73,392
|
|
|
69,760
|
|
||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Subscription business(1)
|
70,718
|
|
|
66,770
|
|
|
64,264
|
|
|
60,387
|
|
|
57,892
|
|
|
54,753
|
|
|
52,333
|
|
|
51,014
|
|
||||||||
Other business
|
17,031
|
|
|
15,061
|
|
|
13,222
|
|
|
11,559
|
|
|
10,543
|
|
|
9,667
|
|
|
8,706
|
|
|
7,682
|
|
||||||||
Total cost of revenue
|
87,749
|
|
|
81,831
|
|
|
77,486
|
|
|
71,946
|
|
|
68,435
|
|
|
64,420
|
|
|
61,039
|
|
|
58,696
|
|
||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Subscription business
|
15,874
|
|
|
15,843
|
|
|
13,472
|
|
|
13,835
|
|
|
13,041
|
|
|
12,668
|
|
|
11,534
|
|
|
10,503
|
|
||||||||
Other business
|
1,860
|
|
|
1,602
|
|
|
1,241
|
|
|
1,197
|
|
|
1,164
|
|
|
1,076
|
|
|
819
|
|
|
561
|
|
||||||||
Total gross profit
|
17,734
|
|
|
17,445
|
|
|
14,713
|
|
|
15,032
|
|
|
14,205
|
|
|
13,744
|
|
|
12,353
|
|
|
11,064
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Technology and development(1)
|
2,556
|
|
|
2,271
|
|
|
2,578
|
|
|
2,669
|
|
|
2,487
|
|
|
2,299
|
|
|
2,298
|
|
|
2,164
|
|
||||||||
General and administrative(1)
|
5,312
|
|
|
5,017
|
|
|
5,219
|
|
|
5,419
|
|
|
4,922
|
|
|
4,174
|
|
|
4,610
|
|
|
4,458
|
|
||||||||
Sales and marketing(1)
|
9,212
|
|
|
9,255
|
|
|
8,757
|
|
|
8,227
|
|
|
6,994
|
|
|
6,365
|
|
|
5,702
|
|
|
5,938
|
|
||||||||
Total operating expenses
|
17,080
|
|
|
16,543
|
|
|
16,554
|
|
|
16,315
|
|
|
14,403
|
|
|
12,838
|
|
|
12,610
|
|
|
12,560
|
|
||||||||
Gain (loss) from investment in joint venture
|
(21
|
)
|
|
(59
|
)
|
|
(272
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Operating income (loss)
|
633
|
|
|
843
|
|
|
(2,113
|
)
|
|
(1,283
|
)
|
|
(198
|
)
|
|
906
|
|
|
(257
|
)
|
|
(1,496
|
)
|
||||||||
Interest expense
|
375
|
|
|
340
|
|
|
317
|
|
|
317
|
|
|
311
|
|
|
336
|
|
|
332
|
|
|
219
|
|
||||||||
Other income, net
|
(535
|
)
|
|
(297
|
)
|
|
(453
|
)
|
|
(344
|
)
|
|
(238
|
)
|
|
(628
|
)
|
|
(303
|
)
|
|
(140
|
)
|
||||||||
Income (loss) before income taxes
|
793
|
|
|
800
|
|
|
(1,977
|
)
|
|
(1,256
|
)
|
|
(271
|
)
|
|
1,198
|
|
|
(286
|
)
|
|
(1,575
|
)
|
||||||||
Income tax expense (benefit)
|
157
|
|
|
18
|
|
|
(46
|
)
|
|
40
|
|
|
4
|
|
|
(7
|
)
|
|
91
|
|
|
(95
|
)
|
||||||||
Net income (loss)
|
$
|
636
|
|
|
$
|
782
|
|
|
$
|
(1,931
|
)
|
|
$
|
(1,296
|
)
|
|
$
|
(275
|
)
|
|
$
|
1,205
|
|
|
$
|
(377
|
)
|
|
$
|
(1,480
|
)
|
|
|
|
|
|
(1) Includes stock-based compensation expense as follows (in thousands):
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||
Cost of revenue
|
$
|
267
|
|
|
$
|
258
|
|
|
$
|
278
|
|
|
$
|
247
|
|
|
$
|
230
|
|
|
$
|
249
|
|
|
$
|
252
|
|
|
$
|
197
|
|
Technology and development
|
97
|
|
|
94
|
|
|
110
|
|
|
63
|
|
|
42
|
|
|
58
|
|
|
60
|
|
|
49
|
|
||||||||
General and administrative
|
860
|
|
|
916
|
|
|
918
|
|
|
618
|
|
|
595
|
|
|
634
|
|
|
625
|
|
|
449
|
|
||||||||
Sales and marketing
|
547
|
|
|
577
|
|
|
567
|
|
|
429
|
|
|
355
|
|
|
358
|
|
|
349
|
|
|
273
|
|
||||||||
Total stock-based compensation expense
|
$
|
1,771
|
|
|
$
|
1,845
|
|
|
$
|
1,873
|
|
|
$
|
1,357
|
|
|
$
|
1,222
|
|
|
$
|
1,299
|
|
|
$
|
1,286
|
|
|
$
|
968
|
|
|
Period Ended
|
||||||||||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||||||||||
Other Financial and Operational Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total Business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total pets enrolled (at period end)
|
646,728
|
|
|
613,694
|
|
|
577,686
|
|
|
548,002
|
|
|
521,326
|
|
|
497,942
|
|
|
472,480
|
|
|
446,533
|
|
||||||||
Subscription Business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total subscription pets enrolled (at period end)
|
494,026
|
|
|
479,427
|
|
|
461,314
|
|
|
445,148
|
|
|
430,770
|
|
|
416,527
|
|
|
401,033
|
|
|
385,640
|
|
||||||||
Monthly average revenue per pet
|
$
|
58.58
|
|
|
$
|
58.12
|
|
|
$
|
57.11
|
|
|
$
|
56.13
|
|
|
$
|
55.15
|
|
|
$
|
54.55
|
|
|
$
|
53.96
|
|
|
$
|
53.62
|
|
Lifetime value of a pet, including fixed expenses
|
$
|
523
|
|
|
$
|
511
|
|
|
$
|
482
|
|
|
$
|
471
|
|
|
$
|
449
|
|
|
$
|
435
|
|
|
$
|
431
|
|
|
$
|
419
|
|
Average pet acquisition cost (PAC)
|
$
|
222
|
|
|
$
|
208
|
|
|
$
|
213
|
|
|
$
|
205
|
|
|
$
|
186
|
|
|
$
|
155
|
|
|
$
|
150
|
|
|
$
|
165
|
|
Average monthly retention
|
98.58
|
%
|
|
98.59
|
%
|
|
98.57
|
%
|
|
98.58
|
%
|
|
98.60
|
%
|
|
98.61
|
%
|
|
98.64
|
%
|
|
98.63
|
%
|
|
Three Months Ended
|
||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||
|
(as a percentage of revenue)
|
||||||||||||||||||||||
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Cost of revenue
|
83
|
|
|
82
|
|
|
84
|
|
|
83
|
|
|
83
|
|
|
82
|
|
|
83
|
|
|
84
|
|
Gross profit
|
17
|
|
|
18
|
|
|
16
|
|
|
17
|
|
|
17
|
|
|
18
|
|
|
17
|
|
|
16
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Technology and development
|
2
|
|
|
2
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
General and administrative
|
5
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
6
|
|
|
5
|
|
|
6
|
|
|
6
|
|
Sales and marketing
|
9
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
8
|
|
Total operating expenses
|
16
|
|
|
17
|
|
|
18
|
|
|
19
|
|
|
17
|
|
|
16
|
|
|
17
|
|
|
18
|
|
Gain (loss) from investment in joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Operating income (loss)
|
1
|
|
|
1
|
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(3
|
)
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income, net
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
Income (loss) before income taxes
|
1
|
|
|
1
|
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
|
(2
|
)
|
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income (loss)
|
1
|
%
|
|
1
|
%
|
|
(2
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
|
2
|
%
|
|
(1
|
)%
|
|
(2
|
)%
|
|
Three Months Ended
|
||||||||||||||||||||||
|
Dec. 31, 2019
|
|
Sept. 30, 2019
|
|
Jun. 30, 2019
|
|
Mar. 31, 2019
|
|
Dec. 31, 2018
|
|
Sept. 30, 2018
|
|
Jun. 30, 2018
|
|
Mar. 31, 2018
|
||||||||
|
(as a percentage of subscription revenue)
|
||||||||||||||||||||||
Subscription business revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Subscription business cost of revenue
|
82
|
|
|
81
|
|
|
83
|
|
|
81
|
|
|
82
|
|
|
81
|
|
|
82
|
|
|
83
|
|
Subscription business gross profit
|
18
|
%
|
|
19
|
%
|
|
17
|
%
|
|
19
|
%
|
|
18
|
%
|
|
19
|
%
|
|
18
|
%
|
|
17
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net cash provided by operating activities
|
$
|
16,157
|
|
|
$
|
12,680
|
|
|
$
|
9,666
|
|
Net cash used in investing activities
|
(28,008
|
)
|
|
(81,451
|
)
|
|
(13,056
|
)
|
|||
Net cash provided by financing activities
|
14,044
|
|
|
71,229
|
|
|
5,081
|
|
|||
Effect of exchange rates on cash and cash equivalents
|
423
|
|
|
(812
|
)
|
|
378
|
|
|||
Net change in cash, cash equivalents, and restricted cash
|
$
|
2,616
|
|
|
$
|
1,646
|
|
|
$
|
2,069
|
|
|
|
Total
|
|
Less Than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than
5 Years
|
||||||||||
Long-term debt obligations(1)
|
|
$
|
26,200
|
|
|
$
|
—
|
|
|
$
|
26,200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Lease obligations
|
|
90
|
|
|
40
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|||||
Other obligations(2)
|
|
7,594
|
|
|
3,320
|
|
|
1,573
|
|
|
405
|
|
|
2,296
|
|
|||||
Total
|
|
$
|
33,884
|
|
|
$
|
3,360
|
|
|
$
|
27,823
|
|
|
$
|
405
|
|
|
$
|
2,296
|
|
|
|
|
|
|
(1) Consists of our revolving line of credit. Excludes interest of the greater of 4.5% or 0.75% plus the prime rate (5.50% at December 31, 2019).
(2) Consists of contractual obligations from non-cancellable vendor service agreements.
|
•
|
Expected volatility —We estimate the expected volatility based on the historical volatility of a representative group of publicly traded companies with similar characteristics to us, and our own historical volatility;
|
•
|
Expected term for awards granted to employees —We have based our expected term for awards issued to employees on the simplified method, as permitted by the SEC Staff Accounting Bulletin Topic 14, Share-Based Payment;
|
•
|
Risk-free interest rate—The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options; and
|
•
|
Expected dividend yield—We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero.
|
|
Page
|
Description of the Matter
|
The Company’s reserve for veterinary invoices totaled $21.2 million as of December 31, 2019. As discussed in Note 1 to the financial statements, the Company’s reserve for veterinary invoices is based on an actuarial analysis of the Company’s historical experience including the number of veterinary invoices it expects to receive, the average cost of those veterinary invoices, the length of time between the date of the veterinary invoice and the date the Company receives the veterinary invoice, the members’ chosen deductibles and the Company’s expected cost to process and administer payments.
Auditing the Company’s reserve for veterinary invoices is complex due to the sensitivity of the estimated reserve to management assumptions including frequency and severity of loss and development factors applied to paid and reported invoices.
|
How We Addressed the Matter in Our Audit
|
We evaluated the design and tested the operating effectiveness of controls over the reserve for veterinary invoices process, including controls over the completeness and accuracy of the data used in management’s actuarial projections and the review and approval processes that management has in place for the methods and assumptions used by management’s actuaries in estimating the reserves.
To evaluate the reserve for veterinary invoices, our audit procedures included, among others, testing the completeness and accuracy of the underlying invoice data and related contracts. We involved our actuarial specialists to assist in our evaluation of management’s methodologies and assumptions used in the calculation of the reserve and compared the Company’s recorded reserve to a range of reasonable estimates developed independently by our actuarial specialists.
|
Trupanion, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
$
|
383,936
|
|
|
$
|
303,956
|
|
|
$
|
242,667
|
|
Cost of revenue:
|
|
|
|
|
|
||||||
Veterinary invoice expense
|
270,947
|
|
|
214,539
|
|
|
170,122
|
|
|||
Other cost of revenue
|
48,065
|
|
|
38,051
|
|
|
29,495
|
|
|||
Gross profit
|
64,924
|
|
|
51,366
|
|
|
43,050
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Technology and development
|
10,074
|
|
|
9,248
|
|
|
9,768
|
|
|||
General and administrative
|
20,967
|
|
|
18,164
|
|
|
16,820
|
|
|||
Sales and marketing
|
35,451
|
|
|
24,999
|
|
|
19,104
|
|
|||
Total operating expenses
|
66,492
|
|
|
52,411
|
|
|
45,692
|
|
|||
Gain (loss) from investment in joint venture
|
(352
|
)
|
|
—
|
|
|
—
|
|
|||
Operating loss
|
(1,920
|
)
|
|
(1,045
|
)
|
|
(2,642
|
)
|
|||
Interest expense
|
1,349
|
|
|
1,198
|
|
|
533
|
|
|||
Other income, net
|
(1,629
|
)
|
|
(1,309
|
)
|
|
(1,244
|
)
|
|||
Loss before income taxes
|
(1,640
|
)
|
|
(934
|
)
|
|
(1,931
|
)
|
|||
Income tax expense (benefit)
|
169
|
|
|
(7
|
)
|
|
(428
|
)
|
|||
Net loss
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
|
|
|
|
|
|
||||||
Net loss per share:
|
|
|
|
|
|
||||||
Basic and Diluted
|
$
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.05
|
)
|
Weighted average shares of common stock outstanding:
|
|
|
|
|
|
||||||
Basic and Diluted
|
34,645,345
|
|
|
31,961,192
|
|
|
29,588,324
|
|
Trupanion, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net loss
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
359
|
|
|
(642
|
)
|
|
277
|
|
|||
Net unrealized gain (loss) on available-for-sale debt securities
|
644
|
|
|
(19
|
)
|
|
8
|
|
|||
Other comprehensive income (loss), net of taxes
|
1,003
|
|
|
(661
|
)
|
|
285
|
|
|||
Comprehensive loss
|
$
|
(806
|
)
|
|
$
|
(1,588
|
)
|
|
$
|
(1,218
|
)
|
Trupanion, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
|
|||||||
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
29,168
|
|
|
$
|
26,552
|
|
Short-term investments
|
69,732
|
|
|
54,559
|
|
||
Accounts and other receivables
|
54,408
|
|
|
31,565
|
|
||
Prepaid expenses and other assets
|
5,513
|
|
|
5,300
|
|
||
Total current assets
|
158,821
|
|
|
117,976
|
|
||
Restricted cash
|
1,400
|
|
|
1,400
|
|
||
Long-term investments, at fair value
|
4,323
|
|
|
3,554
|
|
||
Property and equipment, net
|
70,372
|
|
|
69,803
|
|
||
Intangible assets, net
|
7,731
|
|
|
8,071
|
|
||
Other long-term assets
|
14,553
|
|
|
6,706
|
|
||
Total assets
|
$
|
257,200
|
|
|
$
|
207,510
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
4,087
|
|
|
$
|
2,767
|
|
Accrued liabilities and other current liabilities
|
13,798
|
|
|
11,347
|
|
||
Reserve for veterinary invoices
|
21,194
|
|
|
16,062
|
|
||
Deferred revenue
|
52,546
|
|
|
33,027
|
|
||
Total current liabilities
|
91,625
|
|
|
63,203
|
|
||
Long-term debt
|
26,086
|
|
|
12,862
|
|
||
Deferred tax liabilities
|
1,118
|
|
|
1,002
|
|
||
Other liabilities
|
1,611
|
|
|
1,270
|
|
||
Total liabilities
|
120,440
|
|
|
78,337
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock: $0.00001 par value per share, 100,000,000 shares authorized at December 31, 2019 and December 31, 2018, 35,876,882 and 34,947,017 shares issued and outstanding at December 31, 2019; 34,781,121 and 34,025,136 shares issued and outstanding at December 31, 2018
|
—
|
|
|
—
|
|
||
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized at December 31, 2019 and December 31, 2018, and 0 shares issued and outstanding at December 31, 2019 and December 31, 2018
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
232,731
|
|
|
219,838
|
|
||
Accumulated other comprehensive income (loss)
|
250
|
|
|
(753
|
)
|
||
Accumulated deficit
|
(85,520
|
)
|
|
(83,711
|
)
|
||
Treasury stock, at cost: 929,865 shares at December 31, 2019 and 755,985 shares at December 31, 2018
|
(10,701
|
)
|
|
(6,201
|
)
|
||
Total stockholders’ equity
|
136,760
|
|
|
129,173
|
|
||
Total liabilities and stockholders’ equity
|
$
|
257,200
|
|
|
$
|
207,510
|
|
Trupanion, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
|
||||||||||||||||||||
|
Common Stock
|
Additional Paid-in Capital
|
Accumulated Deficit
|
Accumulated Other Comprehensive Income (Loss)
|
Treasury Stock
|
Total Stockholders' Equity
|
||||||||||||||
|
Shares
|
Amount
|
||||||||||||||||||
Balance at January 1, 2017
|
29,498,947
|
|
$
|
—
|
|
$
|
129,574
|
|
$
|
(81,281
|
)
|
$
|
(377
|
)
|
$
|
(3,201
|
)
|
$
|
44,715
|
|
Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings
|
622,549
|
|
—
|
|
1,375
|
|
—
|
|
—
|
|
—
|
|
1,375
|
|
||||||
Stock-based compensation expense
|
—
|
|
—
|
|
3,562
|
|
—
|
|
—
|
|
—
|
|
3,562
|
|
||||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
285
|
|
—
|
|
285
|
|
||||||
Net loss
|
—
|
|
—
|
|
—
|
|
(1,503
|
)
|
—
|
|
—
|
|
(1,503
|
)
|
||||||
Balance at December 31, 2017
|
30,121,496
|
|
—
|
|
134,511
|
|
(82,784
|
)
|
(92
|
)
|
(3,201
|
)
|
48,434
|
|
||||||
Issuance of common stock from follow-on public offering
|
2,090,909
|
|
—
|
|
65,638
|
|
—
|
|
—
|
|
—
|
|
65,638
|
|
||||||
Issuance of common stock for acquisition of corporate real estate
|
303,030
|
|
—
|
|
9,633
|
|
—
|
|
—
|
|
—
|
|
9,633
|
|
||||||
Exercise of warrants, net
|
231,315
|
|
—
|
|
3,300
|
|
—
|
|
—
|
|
(3,000
|
)
|
300
|
|
||||||
Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings
|
1,278,386
|
|
—
|
|
1,806
|
|
—
|
|
—
|
|
—
|
|
1,806
|
|
||||||
Stock-based compensation expense
|
—
|
|
—
|
|
4,950
|
|
—
|
|
—
|
|
—
|
|
4,950
|
|
||||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
(661
|
)
|
—
|
|
(661
|
)
|
||||||
Net loss
|
—
|
|
—
|
|
—
|
|
(927
|
)
|
—
|
|
—
|
|
(927
|
)
|
||||||
Balance at December 31, 2018
|
34,025,136
|
|
—
|
|
219,838
|
|
(83,711
|
)
|
(753
|
)
|
(6,201
|
)
|
129,173
|
|
||||||
Exercise of warrants, net
|
306,120
|
|
—
|
|
4,800
|
|
—
|
|
—
|
|
(4,500
|
)
|
300
|
|
||||||
Issuance of common stock in connection with the Company's equity award programs, net of tax withholdings
|
615,761
|
|
—
|
|
1,043
|
|
—
|
|
—
|
|
—
|
|
1,043
|
|
||||||
Stock-based compensation expense
|
—
|
|
—
|
|
7,050
|
|
—
|
|
—
|
|
—
|
|
7,050
|
|
||||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
1,003
|
|
—
|
|
1,003
|
|
||||||
Net loss
|
—
|
|
—
|
|
—
|
|
(1,809
|
)
|
—
|
|
—
|
|
(1,809
|
)
|
||||||
Balance at December 31, 2019
|
34,947,017
|
|
$
|
—
|
|
$
|
232,731
|
|
$
|
(85,520
|
)
|
$
|
250
|
|
$
|
(10,701
|
)
|
$
|
136,760
|
|
Trupanion, Inc.
Consolidated Statements of Cash Flows
(in thousands)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Operating activities
|
|
|
|
|
|
||||||
Net loss
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
Adjustments to reconcile net loss to cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
5,632
|
|
|
4,512
|
|
|
4,232
|
|
|||
Stock-based compensation expense
|
6,846
|
|
|
4,775
|
|
|
3,419
|
|
|||
Gain on sale of equity method investment
|
—
|
|
|
—
|
|
|
(1,036
|
)
|
|||
Other, net
|
105
|
|
|
(240
|
)
|
|
(383
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|||||
Accounts and other receivables
|
(22,772
|
)
|
|
(11,248
|
)
|
|
(10,219
|
)
|
|||
Prepaid expenses and other assets
|
(432
|
)
|
|
(2,628
|
)
|
|
(179
|
)
|
|||
Accounts payable, accrued liabilities, and other liabilities
|
4,110
|
|
|
4,531
|
|
|
3,019
|
|
|||
Reserve for veterinary invoices
|
5,059
|
|
|
3,440
|
|
|
3,149
|
|
|||
Deferred revenue
|
19,418
|
|
|
10,465
|
|
|
9,167
|
|
|||
Net cash provided by operating activities
|
16,157
|
|
|
12,680
|
|
|
9,666
|
|
|||
Investing activities
|
|
|
|
|
|
||||||
Purchases of investment securities
|
(65,506
|
)
|
|
(52,862
|
)
|
|
(31,920
|
)
|
|||
Maturities of investment securities
|
49,762
|
|
|
35,413
|
|
|
23,372
|
|
|||
Purchases of other investments
|
(4,000
|
)
|
|
(3,000
|
)
|
|
—
|
|
|||
Acquisition of lease intangibles, related to corporate real estate acquisition
|
—
|
|
|
(2,959
|
)
|
|
—
|
|
|||
Proceeds from sale of equity method investment
|
—
|
|
|
—
|
|
|
1,402
|
|
|||
Purchases of property and equipment
|
(5,373
|
)
|
|
(56,936
|
)
|
|
(3,131
|
)
|
|||
Other
|
(2,891
|
)
|
|
(1,107
|
)
|
|
(2,779
|
)
|
|||
Net cash used in investing activities
|
(28,008
|
)
|
|
(81,451
|
)
|
|
(13,056
|
)
|
|||
Financing activities
|
|
|
|
|
|
||||||
Proceeds from public offering of common stock, net of offering costs
|
—
|
|
|
65,671
|
|
|
—
|
|
|||
Proceeds from exercise of stock options
|
2,982
|
|
|
3,601
|
|
|
2,545
|
|
|||
Shares withheld to satisfy tax withholding
|
(1,667
|
)
|
|
(1,839
|
)
|
|
(1,170
|
)
|
|||
Proceeds from debt financing, net of financing fees
|
13,167
|
|
|
13,431
|
|
|
4,400
|
|
|||
Repayment of debt financing
|
—
|
|
|
(10,000
|
)
|
|
—
|
|
|||
Other financing
|
(438
|
)
|
|
365
|
|
|
(694
|
)
|
|||
Net cash provided by financing activities
|
14,044
|
|
|
71,229
|
|
|
5,081
|
|
|||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net
|
423
|
|
|
(812
|
)
|
|
378
|
|
|||
Net change in cash, cash equivalents, and restricted cash
|
2,616
|
|
|
1,646
|
|
|
2,069
|
|
|||
Cash, cash equivalents, and restricted cash at beginning of period
|
27,952
|
|
|
26,306
|
|
|
24,237
|
|
|||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
30,568
|
|
|
$
|
27,952
|
|
|
$
|
26,306
|
|
Supplemental disclosures
|
|
|
|
|
|
|
|||||
Income taxes paid
|
$
|
158
|
|
|
$
|
216
|
|
|
$
|
177
|
|
Interest paid
|
1,188
|
|
|
1,019
|
|
|
333
|
|
|||
Noncash investing and financing activities:
|
|
|
|
|
|
||||||
Issuance of common stock for cashless exercise of warrants
|
4,500
|
|
|
3,000
|
|
|
—
|
|
|||
Issuance of common stock for acquisition of corporate real estate
|
—
|
|
|
9,640
|
|
|
—
|
|
|||
Purchases of property and equipment included in accounts payable and accrued liabilities
|
485
|
|
|
106
|
|
|
390
|
|
|||
Property and equipment acquired under financing leases
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
689
|
|
•
|
Expected volatility —The Company estimates the expected volatility based on the historical volatility of a representative group of publicly traded companies with similar characteristics to the Company, and its own historical volatility;
|
•
|
Expected term for awards granted to employees —The Company has based its expected term for awards issued to employees on the simplified method, as permitted by the SEC Staff Accounting Bulletin Topic 14, Share-Based Payment;
|
•
|
Risk-free interest rate—The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options; and
|
•
|
Expected dividend yield—The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero.
|
|
As of December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Stock options
|
2,097,978
|
|
|
2,621,503
|
|
|
4,006,399
|
|
Restricted stock awards and restricted stock units
|
581,943
|
|
|
451,160
|
|
|
256,842
|
|
Warrants
|
—
|
|
|
480,000
|
|
|
810,000
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Land and improvements
|
$
|
15,854
|
|
|
$
|
15,833
|
|
Building and improvements
|
47,558
|
|
|
46,561
|
|
||
Software
|
22,976
|
|
|
20,338
|
|
||
Office equipment and other
|
3,384
|
|
|
2,772
|
|
||
Construction in progress
|
247
|
|
|
—
|
|
||
Property and equipment, at cost
|
90,019
|
|
|
85,504
|
|
||
Less: Accumulated depreciation
|
(19,647
|
)
|
|
(15,701
|
)
|
||
Property and equipment, net
|
$
|
70,372
|
|
|
$
|
69,803
|
|
|
|
|
|
|
|
August 9, 2018
|
|
Assumptions
|
|
|
|
|
|
Fair Value
|
|
Risk free interest rate
|
|
|
|
|
|
2.5
|
%
|
Expected volatility
|
|
|
|
|
|
36.72
|
%
|
Expected life (years)
|
|
|
|
|
|
1.88
|
|
Expected dividend yield
|
|
|
|
|
|
—
|
%
|
Building and improvements
|
|
|
|
|
|
$
|
46,379
|
|
Land and improvements
|
|
|
|
|
|
15,833
|
|
|
Lease-related intangible assets
|
|
|
|
|
|
2,959
|
|
|
Total purchase price
|
|
|
|
|
|
$
|
65,171
|
|
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
December 31, 2019:
|
|
|
|
|
|
|
||||||
Licenses
|
|
$
|
4,773
|
|
|
$
|
—
|
|
|
$
|
4,773
|
|
Leases
|
|
2,959
|
|
|
(1,084
|
)
|
|
1,875
|
|
|||
Patents, trademarks, and other
|
|
1,287
|
|
|
(204
|
)
|
|
1,083
|
|
|||
Total Intangibles
|
|
$
|
9,019
|
|
|
$
|
(1,288
|
)
|
|
$
|
7,731
|
|
December 31, 2018:
|
|
|
|
|
|
|
||||||
Licenses
|
|
$
|
4,773
|
|
|
$
|
—
|
|
|
$
|
4,773
|
|
Leases
|
|
2,959
|
|
|
(213
|
)
|
|
2,746
|
|
|||
Patents, trademarks, and other
|
|
743
|
|
|
(191
|
)
|
|
552
|
|
|||
Total Intangibles
|
|
$
|
8,475
|
|
|
$
|
(404
|
)
|
|
$
|
8,071
|
|
Year ending December 31:
|
|
||
2020
|
$
|
949
|
|
2021
|
714
|
|
|
2022
|
245
|
|
|
2023
|
245
|
|
|
2024
|
245
|
|
|
Thereafter
|
493
|
|
|
Total
|
$
|
2,891
|
|
|
Amortized
Cost |
|
Gross
Unrealized Holding Gains |
|
Gross
Unrealized Holding Losses |
|
Fair
Value |
||||||||
As of December 31, 2019
|
|
|
|
|
|
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Foreign deposits
|
$
|
3,323
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,323
|
|
Municipal bond
|
1,000
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
||||
|
$
|
4,323
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,323
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
$
|
6,156
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
6,155
|
|
Certificates of deposit
|
440
|
|
|
—
|
|
|
—
|
|
|
440
|
|
||||
U.S. government funds
|
63,136
|
|
|
—
|
|
|
—
|
|
|
63,136
|
|
||||
|
$
|
69,732
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
69,731
|
|
|
|
|
|
|
|
|
|
||||||||
|
Amortized
Cost |
|
Gross
Unrealized Holding Gains |
|
Gross
Unrealized Holding Losses |
|
Fair
Value |
||||||||
As of December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Foreign deposits
|
$
|
2,573
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,573
|
|
Municipal bond
|
1,000
|
|
|
—
|
|
|
(19
|
)
|
|
981
|
|
||||
|
$
|
3,573
|
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
$
|
3,554
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
$
|
6,645
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
6,642
|
|
Certificates of deposit
|
437
|
|
|
—
|
|
|
—
|
|
|
437
|
|
||||
U.S. government funds
|
47,477
|
|
|
—
|
|
|
—
|
|
|
47,477
|
|
||||
|
$
|
54,559
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
54,556
|
|
|
December 31, 2019
|
||||||
|
Amortized
Cost |
|
Fair
Value |
||||
Available-for-sale:
|
|
|
|
||||
Due after one year through five years
|
$
|
4,323
|
|
|
$
|
4,323
|
|
|
$
|
4,323
|
|
|
$
|
4,323
|
|
|
As of December 31, 2019
|
||||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Restricted cash
|
$
|
1,400
|
|
|
$
|
1,400
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money market funds
|
1,050
|
|
|
1,050
|
|
|
—
|
|
|
—
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
||||||||
Foreign deposits
|
3,323
|
|
|
3,323
|
|
|
—
|
|
|
—
|
|
||||
Municipal bond
|
1,000
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
||||
Investment in variable interest entity
|
7,625
|
|
|
—
|
|
|
—
|
|
|
7,625
|
|
||||
Total
|
$
|
14,398
|
|
|
$
|
5,773
|
|
|
$
|
1,000
|
|
|
$
|
7,625
|
|
|
|
|
|
|
|
|
|
||||||||
|
As of December 31, 2018
|
||||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Restricted cash
|
$
|
1,400
|
|
|
$
|
1,400
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money market funds
|
2,010
|
|
|
2,010
|
|
|
—
|
|
|
—
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
||||||||
Foreign deposits
|
2,573
|
|
|
2,573
|
|
|
—
|
|
|
—
|
|
||||
Municipal bond
|
981
|
|
|
—
|
|
|
981
|
|
|
—
|
|
||||
Investment in variable interest entity
|
3,000
|
|
|
—
|
|
|
—
|
|
|
3,000
|
|
||||
Total
|
$
|
9,964
|
|
|
$
|
5,983
|
|
|
$
|
981
|
|
|
$
|
3,000
|
|
|
Year Ending December 31,
|
|
|
||||||||||||||||||||||||
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
||||||||||||||
Long-term debt obligations(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,200
|
|
Lease obligations
|
40
|
|
|
40
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|||||||
Other obligations(2)
|
3,320
|
|
|
1,053
|
|
|
520
|
|
|
237
|
|
|
168
|
|
|
2,296
|
|
|
7,594
|
|
|||||||
Total
|
$
|
3,360
|
|
|
$
|
1,093
|
|
|
$
|
26,730
|
|
|
$
|
237
|
|
|
$
|
168
|
|
|
$
|
2,296
|
|
|
$
|
33,884
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||
Subscription
|
|
2019
|
|
2018
|
|
2017
|
||||||
Reserve at beginning of year
|
|
$
|
13,875
|
|
|
$
|
11,059
|
|
|
$
|
8,538
|
|
Veterinary invoice expense during the period related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
231,831
|
|
|
190,642
|
|
|
155,623
|
|
|||
Prior years
|
|
585
|
|
|
409
|
|
|
(69
|
)
|
|||
Total veterinary invoice expense
|
|
232,416
|
|
|
191,051
|
|
|
155,554
|
|
|||
Amounts paid during the period related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
217,538
|
|
|
177,418
|
|
|
144,802
|
|
|||
Prior years
|
|
12,494
|
|
|
10,130
|
|
|
7,777
|
|
|||
Total paid
|
|
230,032
|
|
|
187,548
|
|
|
152,579
|
|
|||
Non-cash expenses
|
|
718
|
|
|
687
|
|
|
454
|
|
|||
Reserve at end of period
|
|
$
|
15,541
|
|
|
$
|
13,875
|
|
|
$
|
11,059
|
|
|
|
Year Ended December 31,
|
||||||||||
Other Business
|
|
2019
|
|
2018
|
|
2017
|
||||||
Reserve at beginning of year
|
|
$
|
2,187
|
|
|
$
|
1,697
|
|
|
$
|
983
|
|
Veterinary invoice expense during the period related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
38,881
|
|
|
23,784
|
|
|
14,739
|
|
|||
Prior years
|
|
(350
|
)
|
|
(296
|
)
|
|
(171
|
)
|
|||
Total veterinary invoice expense
|
|
38,531
|
|
|
23,488
|
|
|
14,568
|
|
|||
Amounts paid during the period related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
33,254
|
|
|
21,615
|
|
|
13,053
|
|
|||
Prior years
|
|
1,811
|
|
|
1,383
|
|
|
801
|
|
|||
Total paid
|
|
35,065
|
|
|
22,998
|
|
|
13,854
|
|
|||
Non-cash expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Reserve at end of period
|
|
$
|
5,653
|
|
|
$
|
2,187
|
|
|
$
|
1,697
|
|
|
|
Cumulative veterinary invoice expenses
|
|
Reserve
|
|
Cumulative number of veterinary invoices
|
|||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
As of December 31,
|
|
As of December 31,
|
|||||||||||||||||||
Subscription
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|||||||||||
Year of Occurrence
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|||||||||||
2016
|
|
$
|
124,169
|
|
|
$
|
123,954
|
|
|
$
|
124,035
|
|
|
$
|
124,040
|
|
|
$
|
137
|
|
|
600,143
|
|
2017
|
|
|
|
$
|
155,398
|
|
|
$
|
155,678
|
|
|
$
|
155,681
|
|
|
$
|
464
|
|
|
725,796
|
|
||
2018
|
|
|
|
|
|
$
|
190,316
|
|
|
$
|
190,804
|
|
|
$
|
1,365
|
|
|
870,806
|
|
||||
2019
|
|
|
|
|
|
|
|
$
|
232,552
|
|
|
$
|
13,575
|
|
|
965,768
|
|
||||||
|
|
|
|
|
|
|
|
$
|
703,077
|
|
|
$
|
15,541
|
|
|
|
|
|
Cumulative veterinary invoice expenses
|
|
Reserve
|
|
Cumulative number of veterinary invoices
|
|||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
As of December 31,
|
|
As of December 31,
|
|||||||||||||||||||
Other Business
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|||||||||||
Year of Occurrence
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|||||||||||
2016
|
|
$
|
9,027
|
|
|
$
|
8,843
|
|
|
$
|
8,855
|
|
|
$
|
8,862
|
|
|
$
|
1
|
|
|
59,665
|
|
2017
|
|
|
|
$
|
14,738
|
|
|
$
|
14,420
|
|
|
$
|
14,471
|
|
|
$
|
5
|
|
|
105,891
|
|
||
2018
|
|
|
|
|
|
$
|
23,782
|
|
|
$
|
23,371
|
|
|
$
|
20
|
|
|
173,778
|
|
||||
2019
|
|
|
|
|
|
|
|
$
|
38,883
|
|
|
$
|
5,627
|
|
|
262,083
|
|
||||||
|
|
|
|
|
|
|
|
$
|
85,587
|
|
|
$
|
5,653
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Veterinary invoice expense
|
$
|
697
|
|
|
$
|
571
|
|
|
$
|
355
|
|
Other cost of revenue
|
353
|
|
|
356
|
|
|
239
|
|
|||
Technology and development
|
364
|
|
|
209
|
|
|
216
|
|
|||
General and administrative
|
3,312
|
|
|
2,304
|
|
|
1,887
|
|
|||
Sales and marketing
|
2,120
|
|
|
1,335
|
|
|
722
|
|
|||
Total expensed stock-based compensation
|
6,846
|
|
|
4,775
|
|
|
3,419
|
|
|||
Capitalized stock-based compensation
|
204
|
|
|
175
|
|
|
143
|
|
|||
Total stock-based compensation
|
$
|
7,050
|
|
|
$
|
4,950
|
|
|
$
|
3,562
|
|
|
Year Ended December 31,
|
|
2017
|
Valuation assumptions:
|
|
Expected term (in years)
|
6.25
|
Expected volatility
|
37.1%-39.8%
|
Risk-free interest rate
|
1.8%-2.2%
|
Expected dividend yield
|
—%
|
|
Number
of
Options
|
|
Weighted Average
Exercise
Price per Share
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||
Outstanding as of January 1, 2017
|
4,123,023
|
|
|
$
|
5.06
|
|
|
$
|
43,185
|
|
Granted
|
657,339
|
|
|
17.74
|
|
|
—
|
|
||
Exercised
|
(670,823
|
)
|
|
3.80
|
|
|
10,392
|
|
||
Forfeited
|
(103,140
|
)
|
|
12.25
|
|
|
—
|
|
||
Outstanding as of December 31, 2017
|
4,006,399
|
|
|
7.16
|
|
|
88,578
|
|
||
Granted
|
—
|
|
|
—
|
|
|
—
|
|
||
Exercised
|
(1,292,037
|
)
|
|
2.82
|
|
|
36,625
|
|
||
Forfeited
|
(92,859
|
)
|
|
15.36
|
|
|
—
|
|
||
Outstanding as of December 31, 2018
|
2,621,503
|
|
|
9.01
|
|
|
43,136
|
|
||
Granted
|
—
|
|
|
—
|
|
|
—
|
|
||
Exercised
|
(510,268
|
)
|
|
5.28
|
|
|
13,151
|
|
||
Forfeited
|
(13,257
|
)
|
|
18.23
|
|
|
—
|
|
||
Outstanding as of December 31, 2019
|
2,097,978
|
|
|
9.86
|
|
|
57,907
|
|
||
|
|
|
|
|
|
|||||
Exercisable at December 31, 2019
|
1,891,591
|
|
|
$
|
9.04
|
|
|
$
|
53,760
|
|
|
|
Weighted Average Grant Date Fair Value per Share
|
|
Fair Value
of Options
Vested (in thousands)
|
||||
Year:
|
|
|
|
|
||||
2017
|
|
$
|
7.25
|
|
|
$
|
6,313
|
|
2018
|
|
$
|
—
|
|
|
$
|
2,665
|
|
2019
|
|
$
|
—
|
|
|
$
|
1,591
|
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair Value per
Share
|
|||
Unvested shares as of January 1, 2017
|
|
350,631
|
|
|
$
|
4.77
|
|
Granted
|
|
23,659
|
|
|
30.19
|
|
|
Vested
|
|
(116,877
|
)
|
|
4.77
|
|
|
Forfeited
|
|
(571
|
)
|
|
30.19
|
|
|
Unvested shares as of December 31, 2017
|
|
256,842
|
|
|
4.77
|
|
|
Granted
|
|
375,313
|
|
|
28.10
|
|
|
Vested
|
|
(149,213
|
)
|
|
9.74
|
|
|
Forfeited
|
|
(31,782
|
)
|
|
28.57
|
|
|
Unvested shares as of December 31, 2018
|
|
451,160
|
|
|
22.16
|
|
|
Granted
|
|
459,523
|
|
|
30.03
|
|
|
Vested
|
|
(276,184
|
)
|
|
18.20
|
|
|
Forfeited
|
|
(52,556
|
)
|
|
29.85
|
|
|
Unvested shares as of December 31, 2019
|
|
581,943
|
|
|
$
|
29.56
|
|
Year ending December 31:
|
|
|
|
|
|
|
||
2020
|
|
|
|
|
|
$
|
2,002
|
|
2021
|
|
|
|
|
|
1,632
|
|
|
2022
|
|
|
|
|
|
1,325
|
|
|
2023
|
|
|
|
|
|
1,367
|
|
|
2024
|
|
|
|
|
|
1,410
|
|
|
Thereafter
|
|
|
|
|
|
1,800
|
|
|
Total rental payments
|
|
|
|
|
|
$
|
9,536
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Subscription business:
|
|
|
|
|
|
||||||
Revenue
|
$
|
321,163
|
|
|
$
|
263,738
|
|
|
$
|
218,354
|
|
Veterinary invoice expense
|
232,415
|
|
|
191,051
|
|
|
155,554
|
|
|||
Other cost of revenue
|
29,724
|
|
|
24,941
|
|
|
21,329
|
|
|||
Gross profit
|
59,024
|
|
|
47,746
|
|
|
41,471
|
|
|||
Technology and development
|
8,427
|
|
|
8,024
|
|
|
8,789
|
|
|||
General and administrative
|
17,539
|
|
|
15,761
|
|
|
15,135
|
|
|||
Sales and marketing
|
35,037
|
|
|
24,622
|
|
|
18,886
|
|
|||
Subscription business operating income (loss)
|
(1,979
|
)
|
|
(661
|
)
|
|
(1,339
|
)
|
|||
|
|
|
|
|
|
||||||
Other business:
|
|
|
|
|
|
||||||
Revenue
|
62,773
|
|
|
40,218
|
|
|
24,313
|
|
|||
Veterinary invoice expense
|
38,532
|
|
|
23,488
|
|
|
14,568
|
|
|||
Other cost of revenue
|
18,341
|
|
|
13,110
|
|
|
8,166
|
|
|||
Gross profit
|
5,900
|
|
|
3,620
|
|
|
1,579
|
|
|||
Technology and development
|
1,647
|
|
|
1,224
|
|
|
979
|
|
|||
General and administrative
|
3,428
|
|
|
2,403
|
|
|
1,685
|
|
|||
Sales and marketing
|
414
|
|
|
377
|
|
|
218
|
|
|||
Other business operating income (loss)
|
411
|
|
|
(384
|
)
|
|
(1,303
|
)
|
|||
Gain (loss) from investment in joint venture
|
(352
|
)
|
|
—
|
|
|
—
|
|
|||
Total operating income (loss)
|
$
|
(1,920
|
)
|
|
$
|
(1,045
|
)
|
|
$
|
(2,642
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
United States
|
$
|
316,138
|
|
|
$
|
246,280
|
|
|
$
|
195,297
|
|
Canada
|
67,798
|
|
|
57,676
|
|
|
47,370
|
|
|||
Total revenue
|
$
|
383,936
|
|
|
$
|
303,956
|
|
|
$
|
242,667
|
|
|
|
As of December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Statutory net income
|
|
$
|
16,311
|
|
|
$
|
11,021
|
|
|
$
|
7,507
|
|
Statutory capital and surplus
|
|
$
|
73,810
|
|
|
$
|
56,244
|
|
|
$
|
37,190
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
United States
|
|
$
|
(1,783
|
)
|
|
$
|
(1,054
|
)
|
|
$
|
(1,965
|
)
|
Foreign
|
|
143
|
|
|
120
|
|
|
34
|
|
|||
|
|
$
|
(1,640
|
)
|
|
$
|
(934
|
)
|
|
$
|
(1,931
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Current:
|
|
|
|
|
|
|
||||||
U.S. federal & state
|
|
$
|
12
|
|
|
$
|
(10
|
)
|
|
$
|
183
|
|
Foreign
|
|
52
|
|
|
37
|
|
|
15
|
|
|||
|
|
64
|
|
|
27
|
|
|
198
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
U.S. federal & state
|
|
116
|
|
|
(32
|
)
|
|
(620
|
)
|
|||
Foreign
|
|
(11
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|||
|
|
105
|
|
|
(34
|
)
|
|
(626
|
)
|
|||
Income tax expense (benefit)
|
|
$
|
169
|
|
|
$
|
(7
|
)
|
|
$
|
(428
|
)
|
|
|
Year Ended December 31,
|
|||||||
|
|
2019
|
|
2018
|
|
2017
|
|||
Federal income taxes at statutory rate
|
|
21.0
|
%
|
|
21.0
|
%
|
|
34.0
|
%
|
U.S. state income taxes
|
|
(7.8
|
)
|
|
4.6
|
|
|
(9.5
|
)
|
Equity compensation
|
|
177.2
|
|
|
828.5
|
|
|
189.1
|
|
Change in valuation allowance
|
|
(184.2
|
)
|
|
(857.4
|
)
|
|
(229.6
|
)
|
Meals and entertainment
|
|
(4.9
|
)
|
|
(5.4
|
)
|
|
(3.0
|
)
|
Nondeductible fines and settlements
|
|
(9.2
|
)
|
|
(2.1
|
)
|
|
—
|
|
Other, net
|
|
(11.6
|
)
|
|
(8.6
|
)
|
|
2.0
|
|
Change in federal tax rate
|
|
—
|
|
|
—
|
|
|
32.1
|
|
Credits
|
|
9.2
|
|
|
20.2
|
|
|
7.1
|
|
Effective income tax rate
|
|
(10.3
|
)%
|
|
0.8
|
%
|
|
22.2
|
%
|
|
|
Year Ended December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Deferred revenue
|
|
$
|
2,219
|
|
|
$
|
1,371
|
|
Accruals and reserves
|
|
885
|
|
|
475
|
|
||
Net operating loss carryforwards
|
|
30,569
|
|
|
26,566
|
|
||
Depreciation and amortization
|
|
240
|
|
|
346
|
|
||
Equity compensation
|
|
2,102
|
|
|
1,690
|
|
||
Credits
|
|
547
|
|
|
397
|
|
||
Other
|
|
243
|
|
|
430
|
|
||
Total deferred tax assets
|
|
36,805
|
|
|
31,275
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Deferred costs
|
|
(398
|
)
|
|
(279
|
)
|
||
Intangible assets
|
|
(1,117
|
)
|
|
(1,002
|
)
|
||
Other
|
|
(775
|
)
|
|
(250
|
)
|
||
Total deferred tax liabilities
|
|
(2,290
|
)
|
|
(1,531
|
)
|
||
Total deferred taxes
|
|
34,515
|
|
|
29,744
|
|
||
Less deferred tax asset valuation allowance
|
|
(35,609
|
)
|
|
(30,701
|
)
|
||
Net deferred tax liability
|
|
$
|
(1,094
|
)
|
|
$
|
(957
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, beginning of year
|
|
$
|
89
|
|
|
$
|
327
|
|
|
$
|
120
|
|
Increases (decreases) to tax positions related to prior periods
|
|
19
|
|
|
(243
|
)
|
|
91
|
|
|||
Increases to tax positions related to the current year
|
|
5
|
|
|
5
|
|
|
116
|
|
|||
Balance, end of year
|
|
$
|
113
|
|
|
$
|
89
|
|
|
$
|
327
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed/Furnished
|
||||||
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Exhibit Filing Date
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
3.1
|
|
8/28/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K
|
|
001-36537
|
|
3.1
|
|
6/3/2016
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
3.2
|
|
8/28/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
4.1
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
10.1
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
10.2
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
10.3
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
10.4
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
10.6
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
|
|
333-196814
|
|
10.8
|
|
6/16/2014
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.2
|
|
5/6/2016
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.13
|
|
2/15/2017
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.2
|
|
5/3/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.15
|
|
2/15/2017
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.1
|
|
5/3/2017
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.1
|
|
11/3/2017
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.1
|
|
8/3/2018
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.2
|
|
11/9/2018
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
001-36537
|
|
10.1
|
|
7/31/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K
|
|
001-36537
|
|
10.1
|
|
6/20/2018
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.13
|
|
2/24/2015
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.14
|
|
2/24/2015
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.15
|
|
2/24/2015
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.20
|
|
2/14/2018
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.19
|
|
2/14/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.20
|
|
2/14/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.21
|
|
2/14/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.22
|
|
2/14/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
001-36537
|
|
10.23
|
|
2/14/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document - the instance does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
Inline XBRL Taxonomy Extension Labels Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
|
|
|
|
|
|
|
|
|
|
X
|
+
|
Indicates a management contract or compensatory plan or arrangement.
|
†
|
Registrant has omitted portions of the referenced exhibit pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Exchange Act. The omitted portions of this exhibit have been filed separately with the SEC.
|
*
|
This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
|
|
|
TRUPANION, INC.
|
|
|
|
By:
|
|
/s/ Darryl Rawlings
|
|
|
Darryl Rawlings
Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
Date: February 13, 2020
|
|
/s/ Darryl Rawlings
|
|
|
Darryl Rawlings
Chief Executive Officer and President
(Principal Executive Officer)
|
|
|
|
Date: February 13, 2020
|
|
/s/ Tricia Plouf
|
|
|
Tricia Plouf
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
Date: February 13, 2020
|
|
/s/ Murray Low
|
|
|
Murray Low
Chairman of the Board of Directors |
|
|
|
Date: February 13, 2020
|
|
/s/ Jacqueline Davidson
|
|
|
Jacqueline Davidson
Director |
|
|
|
Date: February 13, 2020
|
|
/s/ Michael Doak
|
|
|
Michael Doak
Director |
|
|
|
Date: February 13, 2020
|
|
/s/ Robin Ferracone
|
|
|
Robin Ferracone
Director |
|
|
|
Date: February 13, 2020
|
|
/s/ Dan Levitan
|
|
|
Dan Levitan
Director |
|
|
|
Date: February 13, 2020
|
|
/s/ H. Hays Lindsley
|
|
|
H. Hays Lindsley
Director |
|
|
|
Date: February 13, 2020
|
|
/s/ Howard Rubin
|
|
|
Howard Rubin
Director |
Trupanion, Inc.
Condensed Statements of Operations and Comprehensive Loss
(Parent Company Only, in thousands)
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Expenses:
|
|
|
||||||||||
Veterinary invoice expense
|
|
$
|
697
|
|
|
$
|
571
|
|
|
$
|
354
|
|
Other cost of revenue
|
|
353
|
|
|
357
|
|
|
239
|
|
|||
Technology and development
|
|
1,085
|
|
|
512
|
|
|
528
|
|
|||
General and administrative
|
|
5,974
|
|
|
4,879
|
|
|
4,204
|
|
|||
Sales and marketing
|
|
2,137
|
|
|
1,355
|
|
|
889
|
|
|||
Total expenses
|
|
10,246
|
|
|
7,674
|
|
|
6,214
|
|
|||
Gain (loss) from investment in joint venture
|
|
(205
|
)
|
|
—
|
|
|
—
|
|
|||
Operating loss
|
|
(10,451
|
)
|
|
(7,674
|
)
|
|
(6,214
|
)
|
|||
Interest expense
|
|
1,327
|
|
|
1,184
|
|
|
529
|
|
|||
Other (income) expense, net
|
|
(4,156
|
)
|
|
(2,557
|
)
|
|
(4,101
|
)
|
|||
Loss before equity in undistributed earnings of subsidiaries
|
|
(7,622
|
)
|
|
(6,301
|
)
|
|
(2,642
|
)
|
|||
Income tax benefit
|
|
5,423
|
|
|
4,042
|
|
|
5,302
|
|
|||
Equity (loss) in undistributed earnings of subsidiaries
|
|
390
|
|
|
1,332
|
|
|
(4,163
|
)
|
|||
Net loss
|
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss) of subsidiaries
|
|
1,003
|
|
|
(661
|
)
|
|
285
|
|
|||
Other comprehensive income (loss)
|
|
1,003
|
|
|
(661
|
)
|
|
285
|
|
|||
Comprehensive loss
|
|
$
|
(806
|
)
|
|
$
|
(1,588
|
)
|
|
$
|
(1,218
|
)
|
Trupanion, Inc.
Condensed Balance Sheets
(Parent Company Only)
(In thousands, except share data)
|
||||||||
|
|
December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Assets
|
|
|
||||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
1,242
|
|
|
$
|
2,133
|
|
Accounts and other receivables
|
|
2,933
|
|
|
2,094
|
|
||
Prepaid expenses and other assets
|
|
361
|
|
|
661
|
|
||
Total current assets
|
|
4,536
|
|
|
4,888
|
|
||
Restricted cash
|
|
1,400
|
|
|
1,400
|
|
||
Property and equipment, net
|
|
663
|
|
|
568
|
|
||
Intangible assets, net
|
|
5,356
|
|
|
5,076
|
|
||
Other long-term assets
|
|
14,146
|
|
|
6,515
|
|
||
Advances to and investments in subsidiaries
|
|
138,174
|
|
|
125,475
|
|
||
Total assets
|
|
$
|
164,275
|
|
|
$
|
143,922
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable, accrued liabilities, and other current liabilities
|
|
$
|
311
|
|
|
$
|
885
|
|
Total current liabilities
|
|
311
|
|
|
885
|
|
||
Long-term debt
|
|
26,086
|
|
|
12,862
|
|
||
Deferred tax liabilities
|
|
1,118
|
|
|
1,002
|
|
||
Total liabilities
|
|
27,515
|
|
|
14,749
|
|
||
Stockholders’ equity:
|
|
|
|
|
||||
Common stock: $0.00001 par value per share, 100,000,000 shares authorized at December 31, 2019 and December 31, 2018, 35,876,882 and 34,947,017 shares issued and outstanding at December 31, 2019; 34,781,121 and 34,025,136 shares issued and outstanding at December 31, 2018
|
|
—
|
|
|
—
|
|
||
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized at December 31, 2019 and December 31, 2018, and 0 shares issued and outstanding at December 31, 2019 and December 31, 2018
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
232,731
|
|
|
219,838
|
|
||
Accumulated other comprehensive income (loss)
|
|
250
|
|
|
(753
|
)
|
||
Accumulated deficit
|
|
(85,520
|
)
|
|
(83,711
|
)
|
||
Treasury stock, at cost: 929,865 shares at December 31, 2019 and 755,985 shares at December 31, 2018
|
|
(10,701
|
)
|
|
(6,201
|
)
|
||
Total stockholders’ equity
|
|
136,760
|
|
|
129,173
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
164,275
|
|
|
$
|
143,922
|
|
Trupanion, Inc.
Condensed Statements of Cash Flows
(Parent Company Only, in thousands)
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Operating activities
|
|
|
||||||||||
Net loss
|
|
$
|
(1,809
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,503
|
)
|
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
|
|
|
|
|
|
|
||||||
(Income) loss attributable to investments in subsidiaries
|
|
(390
|
)
|
|
(1,332
|
)
|
|
4,163
|
|
|||
Depreciation and amortization
|
|
211
|
|
|
436
|
|
|
697
|
|
|||
Stock-based compensation expense
|
|
6,846
|
|
|
4,775
|
|
|
3,419
|
|
|||
Gain on sale of equity method investment
|
|
—
|
|
|
—
|
|
|
(1,036
|
)
|
|||
Other, net
|
|
48
|
|
|
108
|
|
|
(380
|
)
|
|||
Changes in operating assets and liabilities
|
|
(601
|
)
|
|
(97
|
)
|
|
743
|
|
|||
Net cash provided by (used in) operating activities
|
|
4,305
|
|
|
2,963
|
|
|
6,103
|
|
|||
Investing activities
|
|
|
|
|
|
|
||||||
Proceeds from sale of equity method investment
|
|
—
|
|
|
—
|
|
|
1,402
|
|
|||
Purchases of property and equipment
|
|
(728
|
)
|
|
(164
|
)
|
|
(135
|
)
|
|||
Advances to and investments in subsidiaries
|
|
(11,931
|
)
|
|
(67,884
|
)
|
|
(12,168
|
)
|
|||
Other investments
|
|
(7,019
|
)
|
|
(4,237
|
)
|
|
(2,668
|
)
|
|||
Net cash used in investing activities
|
|
(19,678
|
)
|
|
(72,285
|
)
|
|
(13,570
|
)
|
|||
Financing activities
|
|
|
|
|
|
|
||||||
Proceeds from public offering of common stock, net of offering costs
|
|
—
|
|
|
65,671
|
|
|
—
|
|
|||
Proceeds from exercise of stock options
|
|
2,982
|
|
|
3,601
|
|
|
2,545
|
|
|||
Taxes paid related to net share settlement of equity awards
|
|
(1,667
|
)
|
|
(1,839
|
)
|
|
(1,170
|
)
|
|||
Proceeds from debt financing, net of financing fees
|
|
13,167
|
|
|
13,430
|
|
|
4,400
|
|
|||
Repayments of debt financing
|
|
—
|
|
|
(10,000
|
)
|
|
—
|
|
|||
Other financing
|
|
—
|
|
|
287
|
|
|
(604
|
)
|
|||
Net cash provided by financing activities
|
|
14,482
|
|
|
71,150
|
|
|
5,170
|
|
|||
Net change in cash, cash equivalents, and restricted cash
|
|
(891
|
)
|
|
1,828
|
|
|
(2,297
|
)
|
|||
Cash, cash equivalents, and restricted cash at beginning of period
|
|
3,533
|
|
|
1,705
|
|
|
4,001
|
|
|||
Cash, cash equivalents, and restricted cash at end of period
|
|
$
|
2,642
|
|
|
$
|
3,533
|
|
|
$
|
1,705
|
|
Supplemental disclosures
|
|
|
|
|
|
|
||||||
Interest paid
|
|
$
|
1,166
|
|
|
$
|
1,007
|
|
|
$
|
333
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
||||||
Property and equipment acquired under capital lease
|
|
—
|
|
|
—
|
|
|
471
|
|
|||
Cashless exercise of common stock warrants
|
|
4,500
|
|
|
3,000
|
|
|
—
|
|
|||
Issuance of common stock for acquisition of corporate real estate
|
|
$
|
—
|
|
|
$
|
9,640
|
|
|
$
|
—
|
|
A.
|
100% of the commission charged by the producing Broker, plus;
|
B.
|
4.00% of gross premium on the subject Business, representing reimbursement for premium taxes, plus;
|
C.
|
$1,450,000 for the calendar year ended December 31, 2020, representing the Reinsured's "Fronting Fee"
|
|
/s/ Matthew P. Cook
|
|
/s/ Andrew McComb
|
|
/s/ Matthew P. Cook
|
|
/s/ Andrew McComb
|
Subsidiary
|
|
Incorporation
|
American Pet Insurance Company
|
|
United States, New York
|
Trupanion Managers USA, Inc.
|
|
United States, Arizona
|
Trupanion Brokers Ontario, Inc.
|
|
Canada, Ontario
|
Wyndham Insurance Company (SAC), Ltd.
|
|
Bermuda
|
6100 Building, LLC
|
|
United States, Washington
|
Trupanion Canadian Shareholders Ltd.
|
|
Canada, Alberta
|
North American Pet Insurance Company, Inc.
|
|
United States, Arizona
|
Trupanion Alberta Holding Company, ULC
|
|
Canada, Alberta
|
(1)
|
Registration Statement (Form S-8 No. 333-197514) pertaining to the 2014 Equity Incentive Plan, 2014 Employee Stock Purchase Plan, and 2007 Equity Compensation Plan of Trupanion, Inc.,
|
(2)
|
Registration Statement (Form S-8 No. 333-202270) pertaining to the 2014 Equity Incentive Plan and 2014 Employee Stock Purchase Plan of Trupanion, Inc.,
|
(3)
|
Registration Statement (Form S-8 No. 333-209550) pertaining to the 2014 Equity Incentive Plan and 2014 Employee Stock Purchase Plan of Trupanion, Inc.,
|
(4)
|
Registration Statement (Form S-3 No. 333-226752) pertaining to the registration of common stock, preferred stock, debt securities, warrants and units, and
|
(5)
|
Registration Statement (Form S-3 No. 333-225760) pertaining to the registration of common stock, preferred stock, debt securities, warrants and units
|
1.
|
I have reviewed this Annual Report on Form 10-K of Trupanion, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
1.
|
I have reviewed this Annual Report on Form 10-K of Trupanion, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
1.
|
the Annual Report of Trupanion, Inc. on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
the information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Trupanion, Inc.
|
1.
|
the Annual Report of Trupanion, Inc. on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
the information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Trupanion, Inc.
|