false2024Q3000137128500013712852024-10-302024-10-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 2024
TRUPANION, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-36537
83-0480694
(State or other jurisdiction of
incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
6100 4th Avenue S, Suite 200
Seattle, Washington 98108
(Address of principal executive offices, including zip code)

(855) 727 - 9079
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $0.00001 par value per shareTRUPThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02     Results of Operations and Financial Condition.
On October 30, 2024, Trupanion, Inc. (the “Company”) issued a press release regarding the Company's financial results for the quarter ended September 30, 2024. A copy of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01     Financial Statements and Exhibits.
(d)Exhibits
Exhibit No.Description
Press release regarding financial results issued by Trupanion, Inc. dated October 30, 2024
104Cover Page Interactive Data File (formatted as Inline XBRL)



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TRUPANION, INC.
By:
/s/ Fawwad Qureshi
Name: Fawwad Qureshi
Title: Chief Financial Officer
Date: October 30, 2024



Exhibit 99.1
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Trupanion Reports Third Quarter 2024 Results
SEATTLE, WA. October 30, 2024 -- Trupanion, Inc. (Nasdaq: TRUP), a leading provider of medical insurance for cats and dogs, today announced financial results for the third quarter ended September 30, 2024.

“Q3 was a very strong financial quarter for the company, combining consistent revenue growth with a 66% year-over-year increase in subscription discretionary profit,” said Margi Tooth, Chief Executive Officer and President of Trupanion. “This outperformance was driven by aligning the cost of veterinary care with member pricing, resulting in the achievement of our target value proposition of 71%. Trupanion is solving a bigger problem today than ever before, and after generating $30 million in free cash flow over the past 12 months, we are well positioned to reach even more pets in this globally underpenetrated market.”
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Third Quarter 2024 Financial and Business Highlights
•Total revenue was $327.5 million, an increase of 15% compared to the third quarter of 2023.
•Total enrolled pets (including pets from our other business segment) was 1,688,903 at September 30, 2024, a decrease of 1% over September 30, 2023.
•Subscription business revenue was $219.0 million, an increase of 20% compared to the third quarter of 2023.
•Subscription enrolled pets was 1,032,042 at September 30, 2024, an increase of 6% over September 30, 2023.
•Net income was $1.4 million, or $0.03 per basic and diluted share, compared to a net loss of $(4.0) million, or $(0.10) per basic and diluted share, in the third quarter of 2023.
•Adjusted EBITDA was $14.5 million, compared to adjusted EBITDA of $6.1 million in the third quarter of 2023.
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•Operating cash flow was $15.3 million and free cash flow was $13.4 million in the third quarter of 2024. This compared to operating cash flow of $11.4 million and free cash flow of $7.0 million in the third quarter of 2023.

First Nine Months 2024 Financial and Business Highlights
•Total revenue was $948.4 million, an increase of 17% compared to the first nine months of 2023.
•Subscription business revenue was $628.7 million, an increase of 21% compared to the first nine months of 2023.
•Net loss was $(11.3) million, or $(0.27) per basic and diluted share, compared to a net loss of $(42.5) million, or $(1.03) per basic and diluted share, in the first nine months of 2023.
•Adjusted EBITDA was $26.7 million, compared to adjusted EBITDA of $(2.1) million in the first nine months of 2023.
•Operating cash flow was $24.6 million and free cash flow was $16.7 million in the first nine months of 2024. This compared to operating cash flow of $1.1 million and free cash flow of $(13.2) million in the first nine months of 2023.
•At September 30, 2024, the Company held $293.1 million in cash and short-term investments, including $36.4 million held outside the insurance entities, with an additional $15 million available under its credit facility.
•The Company maintained $274.6 million of capital surplus at its insurance subsidiaries. This was $139.9 million more than the estimated risk-based capital requirement of $134.7 million.

Conference Call
Trupanion’s management will host a conference call today to review its third quarter 2024 results. The call is scheduled to begin shortly after 1:30 p.m. PT/ 4:30 p.m. ET. A live webcast will be accessible through the Investor Relations section of Trupanion’s website at https://investors.trupanion.com/ and will be archived online for 3 months upon completion of the conference call. Participants can access the conference call by dialing 1-877-300-8521 (United States) or 1-412-317-6026 (International). A telephonic replay of the call will also be available after the completion of the call, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 10192561.

About Trupanion
Trupanion is a leader in medical insurance for cats and dogs throughout the United States, Canada, Continental Europe, Australia, and Puerto Rico with over 1,000,000 pets enrolled. For over two decades, Trupanion has given pet owners peace of mind so they can focus on their pet's recovery, not financial stress. Trupanion is committed to providing pet owners with the highest value in pet medical insurance with unlimited payouts for the life of their pets. With its patented process, Trupanion is the only North American provider with the technology to pay veterinarians directly in seconds at the time of checkout. Trupanion is listed on NASDAQ under the symbol "TRUP". The company was founded in 2000 and is headquartered in Seattle, WA. Trupanion policies are issued, in the United States, by its wholly-owned insurance entity American Pet Insurance Company and, in Canada, by Accelerant Insurance Company of Canada. Trupanion Australia is a partnership between Trupanion and Hollard Insurance Company. Policies are sold and administered by Trupanion Managers USA, Inc. (CA license No. 0G22803, NPN 9588590). For more information, please visit trupanion.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to, among other things, expectations, plans, prospects and financial results for Trupanion, including, but not limited to, its expectations regarding its ability to continue to grow its enrollments and revenue, and otherwise execute its business plan. These forward-looking statements are based upon the current expectations and beliefs of Trupanion’s management as of the date of this press release, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. All forward-looking statements made in this press release are based on information available to Trupanion as of the date hereof, and Trupanion has no obligation to update these forward-looking statements.

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In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the ability to achieve or maintain profitability and/or appropriate levels of cash flow in future periods; the ability to keep growing our membership base and revenue; the accuracy of assumptions used in determining appropriate member acquisition expenditures; the severity and frequency of claims; the ability to maintain high retention rates; the accuracy of assumptions used in pricing medical plan subscriptions and the ability to accurately estimate the impact of new products or offerings on claims frequency; actual claims expense exceeding estimates; regulatory and other constraints on the ability to institute, or the decision to otherwise delay, pricing modifications in response to changes in actual or estimated claims expense; the effectiveness and statutory or regulatory compliance of our Territory Partner model and of our Territory Partners, veterinarians and other third parties in recommending medical plan subscriptions to potential members; the ability to retain existing Territory Partners and increase the number of Territory Partners and active hospitals; compliance by us and those referring us members with laws and regulations that apply to our business, including the sale of a pet medical plan; the ability to maintain the security of our data; fluctuations in the Canadian currency exchange rate; the ability to protect our proprietary and member information; the ability to maintain our culture and team; the ability to maintain the requisite amount of risk-based capital; our ability to implement and maintain effective controls, including to remediate material weaknesses in internal controls over financial reporting; the ability to protect and enforce Trupanion’s intellectual property rights; the ability to successfully implement our alliance with Aflac; the ability to continue key contractual relationships with third parties; third-party claims including litigation and regulatory actions; the ability to recognize benefits from investments in new solutions and enhancements to Trupanion’s technology platform and website; our ability to retain key personnel; and deliberations and determinations by the Trupanion board based on the future performance of the company or otherwise.

For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the Securities and Exchange Commission (SEC), including but not limited to, Trupanion’s Annual Report on Form 10-K for the year ended December 31, 2023 and any subsequently filed reports on Forms 10-Q, 10-K and 8-K. All documents are available through the SEC’s Electronic Data Gathering Analysis and Retrieval system at https://www.sec.gov or the Investor Relations section of Trupanion’s website at https://investors.trupanion.com.

Non-GAAP Financial Measures
Trupanion’s stated results may include certain non-GAAP financial measures. These non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry as other companies in its industry may calculate or use non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Trupanion’s reported financial results. The presentation and utilization of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Trupanion urges its investors to review the reconciliation of its non-GAAP financial measures to the most directly comparable GAAP financial measures in its consolidated financial statements, and not to rely on any single financial or operating measure to evaluate its business. These reconciliations are included below and on Trupanion’s Investor Relations website.

Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash expenses, Trupanion believes that providing various non-GAAP financial measures that exclude stock-based compensation expense and depreciation and amortization expense allows for more meaningful comparisons between its operating results from period to period. Trupanion offsets new pet acquisition expense with sign-up fee revenue in the calculation of net acquisition cost because it collects sign-up fee revenue from new members at the time of enrollment and considers it to be an offset to a portion of Trupanion’s new pet acquisition expense. Trupanion believes this allows it to calculate and present financial measures in a consistent manner across periods. Trupanion’s management believes that the non-GAAP financial measures and the related financial measures derived from them are important tools for financial and operational decision-making and for evaluating operating results over different periods of time.




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Trupanion, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share data)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(unaudited)
Revenue:
Subscription business$218,986 $182,906 $628,738 $521,369 
Other business108,470 102,947 319,639 291,379 
Total revenue327,456 285,853 948,377 812,748 
Cost of revenue:
Subscription business(1)
177,365 157,444 525,237 455,055 
Other business100,712 93,176 297,265 266,741 
   Total cost of revenue(2)
278,077 250,620 822,502 721,796 
Operating expenses:
Technology and development(1)
7,933 5,302 23,083 15,434 
General and administrative(1)
16,977 12,664 46,903 46,817 
New pet acquisition expense(1)
18,308 17,772 53,025 60,183 
Depreciation and amortization4,381 2,990 12,542 9,445 
Total operating expenses47,599 38,728 135,553 131,879 
Gain (loss) from investment in joint venture(34)4 (184)(140)
Operating income (loss)1,746 (3,491)(9,862)(41,067)
Interest expense3,820 3,053 11,071 8,380 
Other income, net(3,538)(2,465)(9,601)(6,445)
Income (loss) before income taxes1,464 (4,079)(11,332)(43,002)
Income tax expense (benefit)39 (43)(43)(472)
Net income (loss)$1,425 $(4,036)$(11,289)$(42,530)
Net income (loss) per share:
Basic $0.03 $(0.10)$(0.27)$(1.03)
Diluted$0.03 $(0.10)$(0.27)$(1.03)
Weighted average shares of common stock outstanding:
Basic 42,233,903 41,536,575 42,076,998 41,344,195 
Diluted42,822,505 41,536,575 42,076,998 41,344,195 
(1)Includes stock-based compensation expense as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Cost of revenue$1,401 $1,176 $4,186 $3,801 
Technology and development1,259 650 3,774 1,985 
General and administrative4,125 3,281 11,435 14,448 
New pet acquisition expense1,555 1,785 5,743 5,626 
Total stock-based compensation expense$8,340 $6,892 $25,138 $25,860 
(2)The breakout of cost of revenue between veterinary invoice expense and other cost of revenue is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Veterinary invoice expense$238,814 $212,441 $703,485 $613,316 
Other cost of revenue39,263 38,179 119,017 108,480 
     Total cost of revenue$278,077 $250,620 $822,502 $721,796 

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Trupanion, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2024December 31, 2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents$137,477 $147,501 
Short-term investments155,580 129,667 
Accounts and other receivables, net of allowance for doubtful accounts of $1,015 at September 30, 2024 and $1,085 at December 31, 2023289,823 267,899 
Prepaid expenses and other assets16,692 17,022 
Total current assets599,572 562,089 
Restricted cash23,394 22,963 
Long-term investments14,215 12,866 
Property, equipment and internal-use software, net102,862 103,650 
Intangible assets, net14,888 18,745 
Other long-term assets16,004 18,922 
Goodwill45,183 43,713 
Total assets$816,118 $782,948 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$10,136 $10,505 
Accrued liabilities and other current liabilities33,461 34,052 
Reserve for veterinary invoices56,668 63,238 
Deferred revenue260,238 235,329 
Long-term debt - current portion1,350 1,350 
Total current liabilities361,853 344,474 
Long-term debt127,548 127,580 
Deferred tax liabilities2,166 2,685 
Other liabilities4,376 4,487 
Total liabilities495,943 479,226 
Stockholders’ equity:
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 43,368,881 and 42,340,695 issued and outstanding at September 30, 2024; 42,887,052 and 41,858,866 shares issued and outstanding at December 31, 2023— — 
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding— — 
Additional paid-in capital561,010 536,108 
Accumulated other comprehensive income (loss)3,243 403 
Accumulated deficit(227,544)(216,255)
Treasury stock, at cost: 1,028,186 shares at September 30, 2024 and December 31, 2023(16,534)(16,534)
Total stockholders’ equity 320,175 303,722 
Total liabilities and stockholders’ equity$816,118 $782,948 

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Trupanion, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(unaudited)
Operating activities
Net income (loss)$1,425 $(4,036)$(11,289)$(42,530)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization4,381 2,990 12,542 9,445 
Stock-based compensation expense8,341 6,892 25,138 25,860 
Other, net(136)(549)(453)(1,134)
Changes in operating assets and liabilities:
Accounts and other receivables(3,794)(12,409)(22,020)(45,593)
Prepaid expenses and other assets101 452 2,398 (2,761)
Accounts payable, accrued liabilities, and other liabilities1,377 2,632 (350)(3,832)
Reserve for veterinary invoices(3,934)5,258 (6,469)17,697 
Deferred revenue7,535 10,168 25,088 43,979 
Net cash provided by (used in) operating activities15,296 11,398 24,585 1,131 
Investing activities
Purchases of investment securities(26,125)(29,458)(107,375)(109,389)
Maturities and sales of investment securities26,089 29,713 81,767 147,365 
Purchases of property, equipment, and internal-use software(1,914)(4,391)(7,858)(14,310)
Other490 837 1,552 1,420 
Net cash provided by (used in) investing activities(1,460)(3,299)(31,914)25,086 
Financing activities
Proceeds from debt financing, net of financing fees— 24,972 — 60,102 
Proceeds from exercise of stock options258 628 729 1,281 
Shares withheld to satisfy tax withholding(802)(272)(1,390)(1,296)
Repayments of debt financing(338)(338)(1,013)(1,380)
Other financing(157)(150)(609)(150)
Net cash provided by (used in) financing activities(1,039)24,840 (2,283)58,557 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net481 (906)19 (830)
Net change in cash, cash equivalents, and restricted cash13,278 32,033 (9,593)83,944 
Cash, cash equivalents, and restricted cash at beginning of period147,593 136,548 170,464 84,637 
Cash, cash equivalents, and restricted cash at end of period$160,871 $168,581 $160,871 $168,581 

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The following tables set forth our key operating metrics.
Nine Months Ended September 30,
20242023
Total Business:
Total pets enrolled (at period end)1,688,903 1,712,177 
Subscription Business:
Total subscription pets enrolled (at period end)1,032,042 969,322 
Monthly average revenue per pet$71.94 $64.63 
Lifetime value of a pet, including fixed expenses$493 $428 
Average pet acquisition cost (PAC)$227 $232 
Average monthly retention98.29 %98.55 %
Three Months Ended
Sep. 30, 2024Jun. 30, 2024Mar. 31, 2024Dec. 31, 2023Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022
Total Business:
Total pets enrolled (at period end)1,688,903 1,699,643 1,708,017 1,714,473 1,712,177 1,679,659 1,616,865 1,537,573 
Subscription Business:
Total subscription pets enrolled (at period end)1,032,042 1,020,934 1,006,168 991,426 969,322 943,958 906,369 869,862 
Monthly average revenue per pet$74.27 $71.72 $69.79 $67.07 $65.82 $64.41 $63.58 $63.11 
Lifetime value of a pet, including fixed expenses$493 $450 $428 $419 $428 $470 $541 $641 
Average pet acquisition cost (PAC)$243 $231 $207 $217 $212 $236 $247 $283 
Average monthly retention98.29 %98.34 %98.41 %98.49 %98.55 %98.61 %98.65 %98.69 %

The following table reflects the reconciliation of cash provided by operating activities to free cash flow (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net cash provided by operating activities$15,296 $11,398 $24,585 $1,131 
Purchases of property, equipment, and internal-use software(1,914)(4,391)(7,858)(14,310)
Free cash flow$13,382 $7,007 $16,727 $(13,179)
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The following table reflects the reconciliation between GAAP and non-GAAP measures (in thousands except percentages):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Veterinary invoice expense$238,814 $212,441 $703,485 $613,316 
Less:
Stock-based compensation expense(1)
(830)(870)(2,535)(2,565)
Other business cost of paying veterinary invoices(4)
(82,507)(72,694)(239,342)(210,286)
Subscription cost of paying veterinary invoices (non-GAAP)$155,477 $138,877 $461,608 $400,465 
% of subscription revenue71.0 %75.9 %73.4 %76.8 %
Other cost of revenue$39,263 $38,179 $119,017 $108,480 
Less:
Stock-based compensation expense(1)
(536)(282)(1,479)(1,158)
Other business variable expenses(4)
(18,126)(20,482)(57,713)(56,455)
Subscription variable expenses (non-GAAP)$20,601 $17,415 $59,825 $50,867 
% of subscription revenue9.4 %9.5 %9.5 %9.8 %
Technology and development expense$7,933 $5,302 $23,083 $15,434 
General and administrative expense16,977 12,664 46,903 46,817 
Less:
Stock-based compensation expense(1)
(5,258)(3,754)(14,465)(16,072)
Non-recurring transaction or restructuring expenses(2)
— (8)— (4,175)
Development expenses(3)
(1,474)(1,594)(4,307)(3,417)
Fixed expenses (non-GAAP)$18,178 $12,610 $51,214 $38,587 
% of total revenue5.6 %4.4 %5.4 %4.7 %
New pet acquisition expense$18,308 $17,772 $53,025 $60,183 
Less:
Stock-based compensation expense(1)
(1,503)(1,679)(5,426)(5,433)
Other business pet acquisition expense(4)
(8)(10)(31)(123)
Subscription acquisition cost (non-GAAP)$16,797 $16,083 $47,568 $54,627 
% of subscription revenue7.7 %8.8 %7.6 %10.5 %
(1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation according to GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $0.2 million and $1.3 million for the three and nine months ended September 30, 2024, respectively.
(2) Consists of business acquisition transaction expenses, severance and legal costs due to certain executive departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
(3) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant.
(4) Excludes the portion of stock-based compensation expense attributable to the other business segment.
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The following table reflects the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Operating income (loss)$1,746 $(3,491)$(9,862)$(41,067)
Non-GAAP expense adjustments
Acquisition cost16,805 16,093 47,599 54,750 
Stock-based compensation expense(1)
8,127 6,585 23,905 25,228 
Development expenses(3)
1,474 1,594 4,307 3,417 
Depreciation and amortization4,381 2,990 12,542 9,445 
Non-recurring transaction or restructuring expenses(2)
— 8 — 4,175 
Gain (loss) from investment in joint venture(34)4 (184)(140)
Total adjusted operating income (non-GAAP)$32,567 $23,775 $78,675 $56,088 
Subscription Business:
Subscription operating income (loss)$3,824 $(5,709)$(4,109)$(37,294)
Non-GAAP expense adjustments
Acquisition cost16,797 16,083 47,568 54,627 
Stock-based compensation expense(1)
6,215 4,996 18,723 19,229 
Development expenses(3)
986 1,257 2,855 2,439 
Depreciation and amortization2,929 1,913 8,315 6,060 
Non-recurring transaction or restructuring expenses(2)
— 5 — 223 
Subscription adjusted operating income (non-GAAP)$30,751 $18,545 $73,352 $45,284 
Other Business:
Other business operating income (loss)$(2,044)$2,214 $(5,569)$(3,633)
Non-GAAP expense adjustments
Acquisition cost8 10 31 123 
Stock-based compensation expense(1)
1,912 1,589 5,182 5,999 
Development expenses(3)
488 337 1,452 978 
Depreciation and amortization1,452 1,077 4,227 3,385 
Non-recurring transaction or restructuring expenses(2)
— 3 — 3,952 
Other business adjusted operating income (non-GAAP)$1,816 $5,230 $5,323 $10,804 
(1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $0.2 million and $1.3 million for the three and nine months ended September 30, 2024, respectively.
(2) Consists of business acquisition transaction expenses, severance and legal costs due to certain executive departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
(3) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant.



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The following table reflects the reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Subscription revenue$218,986 $182,906 $628,738 $521,369 
Subscription cost of paying veterinary invoices155,477 138,877 461,608 400,465 
Subscription variable expenses20,601 17,415 59,825 50,867 
Subscription fixed expenses*12,157 8,069 33,953 24,753 
Subscription adjusted operating income (non-GAAP)$30,751 $18,545 $73,352 $45,284 
Other business revenue108,470 102,947 $319,639 $291,379 
Other business cost of paying veterinary invoices82,507 72,694 239,342 210,286 
Other business variable expenses18,126 20,482 57,713 56,455 
Other business fixed expenses*6,021 4,541 17,261 13,834 
     Other business adjusted operating income (non-GAAP)$1,816 $5,230 $5,323 $10,804 
Revenue327,456 285,853 $948,377 $812,748 
Cost of paying veterinary invoices237,984 211,571 700,950 610,751 
Variable expenses38,727 37,897 117,538 107,322 
Fixed expenses*18,178 12,610 51,214 38,587 
    Total business adjusted operating income (non-GAAP)$32,567 $23,775 $78,675 $56,088 
As a percentage of revenue:Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Subscription revenue100.0 %100.0 %100.0 %100.0 %
Subscription cost of paying veterinary invoices71.0 %75.9 %73.4 %76.8 %
Subscription variable expenses9.4 %9.5 %9.5 %9.8 %
Subscription fixed expenses*5.6 %4.4 %5.4 %4.7 %
    Subscription adjusted operating income (non-GAAP)14.0 %10.1 %11.7 %8.7 %
Other business revenue100.0 %100.0 %100.0 %100.0 %
Other business cost of paying veterinary invoices76.1 %70.6 %74.9 %72.2 %
Other business variable expenses16.7 %19.9 %18.1 %19.4 %
Other business fixed expenses*5.6 %4.4 %5.4 %4.7 %
    Other business adjusted operating income (non-GAAP)1.7 %5.1 %1.7 %3.7 %
Revenue100.0 %100.0 %100.0 %100.0 %
Cost of paying veterinary invoices72.7 %74.0 %73.9 %75.1 %
Variable expenses11.8 %13.3 %12.4 %13.2 %
Fixed expenses*5.6 %4.4 %5.4 %4.7 %
    Total business adjusted operating income (non-GAAP)9.9 %8.3 %8.3 %6.9 %
*Fixed expenses represent shared services that support both our subscription and other business segments and, as such, are generally allocated to each segment pro-rata based on revenues.



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Adjusted operating income is a non-GAAP financial measure that adjusts operating income (loss) to remove the effect of acquisition cost, development expenses, non-recurring transaction or restructuring expenses, and gain (loss) from investment in joint venture. Non-cash items, such as stock-based compensation expense and depreciation and amortization, are also excluded. Acquisition cost, development expenses, gain (loss) from investment in joint venture, stock-based compensation expense, and depreciation and amortization are expected to remain recurring expenses for the foreseeable future, but are excluded from this metric to measure scale in other areas of the business. Management believes acquisition costs primarily represent the cost to acquire new subscribers and are driven by the amount of growth we choose to pursue based primarily on the amount of our adjusted operating income period over period. Accordingly, this measure is not indicative of our core operating income performance. We also exclude development expenses, gain (loss) from investment in joint venture, stock-based compensation expense, and depreciation and amortization because some investors may not view those items as reflective of our core operating income performance.
Management uses adjusted operating income and the margin on adjusted operating income to understand the effects of scale in its non-acquisition cost and development expenses and to plan future advertising expenditures, which are designed to acquire new pets. Management uses this measure as a principal way of understanding the operating performance of its business exclusive of acquisition cost and new product exploration and development initiatives.  Management believes disclosure of this metric provides investors with the same data that the Company employs in assessing its overall operations and that disclosure of this measure may provide useful information regarding the efficiency of our utilization of revenues, return on advertising dollars in the form of new subscribers and future use of available cash to support the continued growth of our business.

11

The following tables reflect the reconciliation of adjusted EBITDA to net income (loss) (in thousands):
Nine Months Ended September 30,
20242023
Net loss$(11,289)$(42,530)
Excluding:
Stock-based compensation expense23,906 25,228 
Depreciation and amortization expense12,542 9,445 
Interest income(9,412)(6,169)
Interest expense11,071 8,380 
Other non-operating expenses— — 
Income tax benefit(43)(472)
Non-recurring transaction or restructuring expenses— 4,175 
(Gain) loss from equity method investment(33)(110)
Adjusted EBITDA$26,742 $(2,053)
Three Months Ended
Sep. 30, 2024Jun. 30, 2024Mar. 31, 2024Dec. 31, 2023Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022
Net income (loss)$1,425 $(5,862)$(6,852)$(2,163)$(4,036)$(13,714)$(24,780)$(9,285)
Excluding:
Stock-based compensation expense8,127 8,381 7,398 6,636 6,585 6,503 12,140 8,412 
Depreciation and amortization expense4,381 4,376 3,785 3,029 2,990 3,253 3,202 2,897 
Interest income(3,232)(3,135)(3,045)(2,842)(2,389)(2,051)(1,729)(1,614)
Interest expense3,820 3,655 3,596 3,697 3,053 2,940 2,387 1,587 
Other non-operating expenses— — — — — — 
Income tax expense (benefit)39 (44)(38)130 (43)(238)(191)(15)
Non-recurring transaction or restructuring expenses— — 8 65 4,102 193 
(Gain) loss from equity method investment(33)— (110)— — — 
Adjusted EBITDA$14,527 $7,371 $4,844 $8,487 $6,058 $(3,242)$(4,869)$2,175 

12

Contacts:

Investors:
Laura Bainbridge, Senior Vice President, Corporate Communications
Gil Melchior, Director, Investor Relations
Investor.Relations@trupanion.com
13
v3.24.3
Cover Page Document
Oct. 30, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Oct. 30, 2024
Entity Registrant Name TRUPANION, INC.
Entity Incorporation, State or Country Code DE
Entity File Number 001-36537
Entity Tax Identification Number 83-0480694
Entity Address, Address Line One 6100 4th Avenue S, Suite 200
Entity Address, City or Town Seattle
Entity Address, State or Province WA
Entity Address, Postal Zip Code 98108
City Area Code 855
Local Phone Number 727 - 9079
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Amendment Flag false
Document Fiscal Year Focus 2024
Document Fiscal Period Focus Q3
Entity Central Index Key 0001371285
Title of 12(b) Security Common stock, $0.00001 par value per share
Trading Symbol TRUP
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
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