TRUPANION, INC., 10-Q filed on 7/31/2019
Quarterly Report
v3.19.2
Cover Page Document - shares
6 Months Ended
Jun. 30, 2019
Jul. 23, 2019
Cover Page [Abstract]    
Entity Central Index Key 0001371285  
Entity Common Stock, Shares Outstanding   34,790,142
Entity Shell Company false  
Entity Filer Category Large Accelerated Filer  
Entity Interactive Data Current Yes  
Entity Current Reporting Status Yes  
Title of 12(b) Security Common stock, $0.00001 par value per share  
City Area Code (855)  
Entity Address, Address Line One 6100 4th Avenue S, Suite 200  
Entity Address, City or Town Seattle,  
Entity Incorporation, State or Country Code DE  
Document Period End Date Jun. 30, 2019  
Document Transition Report false  
Document Quarterly Report true  
Entity File Number 001-36537  
Entity Tax Identification Number 83-0480694  
Entity Address, State or Province WA  
Entity Address, Postal Zip Code 98108  
Local Phone Number 727 - 9079  
Trading Symbol TRUP  
Security Exchange Name NASDAQ  
Entity Small Business false  
Entity Emerging Growth Company false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Registrant Name TRUPANION, INC.  
v3.19.2
Consolidated Statement of Operations - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Revenue $ 92,199 $ 73,392 $ 179,177 $ 143,152
Cost of Revenue [Abstract]        
Veterinary invoice expense 65,933 51,780 127,215 101,893
Other Cost of Services Sold 11,553 9,259 22,217 17,842
Gross profit 14,713 12,353 29,745 23,417
Operating Expenses [Abstract]        
Technology and Development Expense 2,578 2,298 5,247 4,462
General and Administrative Expense 5,219 4,610 10,638 9,068
Selling and Marketing Expense 8,757 5,702 16,984 11,640
Operating Expenses 16,554 12,610 32,869 25,170
Income (Loss) from Equity Method Investments (272)   (272)  
Operating loss (2,113) (257) (3,396) (1,753)
Interest expense 317 332 634 551
Other income, net (453) (303) (797) (443)
Income (Loss) before income taxes (1,977) (286) (3,233) (1,861)
Income tax (benefit) expense (46) 91 (6) (4)
Net loss $ (1,931) $ (377) $ (3,227) $ (1,857)
Earnings Per Share, Basic and Diluted $ (0.06) $ (0.01) $ (0.09) $ (0.06)
Weighted Average Number of Shares Outstanding, Basic and Diluted 34,610,709 30,721,037 34,450,070 30,485,121
v3.19.2
Consolidated Statement of Comprehensive Income Statement - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net loss $ (1,931) $ (377) $ (3,227) $ (1,857)
Foreign currency translation adjustments 138 (129) 328 (319)
Net unrealized gain on available-for-sale debt securities 0 15 18 0
Other comprehensive income (loss), net of taxes 138 (114) 346 (319)
Comprehensive Income (Loss) $ (1,793) $ (491) $ (2,881) $ (2,176)
v3.19.2
Consolidated Balance Sheet - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Assets [Abstract]    
Cash and cash equivalents $ 27,379 $ 26,552
Short-term Investments 64,712 54,559
Accounts and other receivables 43,550 31,565
Prepaid expenses and other assets 4,322 5,300
Total current assets 139,963 117,976
Restricted Cash 1,400 1,400
Long-Term Investments, at fair value 3,891 3,554
Property and equipment, net 69,371 69,803
Intangible assets, net 7,631 8,071
Other Long-Term Assets 8,208 6,706
Total assets 230,464 207,510
Liabilities and Equity [Abstract]    
Accounts payable 2,117 2,767
Accrued liabilities and other current liabilities 13,390 11,347
Reserve for veterinary invoices 18,280 16,062
Deferred Revenue 44,086 33,027
Total current liabilities 77,873 63,203
Long-term debt 19,056 12,862
Deferred tax liabilities 1,014 1,002
Other liabilities 1,498 1,270
Total liabilities 99,441 78,337
Common stock 0 0
Preferred Stock 0 0
Additional paid-in capital 229,069 219,838
Accumulated other comprehensive loss (407) (753)
Accumulated deficit (86,938) (83,711)
Treasury stock, at cost (10,701) (6,201)
Stockholders' Equity Attributable to Parent 131,023 129,173
Total liabilities and stockholders' equity $ 230,464 $ 207,510
v3.19.2
Consolidated Balance Sheet Condensed Consolidated Balance Sheet Parentheticals - $ / shares
Jun. 30, 2019
Dec. 31, 2018
Common Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares, Issued 35,712,189 34,781,121
Common Stock, Shares, Outstanding 34,782,324 34,025,136
Preferred Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 0 0
Preferred Stock, Shares Outstanding 0 0
Treasury Stock, Shares 929,865 755,985
v3.19.2
Consolidated Statement of Stockholders' Equity Statement - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Treasury Stock [Member]
Common Stock, Shares, Outstanding   30,121,496        
Stockholders' Equity Attributable to Parent $ 48,434 $ 0 $ 134,511 $ (82,784) $ (92) $ (3,201)
Redemption of warrants   30,000        
Settlement of warrant liabilities 300   300     0
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   167,466        
Stock Issued During Period, Shares, New Issues   2,090,909        
Proceeds from issuance of common stock, follow-on public offering 65,689   65,689      
Redemption of warrants   231,315        
Settlement of warrant liabilities 300   3,300     (3,000)
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   275,570        
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings 1,656   1,656      
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 2,349   2,349      
Other Comprehensive Income (Loss), Net of Tax (319)       (319)  
Net Income (Loss) Available to Common Stockholders, Basic $ (1,857)     (1,857)    
Stock Issued During Period, Shares, New Issues 2,090,909          
Common Stock, Shares, Outstanding   30,430,915        
Stockholders' Equity Attributable to Parent $ 48,247 $ 0 139,009 (84,264) (297) (6,201)
Stock Issued During Period, Shares, New Issues   2,090,909        
Proceeds from issuance of common stock, follow-on public offering 65,689   65,689      
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings 1,175   1,175      
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 1,332   1,332      
Other Comprehensive Income (Loss), Net of Tax (114)       (114)  
Net Income (Loss) Available to Common Stockholders, Basic (377)     (377)    
Common Stock, Shares, Outstanding   32,719,290        
Stockholders' Equity Attributable to Parent $ 116,252 $ 0 207,505 (84,641) (411) (6,201)
Common Stock, Shares, Outstanding 34,025,136 34,025,136        
Stockholders' Equity Attributable to Parent $ 129,173 $ 0 219,838 (83,711) (753) (6,201)
Redemption of warrants   30,000        
Settlement of warrant liabilities $ 300   300     0
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   284,859        
Redemption of warrants 480,000 306,120        
Settlement of warrant liabilities $ 300   4,800     (4,500)
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   451,068        
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings 1,092   1,092      
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 3,339   3,339      
Other Comprehensive Income (Loss), Net of Tax 346       346  
Net Income (Loss) Available to Common Stockholders, Basic (3,227)     (3,227)    
Common Stock, Shares, Outstanding   34,467,465        
Stockholders' Equity Attributable to Parent 130,009 $ 0 226,262 (85,007) (545) (10,701)
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings 585   585      
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 1,922   1,922      
Other Comprehensive Income (Loss), Net of Tax 138       138  
Net Income (Loss) Available to Common Stockholders, Basic $ (1,931)     (1,931)    
Common Stock, Shares, Outstanding 34,782,324 34,782,324        
Stockholders' Equity Attributable to Parent $ 131,023 $ 0 $ 229,069 $ (86,938) $ (407) $ (10,701)
v3.19.2
Consolidated Statement of Cash Flows - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Dec. 31, 2018
Statement of Cash Flows [Abstract]          
Net Income (Loss) Available to Common Stockholders, Basic $ (1,931) $ (377) $ (3,227) $ (1,857)  
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]          
Depreciation and Amortization     3,177 1,891  
Stock-based compensation expense     3,230 2,254  
Other, Net     97 38  
Increase (Decrease) in Operating Assets [Abstract]          
Accounts and other receivables     11,940 8,168  
Prepaid expenses and other assets     (989) 4,068  
Accounts Payable, Accrued Liabilities, and Other Liabilities     1,443 2,567  
Claims Reserve     2,145 1,293  
Deferred revenue     10,967 7,661  
Net cash provided by operating activities     6,881 1,611  
Net Cash Provided by Investing Activities [Abstract]          
Payments to Acquire Investments     (32,222) (20,386)  
Maturities of Investment Securities     21,895 15,015  
Purchases of property and equipment     (1,780) (2,370)  
Payments for (Proceeds from) Other Investing Activities     (1,474) 113  
Net cash used in investing activities     (13,581) (7,628)  
Net Cash Provided by Financing Activities [Abstract]          
Proceeds from Issuance or Sale of Equity     0 65,886 $ 65,700
Proceeds from exercise of stock options     1,626 1,656  
Payments Related to Tax Withholding for Share-based Compensation     (247) 0  
Proceeds from Debt, Net of Issuance Costs     6,167 9,250  
Proceeds from (Payments for) Other Financing Activities     (415) (56)  
Net cash provided by financing activities     7,131 76,736  
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net     396 (201)  
Net Increase in Cash, Cash Equivalents, and Restricted Cash     827 70,518  
Cash, Cash Equivalents, and Restricted Cash at beginning of period     27,952 26,306 $ 26,306
Cash, Cash Equivalents, and Restricted Cash, End of Period $ 28,779 $ 96,824 28,779 96,824  
Supplemental Cash Flow Information [Abstract]          
Redemption of Warrants Non-Cash; Common Stock     4,500 3,000  
Purchases of property and equipment included in accounts payable and accrued liabilities     $ 637 $ 153  
v3.19.2
Nature of Operations and Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations and Summary of Significant Accounting Policies Nature of Operations and Significant Accounting Policies
Description of Business and Basis of Presentation
Trupanion, Inc. (collectively with its wholly-owned subsidiaries, the Company) provides medical insurance for cats and dogs throughout the United States, Canada and Puerto Rico.
The financial data as of December 31, 2018 was derived from the Company's audited consolidated financial statements. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations, comprehensive income (loss), stockholders' equity and cash flows for the interim periods. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC) on February 14, 2019 (the 2018 10-K). The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2018 10-K. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates. See Note 1 to the audited financial statements included in the 2018 10-K for additional discussion of these estimates and assumptions.
Recently Adopted Accounting Pronouncements
The Company adopted Accounting Standards Update (ASU) No. 2016-02 Leases (Topic 842), as amended, using the modified retrospective approach under which the transition provisions were applied as of January 1, 2019. In addition, the Company elected the “package of practical expedients” under the transition guidance within the new standard to not reassess prior conclusions about lease identification, lease classification, and initial direct costs for existing lease contracts. The Company also elected the practical expedient to not separate lease and non-lease components, if any, for all lease contracts.
Upon adoption of this standard, the Company recorded approximately $0.1 million right-of-use assets and lease liabilities for operating leases. They were classified as other long-term assets and other liabilities on the Company's consolidated balance sheets. The standard did not have a material impact on the Company's consolidated statements of operations, stockholders' equity, or cash flows.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued an ASU amending the measurement of credit losses on financial instruments. The ASU requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The Company is currently in the process of evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In August 2018, the FASB issued an ASU that eliminates certain disclosure requirements for fair value measurements, requires new disclosures regarding significant unobservable inputs used to develop Level 3 fair value measurements, and modifies certain existing disclosure requirements for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
v3.19.2
Net Loss per Share
6 Months Ended
Jun. 30, 2019
Earnings Per Share, Basic and Diluted [Abstract]  
Earnings Per Share [Text Block] Net Income (Loss) per Share
Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is calculated using the weighted average number of shares of common stock plus, when dilutive, potential shares of common stock outstanding using the treasury-stock method. Potential shares of common stock outstanding include stock options, unvested restricted stock awards and restricted stock units, and warrants.
The following potentially dilutive equity securities were not included in the diluted earnings per share of common stock calculation because they would have had an antidilutive effect:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Stock options
2,253,995

 
3,696,242

 
2,253,995

 
3,696,242

Restricted stock awards and restricted stock units
715,941

 
555,984

 
715,941

 
555,984

Warrants

 
480,000

 

 
480,000


v3.19.2
Investment Securities (Notes)
6 Months Ended
Jun. 30, 2019
Investments [Abstract]  
Investment [Text Block]
The amortized cost, gross unrealized holding gains and losses, and estimates of fair value of long-term and short-term investments by major security type and class of security were as follows as of June 30, 2019 and December 31, 2018 (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Fair
Value
As of June 30, 2019
 
 
 
 
 
 
 
Long-term investments:
 
 
 
 
 
 
 
Foreign deposits
$
2,891

 
$

 
$

 
$
2,891

Municipal bond
1,000

 

 

 
1,000

 
$
3,891

 
$

 
$

 
$
3,891

       Short-term investments:
 
 
 
 
 
 
 
              U.S. Treasury securities
$
6,140

 
$
4

 
$

 
$
6,144

              Certificates of deposit
439

 

 

 
439

              U.S. government funds
58,133

 

 

 
58,133

 
$
64,712


$
4

 
$


$
64,716

 
 
 
 
 
 
 
 
 
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


Maturities of debt securities classified as available-for-sale were as follows (in thousands):
 
As of June 30, 2019
 
Amortized
Cost
 
Fair
Value
Available-for-sale:
 
 
 
Due after one year through five years
$
3,891

 
$
3,891

 
$
3,891

 
$
3,891


The Company evaluated its securities for other-than-temporary impairment and considers the decline in market value for the securities to be primarily attributable to current economic and market conditions. For debt securities, the Company does not intend to sell, nor is it more likely than not that the Company will be required to sell, the securities prior to maturity or prior to the recovery of the amortized cost basis.
Investments [Text Block]
The amortized cost, gross unrealized holding gains and losses, and estimates of fair value of long-term and short-term investments by major security type and class of security were as follows as of June 30, 2019 and December 31, 2018 (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Fair
Value
As of June 30, 2019
 
 
 
 
 
 
 
Long-term investments:
 
 
 
 
 
 
 
Foreign deposits
$
2,891

 
$

 
$

 
$
2,891

Municipal bond
1,000

 

 

 
1,000

 
$
3,891

 
$

 
$

 
$
3,891

       Short-term investments:
 
 
 
 
 
 
 
              U.S. Treasury securities
$
6,140

 
$
4

 
$

 
$
6,144

              Certificates of deposit
439

 

 

 
439

              U.S. government funds
58,133

 

 

 
58,133

 
$
64,712


$
4

 
$


$
64,716

 
 
 
 
 
 
 
 
 
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


v3.19.2
Other Investments (Notes)
6 Months Ended
Jun. 30, 2019
Investments, All Other Investments [Abstract]  
Investments and Other Noncurrent Assets [Text Block] Other Investments
Investment in Variable Interest Entity
In July 2018, the Company purchased $3.0 million in preferred stock of a privately held corporation with a complementary business line. The Company does not have power over the activities that most significantly impact the economic performance of the variable interest entity and is, therefore, not the primary beneficiary. The Company's investment in preferred stock is accounted for as an available-for-sale debt security. Through January 2020, the Company has agreed to purchase an additional $4.0 million in preferred stock of the variable interest entity, contingent upon the exercise of this option by the variable interest entity. The Company has the option to purchase the variable interest entity on the fifth anniversary of the initial preferred stock purchase. Additionally, the Company has extended a $2.5 million revolving line of credit to the variable interest entity. The Company's investment and amounts loaned under the line of credit are recorded in other long-term assets on its consolidated balance sheet. Outstanding loan balance under the line of credit was $2.1 million and $0.6 million as of June 30, 2019 and December 31, 2018, respectively.
Investment in Joint Venture
In September 2018, the Company acquired a non-controlling equity interest in a joint venture, whereby it has committed to licensing certain intellectual property and contributing up to $2.2 million AUD upon the achievement of specific operational milestones over a period of at least four years from the agreement execution date. As of June 30, 2019, the Company has contributed $0.3 million AUD. This equity investment is accounted for using the equity method and is classified in other long-term assets on the Company's consolidated balance sheet. The Company's share of income and losses from this equity method investment is included in gain (loss) from investment in joint venture on its consolidated statement of operations. Also included in this line item are income and expenses associated with administrative services provided to the joint venture.
v3.19.2
Fair Value
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block] Fair Value
Investments
The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis, and placement within the fair value hierarchy (in thousands):
 
As of June 30, 2019
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Restricted cash
$
1,400

 
$
1,400

 
$

 
$

Money market funds
2,038

 
2,038

 

 

Fixed maturities:


 
 
 
 
 
 
Foreign deposits
2,891

 
2,891

 

 

Municipal bond
1,000

 

 
1,000

 

Investment in variable interest entity
3,000

 

 

 
3,000

Total
$
10,329


$
6,329


$
1,000


$
3,000

 
 
 
 
 
 
 
 
 
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


The Company measures the fair value of restricted cash, money market funds, and foreign deposits based on quoted prices in active markets for identical assets. The fair value of the municipal bond is based on either recent trades in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The estimated fair value of the Company's investment in the variable interest entity is a Level 3 measurement, and is based on market interest rates, the assessed creditworthiness of the entity, and the estimated fair value of the entity's common stock. As of June 30, 2019, the Company estimates that the purchase price approximates the fair value. There were no transfers in or out of Level 3 assets during the six months ended June 30, 2019. Short-term investments are carried at amortized cost and the fair value is disclosed in Note 3, Investments. The fair value of these investments is determined in the same manner as for available-for-sale securities and is considered a Level 1 measurement.
Fair Value Disclosures
The Company's other long-term assets balance included $4.4 million of notes receivable as of June 30, 2019 and $3.0 million of notes receivable as of December 31, 2018, recorded at its estimated collectible amount. The Company estimates that the carrying value of the note receivable approximates its fair value. The estimated fair value represents a Level 3 measurement within the fair value hierarchy, and is based on market interest rates and the assessed creditworthiness of the third party.
The Company estimates the fair value of its long-term debt based upon rates currently available to the Company for debt with similar terms and remaining maturities. This is a Level 3 measurement. Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at June 30, 2019 and December 31, 2018.
v3.19.2
Debt
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block] Debt
The Company has a revolving line of credit of up to $50.0 million, maturing June 2022. The facility is secured by any and all interests in the Company's assets that are not otherwise restricted. Interest on the revolving line of credit is payable monthly at the greater of 4.5%, or 0.75% plus the prime rate (6.25% at June 30, 2019). The credit agreement includes other ancillary services and letters of credit of up to $4.5 million, and requires a deposit of restricted cash of $1.4 million. The credit agreement requires the Company to comply with various financial and non-financial covenants. As of June 30, 2019, the Company was in compliance with all financial and non-financial covenants required by the credit agreement.
Borrowings on the revolving line of credit are limited to the lesser of $50.0 million and the total amount of cash and securities held by the Company's insurance subsidiaries (American Pet Insurance Company and Wyndham Insurance Company (SAC) Limited Segregated Account AX). As of June 30, 2019, available borrowing capacity on the line of credit was $30.3 million, with an outstanding balance of $0.5 million for ancillary services and letters of credit, and borrowings under the facility of $19.2 million, recorded net of financing fees of $0.1 million.
v3.19.2
Commitment and Contingencies
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block] Commitments and Contingencies
Certain state insurance regulators in the United States have contacted the Company regarding whether employees who had helped prospective members enroll by telephone in prior years were required to have an insurance license to conduct such telephone conversations. To date, the Company has resolved each of these matters in non-material amounts and believes it is compliant with the applicable regulations. The Company is currently engaged with a limited number of state insurance regulators to resolve this same legacy issue and believes it has adequately reserved for these matters.
In addition, from time to time the Company is or may become subject to various legal proceedings arising in the ordinary course of business, including proceedings against members, other entities or regulatory bodies. Estimated liabilities are recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. At this time, the Company does not believe any such matters to be material individually or in the aggregate. These views are subject to change following the outcome of future events or the results of future developments.
v3.19.2
Claims Reserve
6 Months Ended
Jun. 30, 2019
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid [Abstract]  
SEC Schedule, 12-16, Insurance Companies, Supplementary Insurance Information, Disclosure [Text Block] Reserve for Veterinary Invoices
The reserve for veterinary invoices is an estimate of the future amount the Company will pay for veterinary invoices that are dated as of, or prior to, its balance sheet date. The reserve also includes the Company's estimate of related internal processing costs. The reserve estimate involves actuarial projections, and is based on management's assessment of facts and circumstances currently known, and assumptions about anticipated patterns. The Company uses generally accepted actuarial methodologies, such as paid loss development methods, in estimating the amount of the reserve for veterinary invoices. The reserve is made for each of the Company's segments, subscription and other business, and is continually refined as the Company receives and pays veterinary invoices. Changes in management's assumptions and estimates may have a relatively large impact to the reserve and associated expense.
Reserve for veterinary invoices
Summarized below are the changes in the total liability for the Company's subscription business segment (in thousands):
 
 
Six Months Ended June 30,
Subscription
 
2019
 
2018
Reserve at beginning of year
 
$
13,875

 
$
11,059

Veterinary invoices during the period related to:
 
 
 
 
Current year
 
110,248

 
91,464

Prior years
 
551

 
119

Total veterinary invoice expense
 
110,799

 
91,583

Amounts paid during the period related to:
 
 
 
 
Current year
 
97,165

 
80,841

Prior years
 
11,364

 
9,256

Total paid
 
108,529

 
90,097

Non-cash expenses
 
369

 
333

Reserve at end of period
 
$
15,776

 
$
12,212

The Company's reserve for the subscription business segment increased from $13.9 million at December 31, 2018 to $15.8 million at June 30, 2019. This change was comprised of $110.8 million in expense recorded during the period less $108.5 million in payments of veterinary invoices. The $110.8 million in veterinary invoice expense incurred included an adjustment of $0.6 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. For the six months ended June 30, 2018, the Company increased prior year reserves by $0.1 million as a result of analysis of payment trends.
Summarized below are the changes in total liability for the Company's other business segment (in thousands):
 
 
Six Months Ended June 30,
Other Business
 
2019
 
2018
Reserve at beginning of year
 
$
2,187

 
$
1,697

Veterinary invoices during the period related to:
 
 
 
 
Current year
 
16,747

 
10,589

Prior years
 
(331
)
 
(279
)
Total veterinary invoice expense
 
16,416

 
10,310

Amounts paid during the period related to:
 
 
 
 
Current year
 
14,431

 
8,916

Prior years
 
1,668

 
1,307

Total paid
 
16,099

 
10,223

Non-cash expenses
 

 

Reserve at end of period
 
$
2,504

 
$
1,784

The Company’s reserve for the other business segment increased from $2.2 million at December 31, 2018 to $2.5 million at June 30, 2019. This change was comprised of $16.4 million in expense recorded during the period less $16.1 million in payments of veterinary invoices. The $16.4 million in veterinary invoice expense incurred included a reduction of $0.3 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. For the six months ended June 30, 2018, the Company decreased prior year reserves by $0.3 million as a result of analysis of payment trends.
Reserve for veterinary invoices, by year of occurrence
In the following tables, the reserve for veterinary invoices for each segment is presented as the amount (in thousands) by the year to which the veterinary invoice relates, referred to as the year of occurrence.
Subscription
As of June 30, 2019
Year of Occurrence
 
2017 and prior
$
862

2018
2,201

2019
12,713

 
$
15,776

Other Business
As of June 30, 2019
Year of Occurrence
 
2017 and prior
$
9

2018
179

2019
2,316

 
$
2,504


v3.19.2
Stock-based Compensation
6 Months Ended
Jun. 30, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] Stock-Based Compensation
Stock-based compensation expense includes stock options, restricted stock awards, and restricted stock units granted to employees and other service providers and has been reported in the Company’s consolidated statements of operations depending on the function performed by the employee or other service provider. Stock-based compensation expense recognized in the consolidated statements of operations was as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Veterinary invoice expense
$
185

 
$
148

 
$
346

 
$
268

Other cost of revenue
93

 
104

 
179

 
181

Technology and development
110

 
60

 
173

 
109

General and administrative
918

 
625

 
1,536

 
1,074

Sales and marketing
567

 
349

 
996

 
622

Total stock-based compensation
$
1,873

 
$
1,286

 
$
3,230

 
$
2,254


As of June 30, 2019, the Company had 323,257 unvested stock options and 715,941 unvested restricted stock awards and restricted stock units that are expected to vest. Stock-based compensation expenses of $2.2 million related to unvested stock options and $16.2 million related to unvested restricted stock awards and restricted stock units are expected to be recognized over a weighted average period of approximately 1.6 years and 2.7 years, respectively.
Stock Options
A summary of the Company's stock option activity is as follows:
 
Number of Options
 
Weighted Average Exercise Price per Share
 
Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2018
2,621,503

 
$
9.01

 
$
43,136

Granted

 

 

Exercised
(361,653
)
 
3.65

 
9,736

Forfeited
(5,855
)
 
17.79

 

Outstanding as of June 30, 2019
2,253,995

 
9.85

 
59,245

 
 
 
 
 
 
Exercisable as of June 30, 2019
1,930,738

 
$
8.67

 
$
53,019

As of June 30, 2019, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 5.6 years and 5.2 years, respectively.
Restricted Stock Awards and Restricted Stock Units
A summary of the Company’s restricted stock award and restricted stock unit activity is as follows:
 
Number of 
Shares
 
Weighted Average
Grant Date Fair Value per Share
Unvested shares as of December 31, 2018
451,160

 
$
22.16

Granted
374,348

 
29.88

Vested
(97,735
)
 
27.92

Forfeited
(11,832
)
 
28.07

Unvested shares as of June 30, 2019
715,941

 
$
25.31


v3.19.2
Leases (Notes)
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases of Lessor Disclosure [Text Block] Leases
The Company leases certain office space and equipment from third parties and recognizes lease expense on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on its consolidated balance sheets.
The Company also leases a portion of its building to third parties and records related rental income within general and administrative expense in the consolidated statements of operations. These leases have remaining initial lease terms of 2 years to 8 years, some of which give the tenants options to renew the leases for up to an additional 10 years, and options to terminate the leases after 3 years of the initial lease terms, with early termination fees required. The Company recorded rental income of $1.1 million for the six months ended June 30, 2019.
The following table summarizes the Company's future rental payments to be received from non-cancellable leases in place as of June 30, 2019 (in thousands):
Year ending December 31:
 
 
 
 
 
 
2019
 
 
 
 
 
$
1,071

2020
 
 
 
 
 
1,982

2021
 
 
 
 
 
1,558

2022
 
 
 
 
 
1,173

2023
 
 
 
 
 
1,210

Thereafter
 
 
 
 
 
2,762

Total rental payments
 
 
 
 
 
$
9,756


v3.19.2
Stockholders' Equity (Notes)
6 Months Ended
Jun. 30, 2019
Stockholders' Equity Attributable to Parent [Abstract]  
Stockholders' Equity Note Disclosure [Text Block] Stockholders' Equity
As of June 30, 2019, the Company had 100,000,000 shares of common stock authorized and 34,782,324 shares of common stock outstanding. Holders of common stock are entitled to one vote on each matter properly submitted to the stockholders of the Company except those related to matters concerning possible outstanding preferred stock. At June 30, 2019, the Company had 10,000,000 shares of undesignated preferred stock authorized for future issuance and did not have any outstanding shares of preferred stock. The holders of common stock are also entitled to receive dividends as and when declared by the board of directors of the Company, whenever funds are legally available. These rights are subordinate to the dividend rights of holders of any senior classes of stock outstanding at the time. The Company is unable to pay dividends to stockholders as of June 30, 2019 due to restrictions in its credit agreements.
In June 2018, the Company completed a follow-on public offering (the June 2018 follow-on public offering) whereby the Company sold 2,090,909 shares of common stock (inclusive of 272,727 shares of common stock sold by the Company pursuant to the full exercise of the underwriters' option to purchase additional shares) at a price to the public of $33.00 per share. The Company received aggregate net proceeds from the June 2018 follow-on public offering of $65.7 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The proceeds were primarily used to purchase real estate consisting of properties in use as the Company's home office. In addition, in August 2018, the Company issued 303,030 shares of common stock via a private placement to an accredited investor as a portion of the purchase price of the real estate.
During the six months ended June 30, 2019, outstanding warrants to purchase 480,000 shares of the Company's common stock were exercised. As of June 30, 2019, no warrants remained outstanding.
v3.19.2
Segments
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block] Segments
The Company has two segments: subscription business and other business. The subscription business segment includes revenue and expenses related to monthly subscriptions for the Company’s medical insurance that is marketed directly to consumers, while the other business segment includes all revenue and expenses related to the Company's business that is not directly marketed to consumers.
The chief operating decision maker primarily uses two measures to evaluate segment GAAP financial performance: revenue and gross profit. Additionally, other operating expenses, such as sales and marketing expenses, are allocated to each segment and evaluated when material. Interest and other expenses and income taxes are not allocated to the segments, nor included in the measure of segment profit or loss. The Company does not analyze discrete segment balance sheet information related to long-term assets.
Revenue and gross profit of the Company’s segments were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Subscription business
$
77,736

 
$
63,867

 
$
151,958

 
$
125,384

Other business
14,463

 
9,525

 
27,219

 
17,768

 
92,199

 
73,392

 
179,177

 
143,152

Veterinary invoice expense:
 
 
 
 
 
 
 
Subscription business
57,161

 
46,446

 
110,799

 
91,583

Other business
8,772

 
5,334

 
16,416

 
10,310

 
65,933

 
51,780

 
127,215

 
101,893

Other cost of revenue:
 
 
 
 
 
 
 
Subscription business
7,103

 
5,887

 
13,852

 
11,764

Other business
4,450

 
3,372

 
8,365

 
6,078

 
11,553

 
9,259

 
22,217

 
17,842

Gross profit:
 
 
 
 
 
 
 
Subscription business
13,472

 
11,534

 
27,307

 
22,037

Other business
1,241


819

 
2,438

 
1,380

 
14,713


12,353

 
29,745

 
23,417

 
 
 
 
 
 
 
 
Technology and development
2,578

 
2,298

 
5,247

 
4,462

General and administrative
5,219

 
4,610

 
10,638

 
9,068

Sales and marketing:
 
 
 
 
 
 
 
Subscription business
8,719

 
5,614

 
16,816

 
11,465

Other business
38

 
88

 
168

 
175

 
8,757

 
5,702

 
16,984

 
11,640

Gain (loss) from investment in joint venture
(272
)
 

 
(272
)
 

Operating loss
$
(2,113
)

$
(257
)
 
$
(3,396
)
 
$
(1,753
)

The following table presents the Company’s revenue by geographic region of the member (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
United States
$
75,930

 
$
59,431

 
$
147,087

 
$
115,440

Canada
16,269

 
13,961

 
32,090

 
27,712

Total revenue
$
92,199

 
$
73,392

 
$
179,177

 
$
143,152


Substantially all of the Company’s long-lived assets were located in the United States as of June 30, 2019 and December 31, 2018.
v3.19.2
Nature of Operations and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business Description and Basis of Presentation [Text Block]
Description of Business and Basis of Presentation
Trupanion, Inc. (collectively with its wholly-owned subsidiaries, the Company) provides medical insurance for cats and dogs throughout the United States, Canada and Puerto Rico.
The financial data as of December 31, 2018 was derived from the Company's audited consolidated financial statements. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations, comprehensive income (loss), stockholders' equity and cash flows for the interim periods. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC) on February 14, 2019 (the 2018 10-K). The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2018 10-K. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates. See Note 1 to the audited financial statements included in the 2018 10-K for additional discussion of these estimates and assumptions.
Basis of Accounting, Policy [Policy Text Block]
The financial data as of December 31, 2018 was derived from the Company's audited consolidated financial statements. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations, comprehensive income (loss), stockholders' equity and cash flows for the interim periods. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC) on February 14, 2019 (the 2018 10-K). The Company's accounting policies are described in Note 1 to the audited financial statements included in the 2018 10-K. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.
Use of Estimates [Policy Text Block]
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates. See Note 1 to the audited financial statements included in the 2018 10-K for additional discussion of these estimates and assumptions.
New Accounting Pronouncements, Policy [Policy Text Block]
Recently Adopted Accounting Pronouncements
The Company adopted Accounting Standards Update (ASU) No. 2016-02 Leases (Topic 842), as amended, using the modified retrospective approach under which the transition provisions were applied as of January 1, 2019. In addition, the Company elected the “package of practical expedients” under the transition guidance within the new standard to not reassess prior conclusions about lease identification, lease classification, and initial direct costs for existing lease contracts. The Company also elected the practical expedient to not separate lease and non-lease components, if any, for all lease contracts.
Upon adoption of this standard, the Company recorded approximately $0.1 million right-of-use assets and lease liabilities for operating leases. They were classified as other long-term assets and other liabilities on the Company's consolidated balance sheets. The standard did not have a material impact on the Company's consolidated statements of operations, stockholders' equity, or cash flows.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued an ASU amending the measurement of credit losses on financial instruments. The ASU requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The Company is currently in the process of evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In August 2018, the FASB issued an ASU that eliminates certain disclosure requirements for fair value measurements, requires new disclosures regarding significant unobservable inputs used to develop Level 3 fair value measurements, and modifies certain existing disclosure requirements for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
v3.19.2
Other Investments Investment in Variable Interest Entity (Policies)
6 Months Ended
Jun. 30, 2019
Investments, All Other Investments [Abstract]  
Variable Interest Entity Disclosure [Text Block]
Investment in Variable Interest Entity
In July 2018, the Company purchased $3.0 million in preferred stock of a privately held corporation with a complementary business line. The Company does not have power over the activities that most significantly impact the economic performance of the variable interest entity and is, therefore, not the primary beneficiary. The Company's investment in preferred stock is accounted for as an available-for-sale debt security. Through January 2020, the Company has agreed to purchase an additional $4.0 million in preferred stock of the variable interest entity, contingent upon the exercise of this option by the variable interest entity. The Company has the option to purchase the variable interest entity on the fifth anniversary of the initial preferred stock purchase. Additionally, the Company has extended a $2.5 million revolving line of credit to the variable interest entity. The Company's investment and amounts loaned under the line of credit are recorded in other long-term assets on its consolidated balance sheet. Outstanding loan balance under the line of credit was $2.1 million and $0.6 million as of June 30, 2019 and December 31, 2018, respectively.
v3.19.2
Other Investments Investment in Joint Venture (Policies)
6 Months Ended
Jun. 30, 2019
Investments, All Other Investments [Abstract]  
Equity Method Investments and Joint Ventures Disclosure [Text Block]
Investment in Joint Venture
In September 2018, the Company acquired a non-controlling equity interest in a joint venture, whereby it has committed to licensing certain intellectual property and contributing up to $2.2 million AUD upon the achievement of specific operational milestones over a period of at least four years from the agreement execution date. As of June 30, 2019, the Company has contributed $0.3 million AUD. This equity investment is accounted for using the equity method and is classified in other long-term assets on the Company's consolidated balance sheet. The Company's share of income and losses from this equity method investment is included in gain (loss) from investment in joint venture on its consolidated statement of operations. Also included in this line item are income and expenses associated with administrative services provided to the joint venture.
v3.19.2
Fair Value Notes Receivable (Policies)
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
The Company's other long-term assets balance included $4.4 million of notes receivable as of June 30, 2019 and $3.0 million of notes receivable as of December 31, 2018, recorded at its estimated collectible amount. The Company estimates that the carrying value of the note receivable approximates its fair value. The estimated fair value represents a Level 3 measurement within the fair value hierarchy, and is based on market interest rates and the assessed creditworthiness of the third party.
The Company estimates the fair value of its long-term debt based upon rates currently available to the Company for debt with similar terms and remaining maturities. This is a Level 3 measurement. Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at June 30, 2019 and December 31, 2018.
v3.19.2
Fair Value Fair Value (Policies)
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments, Policy [Policy Text Block]
The Company measures the fair value of restricted cash, money market funds, and foreign deposits based on quoted prices in active markets for identical assets. The fair value of the municipal bond is based on either recent trades in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The estimated fair value of the Company's investment in the variable interest entity is a Level 3 measurement, and is based on market interest rates, the assessed creditworthiness of the entity, and the estimated fair value of the entity's common stock. As of June 30, 2019, the Company estimates that the purchase price approximates the fair value. There were no transfers in or out of Level 3 assets during the six months ended June 30, 2019. Short-term investments are carried at amortized cost and the fair value is disclosed in Note 3, Investments. The fair value of these investments is determined in the same manner as for available-for-sale securities and is considered a Level 1 measurement.
v3.19.2
Claims Reserve Claims Reserve (Policies)
6 Months Ended
Jun. 30, 2019
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid [Abstract]  
Liability Reserve Estimate, Policy [Policy Text Block] Reserve for Veterinary Invoices
The reserve for veterinary invoices is an estimate of the future amount the Company will pay for veterinary invoices that are dated as of, or prior to, its balance sheet date. The reserve also includes the Company's estimate of related internal processing costs. The reserve estimate involves actuarial projections, and is based on management's assessment of facts and circumstances currently known, and assumptions about anticipated patterns. The Company uses generally accepted actuarial methodologies, such as paid loss development methods, in estimating the amount of the reserve for veterinary invoices. The reserve is made for each of the Company's segments, subscription and other business, and is continually refined as the Company receives and pays veterinary invoices. Changes in management's assumptions and estimates may have a relatively large impact to the reserve and associated expense.
v3.19.2
Segments Segments (Policies)
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting, Policy [Policy Text Block]
The Company has two segments: subscription business and other business. The subscription business segment includes revenue and expenses related to monthly subscriptions for the Company’s medical insurance that is marketed directly to consumers, while the other business segment includes all revenue and expenses related to the Company's business that is not directly marketed to consumers.
The chief operating decision maker primarily uses two measures to evaluate segment GAAP financial performance: revenue and gross profit. Additionally, other operating expenses, such as sales and marketing expenses, are allocated to each segment and evaluated when material. Interest and other expenses and income taxes are not allocated to the segments, nor included in the measure of segment profit or loss. The Company does not analyze discrete segment balance sheet information related to long-term assets.
v3.19.2
Net Loss per Share (Tables)
6 Months Ended
Jun. 30, 2019
Earnings Per Share, Basic and Diluted [Abstract]  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]
The following potentially dilutive equity securities were not included in the diluted earnings per share of common stock calculation because they would have had an antidilutive effect:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Stock options
2,253,995

 
3,696,242

 
2,253,995

 
3,696,242

Restricted stock awards and restricted stock units
715,941

 
555,984

 
715,941

 
555,984

Warrants

 
480,000

 

 
480,000


v3.19.2
Investment Securities Available-for-Sale (Tables)
6 Months Ended
Jun. 30, 2019
Investments [Abstract]  
Investment [Table Text Block]
The amortized cost, gross unrealized holding gains and losses, and estimates of fair value of long-term and short-term investments by major security type and class of security were as follows as of June 30, 2019 and December 31, 2018 (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Fair
Value
As of June 30, 2019
 
 
 
 
 
 
 
Long-term investments:
 
 
 
 
 
 
 
Foreign deposits
$
2,891

 
$

 
$

 
$
2,891

Municipal bond
1,000

 

 

 
1,000

 
$
3,891

 
$

 
$

 
$
3,891

       Short-term investments:
 
 
 
 
 
 
 
              U.S. Treasury securities
$
6,140

 
$
4

 
$

 
$
6,144

              Certificates of deposit
439

 

 

 
439

              U.S. government funds
58,133

 

 

 
58,133

 
$
64,712


$
4

 
$


$
64,716

 
 
 
 
 
 
 
 
 
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


Available-for-sale Securities [Table Text Block]
Maturities of debt securities classified as available-for-sale were as follows (in thousands):
 
As of June 30, 2019
 
Amortized
Cost
 
Fair
Value
Available-for-sale:
 
 
 
Due after one year through five years
$
3,891

 
$
3,891

 
$
3,891

 
$
3,891


v3.19.2
Fair Value (Tables)
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair value, asset & liabilities measured on recurring basis [Table Text Block]
The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis, and placement within the fair value hierarchy (in thousands):
 
As of June 30, 2019
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Restricted cash
$
1,400

 
$
1,400

 
$

 
$

Money market funds
2,038

 
2,038

 

 

Fixed maturities:


 
 
 
 
 
 
Foreign deposits
2,891

 
2,891

 

 

Municipal bond
1,000

 

 
1,000

 

Investment in variable interest entity
3,000

 

 

 
3,000

Total
$
10,329


$
6,329


$
1,000


$
3,000

 
 
 
 
 
 
 
 
 
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


The Company measures the fair value of restricted cash, money market funds, and foreign deposits based on quoted prices in active markets for identical assets. The fair value of the municipal bond is based on either recent trades in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The estimated fair value of the Company's investment in the variable interest entity is a Level 3 measurement, and is based on market interest rates, the assessed creditworthiness of the entity, and the estimated fair value of the entity's common stock. As of June 30, 2019, the Company estimates that the purchase price approximates the fair value. There were no transfers in or out of Level 3 assets during the six months ended June 30, 2019. Short-term investments are carried at amortized cost and the fair value is disclosed in Note 3, Investments. The fair value of these investments is determined in the same manner as for available-for-sale securities and is considered a Level 1 measurement.
v3.19.2
Claims Reserve (Tables)
6 Months Ended
Jun. 30, 2019
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid [Abstract]  
Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]
Summarized below are the changes in the total liability for the Company's subscription business segment (in thousands):
 
 
Six Months Ended June 30,
Subscription
 
2019
 
2018
Reserve at beginning of year
 
$
13,875

 
$
11,059

Veterinary invoices during the period related to:
 
 
 
 
Current year
 
110,248