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What changed in TRUPANION, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of TRUPANION, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+392 added−398 removedSource: 10-K (2026-02-13) vs 10-K (2025-02-27)

Top changes in TRUPANION, INC.'s 2025 10-K

392 paragraphs added · 398 removed · 302 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+12 added−28 removed22 unchanged
Biggest changeThese include: • broader coverage and a superior value proposition due, in part, to our vertically integrated structure that reduces frictional costs, • a unique member acquisition strategy that leverages the relationships our Territory Partners have developed in the veterinary community, • a proprietary database containing over 25 years of comprehensive pet health data enabling us to be more precise in our pricing and pet acquisition expense, and • our patented, proprietary software which allows us to pay veterinary invoices directly at time of treatment. 6 Intellectual Property We rely on federal, state, common law, and international rights, as well as contractual restrictions, to protect our intellectual property.
Biggest changeWe believe these include: • Value Proposition - the broadest coverage and a superior value proposition to any other offerings, in part, due to our vertically integrated structure that allows us to control all aspects of the insurance process and reduce frictional costs; • Deep Veterinary Relationships - a unique member acquisition strategy that leverages the relationships our Territory Partners have developed in the veterinary community; • Data Focused Approach - a proprietary database containing over 25 years of comprehensive pet health data enabling us to be more precise in our pricing and pet acquisition expense; • Direct Veterinary Payments - our patented, proprietary software which allows us to pay veterinary invoices directly at time of treatment. 6 Intellectual Property We rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks, and domain names, as well as contractual restrictions, to establish and protect our intellectual property.
In recent years, there has been significant consolidation in the pet medical insurance industry resulting in many brands being controlled by a small number of companies. We believe that we have competitive advantages that position our core Trupanion branded product offerings favorably compared to other brands offered in the marketplace.
In recent years, there has been significant consolidation in the pet medical insurance industry resulting in many brands being controlled by a small number of companies. Competitive Advantages We believe that we have competitive advantages that position our core Trupanion branded product offerings favorably compared to other brands offered in the marketplace.
We leverage this data to price our subscription plan for each pet based on their specific circumstances such as breed, age, geography, desired deductible or co-payment and coverage level, so that, in aggregate, the amounts paid by parents of lucky pets helps to cover the veterinary costs incurred by unlucky pets.
We leverage this data to price our subscription plan for each pet based on their specific circumstances such as breed, age, geography, desired deductible or co- 3 payment and coverage level, so that, in aggregate, the amounts paid by parents of lucky pets helps to cover the veterinary costs incurred by unlucky pets.
Sales and Marketing (New Pet Acquisition) We generate leads for our core Trupanion product through a diverse set of pet parent acquisition channels, which we then aim to convert into members primarily through our website and contact center. These acquisition channels include leads from third-parties such as veterinarians, strategic partners and referrals from existing members.
Sales and Marketing (New Pet Acquisition) We generate leads for our core Trupanion-branded product through a diverse set of pet parent acquisition channels, which we then aim to convert into members primarily through our website and contact center. These acquisition channels include leads from third parties such as strategic partners and referrals from veterinarians and existing members.
We operate our subscription business segment similar to other subscription-based businesses, with a focus on achieving a target margin prior to our pet acquisition expense and acquiring as many pets as possible at our targeted average estimated internal rate of return.
We operate our subscription business segment similar to other subscription-based businesses, with a focus on achieving a target margin prior to our new pet acquisition expense and acquiring as many pets as possible at our targeted average estimated internal rate of return.
Item 1. Business Our Mission Our mission is to help loving, responsible pet parents budget and care for their pets. Company Overview We provide medical insurance for cats and dogs in the United States, Canada, certain countries in Continental Europe, and Australia.
Item 1. Business Our Mission Our mission is to help loving, responsible pet parents budget and care for their pets. Company Overview We provide medical insurance for cats and dogs in the United States, Canada, and certain countries in Continental Europe.
Given the comprehensive and broad coverage of our subscription products and the capabilities of our software to collect and assess date, we believe our data and approach to pricing is unmatched by other pet insurers and provides us with a greater understanding of anticipated veterinary costs.
Given the comprehensive and broad coverage of our subscription products and the capabilities of our software to collect and assess data, we believe our data and approach to pricing is unmatched by other pet insurers and provides us with a greater understanding of anticipated veterinary costs.
Our approach to retention includes the assessment of three member cohorts: members in their first year of membership, members receiving rate changes below 20%, and members receiving rate changes over 20%.
Our approach to retention includes the assessment of three member cohorts: members in their first year of membership, members receiving rate changes below 20% per year, and members receiving rate changes over 20% per year.
We control access to our proprietary technology, software, and documentation by entering into confidentiality and invention assignment agreements with our employees and independent contractors and non-disclosure agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us.
In addition, we control access to our proprietary technology, software, and documentation by entering into confidentiality and invention assignment agreements with our employees and independent contractors and non-disclosure agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us.
Even if a pet ends up being “average” over its life, the timing of accidents or illnesses may not align with the pet owner’s budget. Further, many pet parents do not know how to budget for the “average” cost of medical care for their pets.
Even if a pet ends up being “average” over its life, the timing of accidents or illnesses may not align with the pet parent's budget. Further, many pet parents do not know how to budget for the “average” cost of medical care for their pets.
We believe that, over the long-term, pet insurance penetration rates in the markets we currently operate in could approach those seen in the United Kingdom or Sweden where approximately 28% and 67%, respectively, of household dogs and cats are insured.
We believe that, over the long-term, pet insurance penetration rates in the markets in which we operate could approach those seen in the United Kingdom or Sweden where approximately 28% and 67%, respectively, of household dogs and cats are insured.
We regularly use these channels, as well as social media, to communicate with our members and the public about our company, our services and other issues. It is possible that the information we post on these channels, such as social media, could be deemed to be material information. 10
We regularly use these channels, as well as social media, to communicate with our members and the public about our company, our services and other issues. It is possible that the information we post on these channels, such as social media, could be deemed to be material information. 9
We build awareness of our core Trupanion product predominately through the veterinary community, engaging our team of “Territory Partners." Our Territory Partners are independent contractors who market our product and are paid fees based on activity in their regions.
We build awareness of our core Trupanion-branded product predominately through the veterinary community, engaging our team of "Territory Partners". The Trupanion Territory Partners are independent contractors who market our product and are paid fees based on activity in their regions.
We are investing to increase the rate at which we convert pet parents receiving quotes for our subscription plan into enrolled members. Targeting a 71% value proposition. We aim to pay veterinary invoices promptly and return 71% of premiums we collect, in the aggregate, to members, which we believe is the highest targeted value proposition in our industry.
We are investing to increase the rate at which we convert pet parents receiving quotes for our subscription plan into enrolled members. Targeting a 71% value proposition. We aim to pay veterinary invoices promptly and return 71% of premiums we collect, in the aggregate, to members, which we believe is the highest operationally sustainable value proposition in our industry.
Career Development At Trupanion we are committed to helping everyone grow and thrive along with the company. We are proud to continually see approximately 15% of our employee team members transitioning to new roles within Trupanion each year.
Career Development 7 At Trupanion, we are committed to helping everyone grow and thrive along with the company. We are proud to continually see approximately 27% of our employee team members transitioning to new roles within Trupanion each year.
We have team members working in our Seattle headquarters in the United States, in our offices in the U.K., Germany, and Czechia, and virtually across the U.S., Canada, and Europe. Our Seattle headquarters is pet friendly.
We have team members working in our Seattle headquarters in the United States, in our offices in the U.K., Germany, and Czechia, and virtually across the U.S., Canada, and Europe. Our Seattle headquarters and our Czechia office are pet friendly.
Through our data-driven, vertically-integrated approach, we develop and offer high value medical insurance products, priced specifically for each pet’s unique characteristics and coverage level. Our growing and loyal membership base provides us with highly predictable and recurring revenue. We operate in two reporting segments: subscription business and other business.
Through our data-driven, vertically-integrated approach, we develop and offer high-value medical insurance products, priced to take into account each pet’s unique characteristics and coverage level. Our growing and loyal membership base provides us with highly predictable and recurring revenue. We operate in two reporting segments: subscription business and other business.
As a result, our revenue has grown from $19.1 million in 2010 to $1.3 billion in 2024, which represents a compound annual growth rate of 32%. 4 Our Strategy We are focused on attracting and retaining members by providing the highest customer value proposition and best-in-class member experience.
As a result, our subscription business revenue has grown from $19.1 million in 2010 to $989.3 million in 2025, which represents a compound annual growth rate of 28%. 4 Our Strategy We are focused on attracting and retaining members by providing the highest customer value proposition and best-in-class member experience.
Their role is to create meaningful, long-term relationships with veterinarians and to educate those veterinarians about the benefits of high quality medical insurance for pets. We believe this structure aligns our interests and provides a platform that we can leverage over time. Our Territory Partner approach provides a unique and unmatched moat in our industry.
Their role is to create meaningful, long-term relationships with veterinarians and to educate those veterinarians, and their teams, about the benefits of high quality medical insurance for pets. We believe this structure aligns our interests and provides a platform that we can leverage over time.
North American Pet Health Insurance Association estimates that the penetration rate for medical insurance for cats and dogs in North America is less than four percent. 2 According to FEDIAF European Facts & Figures, GfK Czech consumer panel, and KVL Czech Republic, there are approximately 161 million household dogs and cats in Continental Europe and the estimated penetration rate for medical insurance for cats and dogs is approximately eight and a half percent.
North American Pet Health Insurance Association estimates that the penetration rate for medical insurance for cats and dogs in North America is less than four percent as of April 22, 2025. 2 According to internal estimates incorporating figures from FEDIAF European Facts & Figures, GfK Czech consumer panel, and KVL Czech Republic, there are approximately 165 million household dogs and cats in Continental Europe and the estimated penetration rate for medical insurance for cats and dogs is approximately eight and a half percent as of December 31, 2025.
Our other business segment is comprised of a collective of other product offerings with third parties with whom we generally have a business-to-business relationship, and this business segment has, and targets, a different margin profile than our subscription business segment.
Our other business segment is comprised of a collective of other product offerings, primarily policies underwritten on behalf of third parties with whom we generally have a business-to-business relationship, and this business segment has, and targets, a significantly lower margin profile than our subscription business segment.
Our principal executive offices are located at 6100 4th Avenue South, Seattle, Washington 98108, USA, and our telephone number is +1 (855) 727-9079. Our website address is www.trupanion.com.
In 2013, we formally changed our name to Trupanion, Inc. Our principal executive offices are located at 6100 4th Avenue South, Seattle, Washington 98108, USA, and our telephone number is +1 (855) 727-9079. Our website address is www.trupanion.com.
We intend to continue pursuing opportunities to provide pet parents with complementary products and services. For example, we have invested in a pet food initiative to explore whether pets on a calorie-controlled, high-quality diet have improved health outcomes that can justify a decrease in the cost of their medical insurance.
For example, we have invested in a pet food initiative to explore whether pets on a calorie-controlled, high-quality diet have improved health outcomes that can justify a decrease in the cost of their medical insurance.
A sampling of our development opportunities include: • Trupanion Embark! – All team members participate in company orientation to learn about our history, culture, product, business model, and operations. • Mentorship – Our TruMentor program creates connection across departments, so team members can learn from and support each other in their development. • Professional skills – Our continuing education course catalog includes a wide variety of topics related to our business, the animal health industry, and professional skills. • Leadership Development – Our Leadership Unleashed program offers development for aspiring, new and experienced managers to drive ownership and growth for the future of our business.
A sampling of our development opportunities include: • Trupanion Embark! – All team members participate in company orientation to learn about our history, culture, product, business model, and operations. • TruSpark - TruSpark fosters meaningful, two-way connections between Territory Partners and our home office teams, providing valuable insight, context, and support by fostering engagement and collaboration. • Mentorship – Our Trupanion Women in Leadership ("TWIL") mentorship program creates connection across departments, so team members can learn from and support each other in their development. • Professional skills – Our continuing education course catalog includes a wide variety of topics related to our business, the animal health industry, and professional skills. • Leadership Development – Our Leadership Unleashed program offers development for aspiring, new and experienced managers to drive ownership and growth for the future of our business.
As a result, we are focused primarily on expanding the overall size of our markets by providing pet parents with high value, transparent medical coverage designed for each pet's unique characteristics and coverage level. Throughout our operating history we have competed, and continue to compete, against numerous pet insurance brands.
As a result, we are focused primarily on expanding the overall size of our markets by providing pet parents with high value, transparent medical coverage designed for each pet's unique characteristics and coverage level.
In addition, our Furkin and PHI Direct products are currently distributed direct-to-consumer in Canada and offer similar optionality of coverage at different price points.
In addition, our Furkin and PHI Direct products, available as direct-to-consumer products in Canada, offer further optionality of coverage at different price points.
We seek to protect our proprietary position by filing patent applications in the United States and in jurisdictions outside of the United States related to our technology, inventions, and improvements that are important to our business. We hold several U.S. utility and design patents related to our proprietary software, and we have additional patent applications pending in the United States.
Foremost, we seek to protect our proprietary position by filing patent applications in the United States and in jurisdictions outside of the United States related to our technology, inventions, and improvements that are important to our business.
Average veterinary expenses often greatly exceed the expectations of pet parents and vary dramatically based on a multitude of factors, including the availability of care by region and the types of treatments advisable for specific pet breeds.
Average veterinary expenses often greatly exceed the expectations of pet parents and vary dramatically based on a multitude of factors, including the availability of care by region and the type and extent of treatments advisable and available for specific pet breeds. Consequently, self-insuring is not an effective solution for many pet parents.
Our key markets are large and under-penetrated, as measured by insured pets: North America 1 Continental Europe 2 Household dogs and cats (in thousands) 213,300 160,599 Pet insurance market penetration 3.6 % 8.5 % 1 According to IBIS World and Canadian Animal Health Institute, there are approximately 213.3 million household dogs and cats in the United States and Canada.
Our key markets are large and under-penetrated, as measured by insured pets: North America 1 Continental Europe 2 Household dogs and cats (in thousands) 180,700 165,271 Pet insurance market penetration 3.9 % 8.6 % 1 According to NAPHIA, there are approximately 180.7 million household dogs and cats in the United States and Canada.
We believe our actuarial team, working with our granular data, is able to price our subscription products much more accurately than any other players in the pet health insurance industry, enabling us to provide our members with the most accurate cost and highest value proposition relative to coverage level in our industry. 3 Since launch, our core “Trupanion” branded product has been designed by veterinarians to enable them to practice best medicine – thus recommending the optimal treatment for the pet.
We believe our actuarial team, working with our granular data, is able to price our subscription products much more accurately than any other players in the pet health insurance industry, enabling us to provide our members with the most accurate cost and highest value proposition relative to coverage level in our industry.
The largest source of revenue within this segment is from our long-standing contractual relationship with Pets Best, an unaffiliated pet insurance company we have worked with since 2015. Additional products in this segment include the U.S. Department of Veterans Affairs program and certain employer sponsored programs.
The largest source of revenue within this segment is from our long-standing contractual relationship as an underwriter for Pets Best. Additional products in this segment include the U.S. Department of Veterans Affairs program and certain employer sponsored programs, primarily for companies with animal health related operations.
Our "Powered by Trupanion" products offer the same experience members with Trupanion branded products receive but with options for varying levels of coverage to meet the different needs of our target pet parents and associated budgetary requirements.
Our "Powered by Trupanion" products offer the same experience members with Trupanion branded products receive including veterinary direct payment and access to our 24/7 member support contact center. However, they also include options for varying levels of coverage to meet the different needs of our target pet parents and associated budgetary requirements.
We believe that it would be extremely difficult, costly and time consuming for a competitor to replicate this model and that heavy investment alone would not likely dissolve the competitive advantage this model provides us.
Our Territory Partner approach has been cultivated over the last 25 years and provides a unique and unmatched moat in our industry. We believe that it would be extremely difficult, costly and time consuming for a competitor to replicate this model and that heavy investment alone would not likely dissolve the competitive advantage this model provides us.
Accelerant’s Canadian insurance operations are supervised and regulated by Canadian federal, provincial and territorial governments and Accelerant is a fully licensed insurer in all of the Canadian provinces and territories in which we do business. In addition, we are required to fund a Canadian trust account in accordance with Canadian regulations.
Under the terms of our existing agreements with Accelerant, we retain any financial risk associated with our Canadian business. Accelerant's Canadian insurance operations are supervised and regulated by Canadian federal, provincial and territorial governments and Accelerant is a fully licensed insurer in all of the Canadian provinces and territories in which we do business.
Competition We compete primarily with pet parents who choose to self-fund their veterinary costs, mainly via credit cards, as well as new and existing pet medical insurance brands. We view our primary competitive challenge as educating pet parents on why high-quality medical insurance for pets is a better alternative to self-insuring.
Competition We compete primarily with pet parents who choose to self-fund their veterinary costs, mainly via credit cards, as well as new and existing pet medical insurance brands.
Information contained on, or that can be accessed through, our website is not incorporated by reference, and you should not consider information on our website to be part of this Annual Report on Form 10-K. 9 Available Information We are required to file annual, quarterly and other reports, proxy statements and other information with the Securities and Exchange Commission (SEC) under the Exchange Act.
Information contained on, or that can be accessed through, our website is not incorporated by reference, and you should not consider information on our website to be part of this Annual Report on Form 10-K.
Our subscription products, priced specifically for each pet’s unique characteristics and coverage level, help pet parents budget for unforeseen medical expenses. Through our high quality medical insurance products, pet parents are able to ensure coverage for the best care for their pet and avoid treatment decisions being made due to financial constraints.
Through our high quality medical insurance products, pet parents are able to ensure coverage for the best care for their pet and avoid treatment decisions being made due to financial constraints, which can frequently lead to the economic euthanasia of a pet.
Our total enrolled pets has grown from 31,207 pets on January 1, 2010 to 1,677,570 pets on December 31, 2024, which represents a compound annual growth rate of 30%.
Total pets enrolled in our subscription business have grown from 31,200 pets on January 1, 2010 to 1,096,173 pets on December 31, 2025, which represents a compound annual growth rate of 25%.
Our primary insurance subsidiary and underwriter, American Pet Insurance Company (APIC), is domiciled in New York State and the New York Department of Financial Services (NY DFS) serves as its primary regulator. APIC is currently licensed to do business in all 50 states, Puerto Rico and the District of Columbia.
In the United States, our primary insurance subsidiary and underwriter, American Pet Insurance Company ("APIC"), is licensed to do business in all 50 states, Puerto Rico and the District of Columbia. Our subsidiary ZPIC Insurance Company ("ZPIC"), which has not yet begun underwriting activity, is currently licensed to do business in 40 states and the District of Columbia.
As of December 31, 2024, we employed 1,130 people across the U.S., Canada and Europe. Our team is further supported by 171 field sales Territory Partner business owners and their associates who represent Trupanion. We also contract with team members in the Philippines through a third-party service provider.
Our team is further supported by 159 field sales Territory Partners and their associates who represent Trupanion. We also contract with team members in India and the Philippines through third-party service providers.
As a result, we believe our Trupanion-branded products (the products with our most comprehensive coverage options) enable veterinarians to establish stronger ties and better alignment with our members. Members with a Trupanion-branded product visit their veterinarian more frequently and spend more money on the best course of treatment for their pet.
Since launch, our core “Trupanion” branded product has been designed by veterinarians to enable them to practice best medicine – thus recommending the optimal treatment for the pet. As a result, we believe our Trupanion-branded product (the product with our most comprehensive coverage options) enables veterinarians to establish stronger ties and better alignment with our members.
This approach extends throughout the way we work together; for example, team members that come into any of our offices work in an open environment where the size of working space is the same for everyone regardless of role or seniority.
For example, team members that come into any of our offices work in an open environment where the size of working space is the same for everyone regardless of role or seniority. As of December 31, 2025, we employed 1,121 people across the U.S., Canada and Europe, with women representing 63% of leadership positions.
Using our software, veterinary hospitals can receive payment from us directly for approved invoices in seconds, with our members only paying their deductible or co-payment for covered treatments. We believe this unique and patented solution, which is offered free to veterinarians and our members, transforms the pet insurance experience.
Through the use of our proprietary, patented software designed to communicate directly with a veterinary hospital’s practice management system, we are able to offer a differentiated experience to our members. Using our software, veterinary hospitals can receive payment from us directly for approved invoices in seconds, with our members only paying their deductible or co-payment for covered treatments.
Other Jurisdictions Regulations In Canada, our insurance is currently written by an unaffiliated Canadian-licensed insurer, Accelerant Insurance Company of Canada (Accelerant), formerly known as Omega General Insurance Company. Under the terms of our agreements with Accelerant, we retain any financial risk associated with our Canadian business.
Other Jurisdictions Regulations In Canada, we have transitioned most of our business to our wholly-owned insurance subsidiary, GPIC Insurance Company ("GPIC"). This business was previously written by an unaffiliated Canadian-licensed insurer, Accelerant Insurance Company of Canada ("Accelerant"), formerly known as Omega General Insurance Company.
The largest source of revenue within this segment is from our long-standing contractual relationship with Pets Best Insurance Services ("Pets Best"), a third-party partner we have worked with since 2015. Our Business It is very difficult for pet owners, who we refer to as pet parents, to budget for veterinary expenses when their pets become sick or injured.
Our Business It is very difficult for pet owners, who we refer to as pet parents, to budget for veterinary expenses when their pets become sick or injured.
Through our "Powered by Trupanion" suite of products, which are marketed by third parties, we are broadening our distribution in the retail and corporate worksite channels.
We believe this unique and patented solution, which is offered free to veterinarians and our members, transforms the pet insurance experience and will help to grow the category. Through our "Powered by Trupanion" suite of products, which are marketed by third parties, we have broadened our distribution in the retail and corporate worksite channels.
A core tenet of Trupanion is that we offer a work experience that applies equally to all team members, regardless of role, as noted for example with respect to our Benefits offerings.
We strive to foster an environment where team members with different perspectives and backgrounds can thrive. A core tenet of Trupanion is that we offer a work experience that applies equally to all team members, regardless of role, such as our Benefits offerings described below. This approach extends throughout the way we work together.
In 2006, we effected a business reorganization whereby Vetinsurance Ltd. became a consolidated subsidiary of Vetinsurance International, Inc., a Delaware corporation. In 2007, we began doing business as Trupanion. In 2013, we formally changed our name to Trupanion, Inc.
"Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulation." Corporate Information We were founded in Canada in 2000 as Vetinsurance Ltd. In 2006, we effected a business reorganization whereby Vetinsurance Ltd. became a consolidated subsidiary of Vetinsurance International, Inc., a Delaware corporation. In 2007, we began doing business as Trupanion.
Our other business segment is comprised of revenue from other product offerings with third parties with whom we generally have a business-to-business relationship. This business segment has, and targets, a lower margin profile than our subscription business segment and is not part of our core business strategy.
This business segment has, and targets, a significantly lower margin profile than our subscription business segment and is not part of our core business strategy. The largest source of revenue within this segment is from our long-standing contractual relationship as an underwriter for Pets Best Insurance Services ("Pets Best"), a third-party insurance provider we have worked with since 2015.
We have funded required statutory capital to this new subsidiary and expect our underwriting activity to ramp up significantly in 2025 and our business with Accelerant to diminish. We have three segregated accounts with Wyndham Insurance Company (SAC) Limited ("WICL"), located in Bermuda. WICL is regulated by the Bermuda Monetary Authority (BMA).
We also own three segregated accounts with Wyndham Insurance Company (SAC) Limited ("WICL"), located in Bermuda, relating to our reinsurance agreements with insurance partners in Canada, Germany and Switzerland. WICL is regulated by the Bermuda Monetary Authority ("BMA").
Most significantly, Bermudan law restricts WICL’s ability to declare or pay dividends and the value of WICL’s assets must remain greater than the aggregate of its liabilities, issued share capital, and share premium accounts. Corporate Information We were founded in Canada in 2000 as Vetinsurance Ltd.
Most significantly, Bermudian law restricts WICL’s ability to declare or pay dividends and the value of WICL’s assets must remain greater than the aggregate of its liabilities, issued share capital, and share premium accounts. 8 For further information regarding these regulatory regimes and how they may materially affect our business, including our financial results and condition and ability to compete in our industry, please see Item 1A.
We seek to grow our subscription membership through the addition of new member acquisition channels including employee benefits, retail, and direct-to-consumer. We also intend to expand internationally, including in certain countries in Continental Europe, and enter into relationships with strategic partners who are leaders in their field and are aligned with our goals. 5 Pursuing non-insurance revenue offerings.
In recent years, we have expanded internationally in certain countries in Continental Europe and entered into relationships with strategic partners who are leaders in their field and are aligned with our goals. 5 Pursuing non-insurance revenue offerings. We intend to continue pursuing opportunities to provide pet parents with complementary products and services.
Consequently, self-insuring is not an effective solution for many pet parents as the cost of pet medical care has been outpacing inflation for over 20 years due to advancements in medical procedures and technology and due to increased availability of care options.
This challenge has compounded further as the cost of veterinary care has been outpacing inflation, a trend that has been accelerating in recent years due to advancements in medical procedures and technology and due to increased availability of care options. We provide a solution for the challenge of planning for unexpected costs of veterinary care.
This results in better health outcomes for pets, which we believe creates a flywheel effect that has been the key driver of growth for our subscription business. Through the use of our proprietary, patented software designed to communicate directly with a veterinary hospital’s practice management system, we are able to offer a differentiated experience to our members.
Members with a Trupanion-branded product visit their veterinarian more frequently and spend more money on the best course of treatment for their pet. This results in better health outcomes for pets, which we believe creates a flywheel effect that has been the key driver of growth for our subscription business.
As of December 31, 2024, the account held CAD $19.9 million. In 2022, we incorporated a new wholly-owned insurance subsidiary, GPIC Insurance Company (GPIC), domiciled in Canada. GPIC is currently licensed to do business in all provinces and territories in Canada except for Nunavut.
GPIC is domiciled in Canada and is currently licensed to do business in all provinces and territories in Canada except for Nunavut. GPIC provides us with flexibility to directly underwrite policies as part of our vertical integration approach.
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Within this segment we also offer products in certain countries in Continental Europe which are currently underwritten using third-party underwriters. Going forward our intent is to assume full insurance risk for these products, either through direct underwriting or reinsurance arrangements.
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Within this segment we also offer products in certain countries in Continental Europe which are currently underwritten by third parties who pay us commissions that we recognize as revenue. Our other business segment generates revenue from other product offerings, primarily by underwriting policies on behalf of third parties with whom we generally have a business-to-business relationship.
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We also rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks, and domain names to establish and protect our intellectual property.
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We expect that enrollment from Pets Best will continue to decline as it engages other third-party underwriters. Additional products in this segment include the U.S. Department of Veterans Affairs program and employer-sponsored programs, primarily for companies with animal health related operations.
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We also have several issued utility and design patents in other jurisdictions, as well as additional patent applications pending. We additionally rely on data and market exclusivity, and patent term extensions when available. Our ability to protect and enforce our intellectual property rights is subject to risk and our failure to do so may adversely impact our business.
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Our subscription products, priced specifically for each pet’s unique characteristics and coverage level, help pet parents budget for unforeseen medical expenses.
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Diversity, Equity, and Inclusion We believe that diversity, equity, and inclusion (DEI) is critical to supporting our fellow team members and enhancing our ability to fulfill our mission and achieve our goals. We strive to foster an environment where diversity of people with different perspectives and backgrounds can thrive.
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We believe that providing an exceptional member experience has increased the rate at which our existing members enroll additional pets and/or refer their friends and family, all of which has contributed towards our industry leading retention rates.
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We have multiple employee-led resource groups that celebrate aspects of our team’s diversity and help foster a welcoming and safe space for support, education, professional development, and networking.
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We seek to grow our subscription membership through the addition of new member acquisition channels including employee benefits, retail, and enhanced direct-to-consumer offerings over time.
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Our DEI Committee is also employee-led and focuses on cultivating a culture of inclusion and belonging by supporting DEI activities, fostering effective DEI communications with Trupanion employees and advising on ways to improve progress in Trupanion's commitment to DEI.
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We view our primary competitive challenge as educating pet parents on why high-quality medical insurance for pets is a better alternative to self-insuring and on the differences between Trupanion's unique lifetime coverage and coverage offered by other providers. Throughout our operating history we have competed, and continue to compete, against numerous pet insurance brands.
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We have also developed a DEI curriculum that is required for all team members, and we continue to develop accessibility enhancements to both our physical and digital spaces. 7 We have a large representation of women at Trupanion including 61% of leadership positions.
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We hold 13 patents and have 23 patents pending across several countries, including the U.S., in four main patent families related to our: 1) veterinary integration software 2) claims automation 3) pet tracking technology and 4) pet food formulation, manufacturing and integration systems. We additionally rely on data and market exclusivity, and patent term extensions when available.
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Our culture of inclusion at Trupanion is in part reflected by, in 2024, 39% of our US new hires self-identifying that they are from an underrepresented group. Trupanion is committed to paying equitably for equal work, regardless of gender or race/ethnicity, and conducts pay equity analyses as part of our efforts in furtherance of this commitment.
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We monitor market activity for potential infringement of our patents and bring litigation claims from time to time.
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Regulation For further information, refer to the Regulation section included in Part II Item 7 of this report. United States Regulations U.S. federal law and the laws and regulations of each United States state, territory and possession apply to companies licensed to transact insurance business in these jurisdictions.
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Regulation United States Regulations Our insurance subsidiaries are required to be licensed to transact insurance business in, and are subject to the comprehensive regulation and supervision in, the jurisdictions where they are domiciled and conduct business.
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As such, APIC is also subject to comprehensive regulation and supervision under laws and regulations of each U.S. state, territory, and possession. Because APIC is domiciled in New York, we are subject to laws governing insurance holding companies in New York.
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Pursuant to the Canadian Office of the Superintendent of Financial Institutions ("OSFI"), we have funded required statutory capital to GPIC, which is, and may continue to be for the foreseeable future, more than the amount we have historically held with our fronting arrangement with Accelerant.
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These laws, among other things, require that we file periodic information reports with the NY DFS, including information concerning our capital structure, ownership, financial condition and general business operations; limit our ability to enter into transactions between APIC and our other affiliated entities; restrict the ability of any one person to acquire certain levels of our voting securities without prior regulatory approval; and restrict APIC’s ability to pay dividends to its holding company parent.
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Under this arrangement we are required to fund a trust account in accordance with Canadian regulations. As we transition more of our business to GPIC, the amount we are required to fund in this trust account will be reduced. As of December 31, 2025, the account held CAD $8.7 million.
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Other state regulators also have broad authority to perform on-site market conduct examinations of our management and operations, marketing and sales, underwriting, customer service, claims handling and licensing.
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Available Information We are required to file annual, quarterly and other reports, proxy statements and other information with the Securities and Exchange Commission ("SEC") under the Exchange Act.
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Regulators may perform market conduct examinations by visiting our facilities for a period of time to identify potential regulatory violations, discuss and correct identified violations, or to obtain a better understanding of how we operate in the marketplace.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

132 edited+36 added−37 removed190 unchanged
Biggest changeSubstantial indebtedness, and the fact that a substantial portion of our cash flow from operating activities could be needed to make payments on this indebtedness, could have adverse consequences, including the following: 26 • reducing the availability of our cash flow for our operations, capital expenditures, future business opportunities and other purposes; • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, which could place us at a competitive disadvantage compared to our competitors that may have less debt; • limiting our ability to borrow additional funds; and • increasing our vulnerability to general adverse economic and industry conditions.
Biggest changeAmong other consequences, our level of indebtedness could: • require us to use a significant percentage of our cash flow from operations for debt service and the satisfaction of repayment obligations, and not for other purposes that could grow our business; • limit our ability to borrow money or issue equity to fund our working capital, capital expenditures, acquisitions and debt service requirements; • cause our interest expense to increase if there is a general increase in interest rates, because a portion of our indebtedness bears interest at floating rates; • limit our flexibility in planning for or reacting to changes in our business and future business opportunities; • cause us to be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; • make us more vulnerable to a downturn in our business or the economy; and • limit our ability to exploit business opportunities.
These relationships may require several years to implement, may face delays or terminations, and may not be successfully implemented at all. We may be unsuccessful in entering into agreements with acceptable third parties, negotiating favorable terms in these agreements, or achieving the anticipated results over our desired time horizon.
These relationships may require several years to implement, may face delays or terminations, and may not be successfully implemented at all. We may be unsuccessful in entering into agreements with acceptable third parties, negotiating favorable terms in these agreements, or achieving the anticipated results over our desired time horizon or at all.
Managing tenants, maintaining the building, and otherwise facing the costs and responsibilities of being the owner of a building may be a distraction from our core business and cause our performance to suffer. We are also exposed to and potential third-party liability as the owner of our office building, such as if an accident occurs on the premises.
Managing tenants, maintaining the building, and otherwise facing the costs and responsibilities of being the owner of a building may be a distraction from our core business and cause our performance to suffer. We are also exposed to potential third-party liability as the owner of our office building, such as if an accident occurs on the premises.
Among others, these risks relate to: • Our significant net losses since inception, ability to achieve and maintain profitability and our ability to maintain our rate of revenue growth in the future; • Our ability to grow and retain our member base, including uncertainties in the assumptions we use to determine our new pet acquisition spend, variable costs of attracting new members through online channels such as social media or search engines and from leads generated from Territory Partners, veterinarians and other third parties; • Our ability to maintain certain levels of surplus capital, and access excess capital for other parts of our business, under applicable insurance regulations; • Our reliance on Territory Partners, whom we engage as independent contractors rather than employees, and other third parties; • Our veterinary invoice expense (which may increase with use of our patented software for direct payment of invoices) and our ability to timely and accurately process valid invoices and to identify improper invoices; • Our ability to comply with numerous laws and regulations applicable to our business, including state, federal and foreign laws relating to insurance, privacy, e-commerce, email and texting, and accounting matters; • Our ability to react to competitors and alternative financing methods for pet related medical costs; • Our ability to maintain and enhance our brand; • Our ability to maintain and scale our infrastructure, to invest in or acquire businesses, products or technologies, or otherwise manage our growth; • Changes in legal, judicial, social and other environmental conditions, which could result in unexpected claim and coverage liability; • Our reliance on key personnel and strategic relationships and our ability to maintain these relationships; • Fluctuations in foreign exchange rates, other issues relating to expanding our operations internationally, and general changes in the global economy that can cause our operating results to vary; • Our ownership of multiple insurance subsidiaries in different jurisdictions; • Our ability to maintain effective internal controls and security measures, including measures to mitigate cyber-attacks; • Our acceptance of automatic fund transfers, credit card and debit card payments; • Our ability to protect our intellectual property (IP), avoid violating IP rights of others, and maintain relationships with third parties providing necessary IP and technology to us; • The outcome of litigation or regulatory proceedings; • Our level of indebtedness, our ability to service our debt, and our ability to comply with covenants that may restrict our operations and limit our ability to expand our business; • Our ability to initiate substantial underwriting activity by our Canadian subsidiary GPIC in connection with rolling off business and ending our contractual relationship with our fronting partner Accelerant; • Our ability to utilize net operating loss carryforwards and potential increases in our tax liabilities; and • Our common stock, including missed earnings guidance, inadequate analyst coverage, trading volatility, lack of dividends, concentrated ownership, and anti-takeover provisions in our governing documents. 11 Risks Related to Our Business and Industry We have incurred significant cumulative net losses since our inception and may not be able to achieve or maintain profitability in the future.
Among others, these risks relate to: • Our significant net losses since inception, ability to achieve and maintain profitability and our ability to maintain our rate of revenue growth in the future; • Our ability to grow and retain our member base, including uncertainties in the assumptions we use to determine our new pet acquisition spend, variable costs of attracting new members through online channels such as social media or search engines and from leads and referrals generated from Territory Partners, veterinarians and other third parties; • Our ability to maintain certain levels of surplus capital, and access excess capital for other parts of our business, under applicable insurance regulations; • Our reliance on Territory Partners, whom we engage as independent contractors rather than employees, and other third parties; • Our veterinary invoice expense (which may increase with use of our patented software for direct payment of invoices) and our ability to timely and accurately process valid invoices and to identify improper invoices; • Our ability to comply with numerous laws and regulations applicable to our business, including state, federal and foreign laws relating to insurance, privacy, e-commerce, email and texting, and accounting matters; • Our ability to react to competitors and alternative financing methods for pet related medical costs; • Our ability to maintain and enhance our brand; • Our ability to maintain and scale our infrastructure, to invest in or acquire businesses, products or technologies, or otherwise manage our growth; • Changes in legal, judicial, social and other environmental conditions, which could result in unexpected claim and coverage liability; • Our reliance on key personnel and strategic relationships and our ability to maintain these relationships; • Fluctuations in foreign exchange rates, other issues relating to expanding our operations internationally, and general changes in the global economy that can cause our operating results to vary; • Our ownership of multiple insurance subsidiaries in different jurisdictions; • Our ability to maintain effective internal controls and security measures, including measures to mitigate cyber-attacks; • Our acceptance of automatic fund transfers, credit card and debit card payments; • Our ability to protect our intellectual property (IP), avoid violating IP rights of others, and maintain relationships with third parties providing necessary IP and technology to us; • The outcome of litigation or regulatory proceedings; • Our level of indebtedness, our ability to service our debt, and our ability to comply with covenants that may restrict our operations and limit our ability to expand our business; • Our ability to initiate substantial underwriting activity by our Canadian subsidiary GPIC in connection with rolling off business and ending our contractual relationship with our fronting partner Accelerant; • Our ability to utilize net operating loss carryforwards and potential increases in our tax liabilities; and • Our common stock, including missed earnings guidance, inadequate analyst coverage, trading volatility, lack of dividends, concentrated ownership, and anti-takeover provisions in our governing documents. 10 Risks Related to Our Business and Industry We have incurred significant cumulative net losses since our inception and may not be able to achieve or maintain profitability in the future.
For these efforts to be successful, we must negotiate and enter into agreements with these third parties on terms that are attractive to us, and then successfully implement the arrangement, which requires integrating and coordinating their resources and capabilities with our own, which may present challenges relating to technology integration, marketing, regulatory matters, customer support, and other operational matters.
For these efforts to be successful, we must negotiate and enter into agreements with these third parties on terms that are attractive to us, and then successfully implement the arrangement, which requires integrating and coordinating their resources and capabilities with our own, which may present challenges relating to technology integration, marketing, branding, regulatory matters, customer support, and other operational matters.
If we terminate a contract with a Territory Partner, such termination could also trigger contractually obligated termination payments or result in disputes, including threatened or actual legal or regulatory proceedings. We believe that Territory Partners are not and should not be classified as employees under existing interpretations of the applicable laws of the jurisdictions in which we operate.
If we terminate a contract with a Territory Partner, such termination could also trigger contractually obligated termination payments or result in disputes, including threatened or actual legal or regulatory proceedings. 14 We believe that Territory Partners are not and should not be classified as employees under existing interpretations of the applicable laws of the jurisdictions in which we operate.
We may also consider external factors, including changes in the law, court decisions, changes to regulatory requirements and economic conditions. Because reserves are estimates of veterinary invoices that have been incurred but are not yet submitted to us, setting appropriate reserves is an inherently uncertain and complex process that involves significant subjective judgment.
We may also consider external factors, including changes in the law, court decisions, changes to regulatory requirements and economic conditions. 15 Because reserves are estimates of veterinary invoices that have been incurred but are not yet submitted to us, setting appropriate reserves is an inherently uncertain and complex process that involves significant subjective judgment.
In connection with our strategic relationships, we have in the past and may in the future provide equity consideration, impose contractual holding periods for such securities, impose standstill obligations or include other requirements that terminate in the event the strategic relationship ceases, which may have an adverse effect on our stock price and otherwise cause our business to suffer.
In connection with our strategic 20 relationships, we have in the past and may in the future provide equity consideration, impose contractual holding periods for such securities, impose standstill obligations or include other requirements that terminate in the event the strategic relationship ceases, which may have an adverse effect on our stock price and otherwise cause our business to suffer.
If we do not effectively manage growth at any time, our financial condition could be harmed and the quality of our services could suffer. In order to successfully expand our business, we need to hire, integrate and retain in-demand highly skilled and motivated employees and continue to improve our existing systems for operational and financial management.
If we do not effectively manage growth at any time, our financial condition could be harmed and the quality of our services could suffer. In order to successfully expand our business, we need to hire, integrate and retain in-demand highly skilled and motivated employees and continue to improve our existing systems for operational, data and financial management.
New laws may be adopted that could further affect our business, for example our ability to effect rate increases, to cancel or not issue existing policies, to use artificial intelligence or machine learning, or to market our products in various ways. Implementing changes in order to comply with new laws or regulations could also be time-consuming and costly.
New laws may be adopted that could further affect our business, for example our ability to affect rate increases, to cancel or not issue existing policies, to use artificial intelligence or machine learning, or to market our products in various ways. Implementing changes in order to comply with new laws or regulations could also be time-consuming and costly.
Third parties to whom we outsource certain of our functions are also subject to these risks. While we can review and assess our third-party providers’ cybersecurity controls, as appropriate, and make changes to our business processes to manage these risks, 17 we cannot ensure that our attempts to keep such information confidential will always be successful.
Third parties to whom we outsource certain of our functions are also subject to these risks. While we can review and assess our third-party providers’ cybersecurity controls, as appropriate, and make changes to our business processes to manage these risks, we cannot ensure that our attempts to keep such information confidential will always be successful.
In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5-percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
In general, an 26 “ownership change” occurs if there is a cumulative change in our ownership by “5-percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
It may take a longer period of time to achieve efficiency on these contributions, if ever. • Each insurance entity will be subject to additional regulatory scrutiny in the jurisdiction of incorporation and any additional jurisdictions in which the insurance subsidiary operates.
It may take a longer period of time to achieve efficiency on these contributions, if ever. 22 • Each insurance entity will be subject to additional regulatory scrutiny in the jurisdiction of incorporation and any additional jurisdictions in which the insurance subsidiary operates.
Our ability to achieve and maintain profitability will depend, in significant part, on obtaining new members, retaining our existing members, maintaining relationships with our strategic partners, and ensuring that our expenses, including new pet acquisition expense, do not exceed our revenue.
Our ability to maintain profitability will depend, in significant part, on obtaining new members, retaining our existing members, maintaining relationships with our strategic partners, and ensuring that our expenses, including new pet acquisition expense, do not exceed our revenue.
In general, international sales and operations may be subject to a number of risks, including the following: • regulatory rules and practices, including robust privacy regulations, foreign exchange controls, tariffs, tax laws and treaties that are different than those we operate under currently; • the costs and resources required to modify our subscription appropriately to suit the needs and expectations of residents and veterinarians in such foreign countries; • our data analytics platform may have limited applicability in foreign countries, which may impact our ability to develop adequate underwriting criteria and accurately price subscriptions in such countries; • increased expenses incurred in establishing and maintaining office space and equipment for our international operations; • technological incompatibility between our patented proprietary software and software used by veterinarians; • difficulties in modifying our business model or subscription in a manner suitable for any particular foreign country, including any modifications to our Territory Partner model to the extent we determine that our existing model is not suitable for use in foreign countries; • our lack of experience in marketing to consumers and veterinarians and online engagement in foreign countries, especially if doing so in a foreign language; • our relative lack of industry connections in many foreign countries; • our ability to locally hire, integrate and retain highly skilled and motivated employees and establish and improve systems for operational and financial management where appropriate; • difficulties in managing operations due to language barriers, distance and time zone differences, staffing, cultural differences and business infrastructure constraints, including difficulty in obtaining foreign and domestic visas; • the uncertainty of protection for intellectual property rights in some countries; and • general economic and political conditions in these foreign markets.
In general, international sales and operations may be subject to a number of risks, including the following: • regulatory rules and practices, including robust privacy regulations, foreign exchange controls, tariffs, tax laws and treaties that are different than those in North America where we primarily operate; • the costs and resources required to modify our subscription appropriately to suit the needs and expectations of residents and veterinarians in such foreign countries; • our data analytics platform may have limited applicability in foreign countries, which may impact our ability to develop adequate underwriting criteria and accurately price subscriptions in such countries; • increased expenses incurred in establishing and maintaining office space and equipment for our international operations; • technological incompatibility between our patented proprietary software and software used by veterinarians; • difficulties in modifying our business model or subscription in a manner suitable for any particular foreign country, including any modifications to our Territory Partner model to the extent we determine that our existing model is not suitable for use in foreign countries; • our lack of experience in marketing to consumers and veterinarians and online engagement in foreign countries, especially if doing so in a foreign language; • our relative lack of industry connections in many foreign countries; • our ability to locally hire, integrate and retain highly skilled and motivated employees and establish and improve systems for operational and financial management where appropriate; • difficulties in managing operations due to language barriers, distance and time zone differences, staffing, cultural differences and business infrastructure constraints, including difficulty in obtaining foreign and domestic visas; • the uncertainty of protection for intellectual property rights in some countries; and • general economic and political conditions in these foreign markets.
We are currently compliant with PCI DSS in North America but our compliance efforts are ongoing with respect to acquired businesses. We may not be fully or materially compliant with PCI DSS, or other payment card operating rules in the future.
We are currently compliant with PCI DSS in North America but our internal compliance efforts are ongoing with respect to acquired businesses. We may not be fully or materially compliant with PCI DSS, or other payment card operating rules in the future.
The second account, WICL Segregated Account Trupanion Germany, has entered into a reinsurance 29 agreement with our German insurance partner. The third account, WICL Segregated Account Switzerland has entered into a reinsurance agreement with our Swiss insurance partner. WICL is a class 3 insurer regulated by the Bermuda Monetary Authority ("BMA").
The second account, WICL Segregated Account Trupanion Germany, has entered into a reinsurance agreement with our German insurance partner. The third account, WICL Segregated Account Switzerland has entered into a reinsurance agreement with our Swiss insurance partner. WICL is a class 3 insurer regulated by the Bermuda Monetary Authority ("BMA").
We believe that our continued revenue growth will depend on, among other factors, our ability to: • improve our market penetration through cost-efficient and effective pet acquisition programs to attract new members; • convert leads into enrollments; • maintain high retention rates; • increase the lifetime value per pet; • price our subscriptions in relation to actual operating expenses and achieve required regulatory approval for pricing changes; • achieve our target margin profile to allow continued reinvestment in growth and member experience; • maintain and increase positive relationships with veterinarians and other lead sources; • maintain high-performing Territory Partners in our target markets; • administer and continue to grow our business internationally; • create and maintain positive relationships with strategic partners, particularly partners who present us with new sales channels and those who create software solutions for veterinary practices; • continue to offer products with a superior value with competitive features and rates; • recruit, integrate and retain skilled, qualified and experienced sales professionals who can demonstrate our value proposition to new and existing members; • provide our members with superior service, including timely and efficient payment of veterinary invoices, and by recruiting, integrating and retaining skilled and experienced personnel who can efficiently review veterinary invoices and process payments; • generate business to replace revenue generated through our relationship with Pets Best, since we expect our relationship with Pets Best will diminish and our business activity with them will terminate over future periods; • react to existing and new competitors; • protect and defend our critical intellectual property; • increase awareness of and positive associations with medical insurance for pets and our brand; • react to unexpected developments and general macroeconomic conditions, including pandemics and unfavorable changes in economic conditions, such as inflation, rising interest rates, or a recession; and • successfully respond to and comply with regulations affecting our business and defend or prosecute any litigation.
We believe that our continued revenue growth will depend on, among other factors, our ability to: • improve our market penetration through cost-efficient and effective pet acquisition programs to attract new members; • convert leads into enrollments; • maintain high retention rates; • increase the lifetime value per pet; • effectively communicate our value proposition to new and existing members; • price our subscriptions in relation to actual operating expenses and achieve required regulatory approval for pricing changes; • achieve our target margin profile to allow continued reinvestment in growth and member experience; • maintain and increase positive relationships with veterinarians and other referral and lead sources; • maintain high-performing Territory Partners in our target markets; • administer and continue to grow our business internationally; • create and maintain positive relationships with strategic partners, particularly partners who present us with new sales channels and those who create software solutions for veterinary practices; • continue to offer and develop a portfolio of products and adjacent products with a superior value with competitive features and rates; • recruit, integrate and retain skilled, qualified and experienced sales professionals who can demonstrate our value proposition to new and existing members; • provide our members with superior service, including timely and efficient payment of veterinary invoices, and by recruiting, integrating and retaining skilled and experienced personnel who can efficiently review veterinary invoices and process payments; • generate business to replace revenue generated through our relationship with Pets Best, since we expect our relationship with Pets Best to continue to diminish and our business activity with them will terminate over future periods; • react to existing and new competitors; • protect and defend our critical intellectual property; • increase awareness of and positive associations with medical insurance for pets and our brand; • react to unexpected developments and general macroeconomic conditions, including pandemics and unfavorable changes in economic conditions, such as inflation, rising interest rates, or a recession; and • successfully respond to and comply with regulations affecting our business and defend or prosecute any litigation.
We do not intend to pay dividends on our common stock and, therefore, any returns will be limited to the value of our stock. We have never declared or paid any cash dividends on our common stock.
We do not intend to pay dividends on our common stock and, therefore, any returns will be limited to the value of our stock. 30 We have never declared or paid any cash dividends on our common stock.
We cannot predict the outcome of these actions or proceedings, and the cost of defending such actions or proceedings could be material. Further, defending such actions or proceedings could divert our management and key personnel from our business operations.
We cannot predict the outcome of these actions or proceedings, and the cost of defending such actions or proceedings could be 25 material. Further, defending such actions or proceedings could divert our management and key personnel from our business operations.
Acquisitions and operations of these insurers presents a number of risks, including the following: • Acquiring or forming a new insurance subsidiary may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not the acquisition or formation is completed. • Even if we are successful in forming or acquiring a new insurance subsidiary we may not achieve the anticipated benefits.
Acquisitions and operations of these insurers present a number of risks, including the following: • Acquiring or forming a new insurance subsidiary may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not the acquisition or formation is completed. • Even if we are successful in forming or acquiring a new insurance subsidiary we may not achieve the anticipated benefits.
This plan provides certain benefits to our employees in the event there is a change in control of our company and an employee is terminated under certain conditions. Potential acquirers may determine that the possible payments and acceleration of equity under this plan make an acquisition of our company unattractive. 32 Item 1B. Unresolved Staff Comments None.
This plan provides certain benefits to our employees in the event there is a change in control of our company and an employee is terminated under certain conditions. Potential acquirers may determine that the possible payments and acceleration of equity under this plan make an acquisition of our company unattractive. 31 Item 1B. Unresolved Staff Comments None.
We have made and plan to continue to make substantial investments in features and enhanced functionalities for our website and support our contact center. These enhancements are designed to help appropriately direct pet owner traffic to the enrollment journey of their choice, increase member engagement, and improve member service.
We have made and plan to continue to make substantial investments in features and enhanced functionalities for our website and support our contact center. These enhancements are designed to help appropriately direct pet parent traffic to the enrollment journey of their choice, increase member engagement, and improve member service.
Significant judgments, assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, reserve for veterinary invoices, business combinations, and income taxes. Risks Related to Ownership of Our Common Stock Our actual operating results may differ significantly from our guidance.
Significant judgments, assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, reserve for veterinary invoices, and income taxes. Risks Related to Ownership of Our Common Stock Our actual operating results may differ significantly from our guidance.
In order to increase our membership, we must continue to convince prospective members of the benefits of medical insurance for pets in general and our subscription business segment in particular. To maintain our existing member base, we need to continue to reinforce the value of our subscription among our members, prospective members, and veterinarians.
In order to increase our membership, we must continue to generate leads and convince prospective members of the benefits of medical insurance for pets in general and our subscription business segment in particular. To maintain our existing member base, we need to continue to reinforce the value of our subscription among our members, prospective members, and veterinarians.
Further, WICL could be limited from allowing dividends to be paid out of any of our segregated accounts in the event of adverse regulatory actions. Our accounting is becoming more complex, and relies upon estimates or judgments relating to our critical accounting policies.
Further, WICL could be limited from allowing dividends to be paid out of any of our segregated accounts in the event of adverse regulatory actions. Our accounting is complex and relies upon estimates or judgments relating to our critical accounting policies.
We do not have experience manufacturing, selling, or distributing food products and pet food manufacturing facilities and pet food products are subject to many laws and regulations administered by the United States Department of Agriculture, the Federal Food and Drug Administration, the Occupational Safety and Health Administration, and other federal, state, local, and foreign governmental agencies relating to the production, packaging, labelling, storage, distribution, quality, and safety of food products and the health and safety of employees.
We have not, historically, had experience manufacturing, selling, or distributing food products and pet food manufacturing facilities and pet food products are subject to many laws and regulations administered by the United States Department of Agriculture, the Federal Food and Drug Administration, the Occupational Safety and Health Administration, and other federal, state, local, and foreign governmental agencies relating to the production, packaging, labelling, storage, distribution, quality, and safety of food products and the health and safety of employees.
You should not rely on our historical rate of revenue growth as an indication of our future performance. 12 We base our decisions regarding new pet acquisition expenditures primarily on the projected internal rate of return on marketing spend.
You should not rely on our historical rate of revenue growth as an indication of our future performance. 11 We base our decisions regarding new pet acquisition expenditures primarily on the projected internal rate of return on marketing spend.
We believe that maintaining and enhancing our brand recognition and reputation is critical to our relationships with existing members, Territory Partners, veterinarians and others, and to our ability to attract new members, new Territory Partners, and additional supportive veterinarians.
We believe that maintaining and enhancing our brand recognition and reputation is critical to our relationships with existing members, Territory Partners, veterinarians and others, and to our ability to attract new members, new Territory Partners, and additional supportive veterinarians and their teams.
For example, we have invested in a pet food initiative, and we believe that pet food may be an important part of our offerings over the long term.
For example, we have invested in a pet food initiative, and we believe that pet food will be an important part of our offerings over the long term.
Moreover, if our new pet acquisition expenses increase or we invest in member acquisition channels that do not ultimately result in the expected number of new member enrollments or enrollments cancel before we recoup our acquisition expenses, the return on our investment may be lower than we anticipate irrespective of the lifetime value of the pets that we project to acquire as a result of the new members.
Moreover, if our new pet acquisition expenses increase or we invest in member acquisition channels that do not ultimately result in the expected number of new member enrollments or enrollments are at a lower subscription price or cancel before we recoup our acquisition expenses, the return on our investment may be lower than we anticipate irrespective of the lifetime value of the pets that we project to acquire as a result of the new members.
Increases in the number and amount of veterinary invoices we receive could arise from unexpected or other events that are inherently difficult to predict or estimate, such as a pandemic that spreads through the pet population, tainted pet food or supplies or an unusually high number of serious injuries or illnesses.
Increases in the number and amount of veterinary invoices we receive could arise from unexpected or other events that are inherently difficult to predict or estimate, such as illness or disease that spreads through the pet population, tainted pet food or supplies or an unusually high number of serious injuries or illnesses.
Computer viruses, hackers, employee misconduct, and other external hazards could expose our technology platform to security breaches, cyber-attacks or other disruptions.
Computer viruses, hackers, employee misconduct, and other external hazards could expose our technology platforms to security breaches, cyber-attacks or other disruptions.
To comply with these regulations and contractual obligations, we may be required to maintain capital that we would otherwise invest in our growth and operations, which may require us to modify our operating plan or marketing initiatives, delay the implementation of new initiatives or development of new technologies, decrease the rate at which we hire additional personnel and enter into relationships with Territory Partners, incur indebtedness or pursue equity or debt financings or otherwise modify our business operations, any of which could have a material adverse effect on our operating results and financial condition. 15 We operate in a competitive market which could adversely affect our prospects, operating results and financial condition.
To comply with these regulations and contractual obligations, we may be required to maintain capital that we would otherwise invest in our growth and operations, which may require us to modify our operating plan or marketing initiatives, delay the implementation of new initiatives or development of new technologies, decrease the rate at which we hire additional personnel and enter into relationships with Territory Partners, incur indebtedness or pursue equity or debt financings or otherwise modify our business operations, any of which could have a material adverse effect on our operating results and financial condition.
The promotion of our brand will require us to make substantial investments, and we anticipate that, as our market becomes increasingly competitive, these branding initiatives may become increasingly difficult and expensive.
The promotion of our brand requires us to make substantial investments, and we anticipate that, as our market becomes increasingly competitive, these branding initiatives may become increasingly difficult and expensive.
Fluctuations in the relative strength of the US dollar compared to the currencies of other jurisdictions in which we operate has in the past and could in the future adversely affect our revenue and operating results.
Fluctuations in the relative strength of the U.S. dollar compared to the currencies of other jurisdictions in which we operate has in the past and could in the future adversely affect our revenue and operating results.
Failure to receive this information timely, or failure to receive complete and accurate information, could negatively impact our ability to meet regulatory filing requirements, including the filing of our annual audited financial statements. 21 We and Pets Best have agreed to roll off a portion of our business together, as Pets Best ramps up policies written by another insurer.
Failure to receive this information timely, or failure to receive complete and accurate information, could negatively impact our ability to meet regulatory filing requirements, including the filing of our annual audited financial statements. We and Pets Best have agreed to roll off a portion of our business together, as Pets Best ramps up policies written by other insurers.
The prices of our subscriptions are based on assumptions and estimates. If our actual experience differs from the assumptions and estimates used in pricing our subscriptions or if we are unable to obtain any necessary regulatory approval for our pricing, our revenue and financial condition could be adversely affected.
If our actual experience differs from the assumptions and estimates used in pricing our subscriptions or if we are unable to obtain any necessary regulatory approval for our pricing, our revenue and financial condition could be adversely affected.
We have in the past, and may in the future identify material weaknesses or significant deficiencies in our internal control over financial reporting, which may result in us not detecting material errors in our financial statements on a timely basis.
We have in the past identified material weaknesses or significant deficiencies in our internal control over financial reporting, which have been remediated. We may, in the future, identify material weaknesses or significant deficiencies in our internal control over financial reporting, which may result in us not detecting material errors in our financial statements on a timely basis.
If we cannot generate profits from this investment, we may need to alter our growth strategies, and our growth rate and operating results may be adversely affected.
If we cannot generate sufficient returns from this investment, we may need to alter our growth strategies, and our growth rate and operating results may be adversely affected.
Moreover, in the future, we may continue to expand the number of countries in which we offer products and operate and this could increase our exposure to currency exchange rate fluctuations. Owning multiple insurance subsidiaries may harm our results of operations.
Moreover, in the future, we may continue to expand the number of countries in which we offer products and operate and this could increase our exposure to currency exchange rate fluctuations. Owning multiple insurance subsidiaries may harm our results of operations. We currently have insurance subsidiaries in the U.S. and Canada.
The expansion of our existing international operations and entry into 22 additional international markets will require significant management attention and financial resources, which may detract from management attention and financial resources otherwise available to our existing business.
The expansion of our existing international operations and any entry into additional international markets could require significant management attention and financial resources, which may detract from management attention and financial resources otherwise available to our existing business.
Our ability to generate leads through veterinary hospitals could be negatively impacted if any of our products are perceived to be inadequate, unreliable, cumbersome or otherwise does not provide sufficient value, or if our process for paying veterinary invoices is unsatisfactory to the veterinarians and their clients.
In addition our ability to generate leads could be negatively impacted if any of our products are perceived to be inadequate, unreliable, cumbersome or otherwise do not provide sufficient value, or if our process for paying veterinary invoices is unsatisfactory to the veterinarians and their clients.
To compete effectively, we believe we will need to continue to invest significant resources in pet acquisition, improve our member service levels, enhance the online experience and functionalities of our website and in other technologies and infrastructure.
To compete effectively, we believe we will need to continue to invest significant resources in pet acquisition, improve our member service levels, enhance the online experience and functionalities of our website and in other technologies and infrastructure, including in our proprietary direct pay software.
We spent $71.4 million in new pet acquisition expense to acquire new members for the year ended December 31, 2024. We base our decisions regarding our new pet acquisition expenditures primarily on our internal rate of return generated on an average pet.
We invested $85.4 million in new pet acquisition expense to acquire new members for the year ended December 31, 2025. We base our decisions regarding our new pet acquisition expenditures primarily on our internal rate of return generated on an average pet.
Strategic relationships also involve various risks, depending on their structure, including the following: • our strategic partnerships may not be successful; • we may be unable to convert leads from our strategic referral partners into enrolled pets; • our strategic partners could terminate their relationships with us; • our strategic partners may acquire or form alliances with our competitors, thereby reducing or eliminating their business with us; • we may overpay strategic partners relative to the business the relationship generates; and • negative publicity and other issues faced by our strategic partners could adversely impact us.
Strategic relationships also involve various risks, depending on their structure, including the following: • our strategic partnerships may not be successful; • we may change our strategy or plans and not achieve the intended benefits of our strategic initiatives and relationships; • we may be unable to convert leads from our strategic referral partners into enrolled pets; • our strategic partners could terminate their relationships with us; • our strategic partners may acquire or form alliances with our competitors, thereby reducing or eliminating their business with us; • we may overpay strategic partners relative to the business the relationship generates; and • negative publicity and other issues faced by our strategic partners could adversely impact us, including by harming our brand and reputation.
We are and will continue to operate in a competitive market. In addition to pet parents self-financing their pets' medical care, there are traditional insurance companies that provide pet insurance products, either as a stand-alone product or along with a broad range of other insurance products, such as wellness.
In addition to pet parents self-financing their pets' medical care, there are traditional insurance companies that provide pet insurance products, either as a stand-alone product or along with a broad range of other insurance products, such as wellness.
If capital is not available to us at any time, our business, operating results and financial condition may be harmed. 23 We may require additional capital to meet our risk-based capital requirements, operate or expand our business or respond to unforeseen circumstances.
We may require additional capital to meet our risk-based capital requirements, pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us at any time, our business, operating results and financial condition may be harmed.
We rely significantly on Territory Partners, veterinarians and other third parties, including strategic partners, to generate leads. 14 In order for us to continue to implement our business strategy and grow our revenue, we must effectively maintain and increase the number and quality of our relationships with Territory Partners, veterinarians and veterinary affiliates, including veterinary purchasing groups and associations, existing members, complementary online and other businesses, animal shelters, breeders and other referral sources, and continue to scale and improve our processes, programs and procedures that support them.
In order for us to continue to implement our business strategy and grow our revenue, we must effectively manage the number and quality of our relationships with Territory Partners, veterinarians and veterinary affiliates, including veterinary purchasing groups and associations, existing members, complementary online and other businesses, animal shelters, breeders and other referral sources, and continue to scale and improve our processes, programs and procedures that support them.
Our failure to pay veterinary invoices, accurately and in a timely manner, or to deploy resources appropriately, could result in unanticipated costs to us, lead to material litigation, undermine member goodwill and our reputation, and impair our brand image and, as a result, materially and adversely affect our competitiveness, financial results, prospects and liquidity.
Our failure to pay veterinary invoices, accurately and in a timely manner, or to deploy resources appropriately, could result in unanticipated costs to us, lead to material litigation, undermine member goodwill and our reputation, and impair our brand image and, as a result, materially and adversely affect our competitiveness, financial results, prospects and liquidity. 17 In addition, we automate the payment of veterinary invoices using machine learning.
Other than potential repurchases of our common stock, we currently intend to retain all available funds and any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.
Other than potential repurchases of our common stock, we currently intend to retain all available funds and any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our stock price.
Moreover, applicable law might prevent or limit our ability to subject our Territory Partners to non-compete obligations. Similarly, Territory Partners may not require, or applicable law may not permit or may limit a Territory Partner’s ability to subject their employees or service providers to non-compete obligations.
Moreover, applicable law might prevent or limit our ability to subject our Territory Partners to non-compete obligations and similar restrictions in animal health channels. Similarly, Territory Partners may not require, or applicable law may not permit or may limit a Territory Partner’s ability to subject their employees or service providers to non-compete obligations.
Emerging claim and coverage issues may adversely affect our business. 19 As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge, including new or expanded theories of liability.
As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge, including new or expanded theories of liability.
We are also subject to contractual obligations related to reinsurance agreements with third parties (including Accelerant, who currently underwrites our policies in Canada) which requires us to fund trust accounts to support the capital requirements of our insurance company partners.
We are also subject to contractual obligations related to reinsurance agreements with third parties (including Accelerant, who continues to underwrite a minority-portion of our policies in Canada) which require us to fund trust accounts to support the capital requirements of our insurance company partners.
If we do not maintain or expand the systems and infrastructure underlying our technology platform successfully, or if we experience operational failures, our reputation could be harmed and we could lose current and potential members, which could harm our operating results and financial condition.
If we do not maintain or expand the systems and infrastructure underlying our technology platform successfully, or if we experience operational failures, including those that may impact our proprietary direct pay software, our reputation could be harmed and we could lose current and potential members, which could harm our operating results and financial condition.
They could also lead to strained relationships with veterinarians and/or members, and could adversely affect our competitiveness, financial results and liquidity. 18 If we are unable to maintain and enhance our brand recognition and reputation, our business and operating results will be harmed.
Such activity could lead to unanticipated costs to us and/or to time and expense to recover such costs. They could also lead to strained relationships with veterinarians and/or members, and could adversely affect our competitiveness, financial results and liquidity. If we are unable to maintain and enhance our brand recognition and reputation, our business and operating results will be harmed.
State legislatures and insurance regulators have shown interest in insurance companies' use of external data and artificial intelligence in insurance practices, including underwriting, marketing and claims practices. The NAIC adopted Artificial Intelligence Principles in August 2020.
State legislatures and insurance regulators have shown interest in insurance companies' use of external data and artificial intelligence in insurance practices, including underwriting, marketing, communicating with customers and prospects, and claims practices. The NAIC has adopted Artificial Intelligence Principles.
Members may reduce or eliminate their spending during an economic downturn, resulting in an increase in subscription cancellations and a reduction in the number of new member enrollments.
Our business may be affected by changes in the economic environment. Members may reduce or eliminate their spending during an economic downturn, resulting in an increase in subscription cancellations and a reduction in the number of new member enrollments.
Failure to comply with federal, state and provincial laws and regulations relating to privacy and security of personal information, and civil liabilities relating to breaches of privacy and security of personal information, could create liabilities for us, damage our reputation and harm our business. A variety of regulations govern the collection, use, retention, sharing and security of personal information.
Failure to comply with federal, state and provincial laws and regulations relating to privacy and security of personal information, and civil liabilities relating to breaches of privacy and security of personal information, could create liabilities for us, damage our reputation and harm our business.
Failure to comply with insurance laws, regulations and guidelines or other laws and regulations applicable to our business could result in significant liability, additional department of insurance licensing requirements, the revocation of licenses in a particular jurisdiction or our inability to sell insurance products, which could significantly increase our operating expenses, result in the loss of our revenue and otherwise harm our business, operating results and financial condition. 27 Moreover, adverse regulatory action in one jurisdiction could result in penalties and adversely affect our license status or reputation in other jurisdictions.
Failure to comply with insurance laws, regulations and guidelines or other laws and regulations applicable to our business could result in significant liability, additional department of insurance licensing requirements, the revocation of licenses in a particular jurisdiction or our inability to sell insurance products, which could significantly increase our operating expenses, result in the loss of our revenue and otherwise harm our business, operating results and financial condition.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this report, or the other reports we file from time to time, could result in the actual operating results being different from our guidance, and the differences may be adverse and material. 30 Future securities issuances could result in significant dilution to our stockholders and impair the market price of our common stock.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this report, or the other reports we file from time to time, could result in the actual operating results being different from our guidance, and the differences may be adverse and material.
These improvements could require significant capital expenditures and place increasing demands on our management. If we do not successfully implement improvements in these areas, our business, operating results and financial condition will be harmed.
These improvements could require significant ongoing capital expenditures and continue to place increasing demands on our management. If we do not successfully implement improvements in these areas, our business, operating results and financial condition will be harmed. Emerging claim and coverage issues may adversely affect our business.
Moreover, a vendor could fail to process payments, or could process payments in the wrong amounts, which could result in us failing to collect premiums, could result in increased cancellations and could adversely affect our reputation.
Moreover, any of our third-party billing providers could fail to process payments, or could process payments in the wrong amounts, which could result in us failing to collect premiums, could result in increased cancellations and could adversely affect our reputation.
Law and regulations of the Internet, email and texting could adversely affect our business. Many laws governing general commerce on the Internet remain unsettled and it may take years to fully determine whether and how existing laws such as those governing insurance, intellectual property, privacy and taxation apply to the Internet.
Many laws governing general commerce on the Internet remain unsettled and it may take years to fully determine whether and how existing laws such as those governing insurance, intellectual property, privacy and taxation apply to the Internet.
We do not control the timing or extent of this roll off and, accordingly, it may not proceed as we expect, which could cause our results to fluctuate or have other unexpected impacts on our business. Our Pets Best business historically has had, and we expect it to continue to have, significantly lower margins than our subscription business.
We do not control the timing or extent of this roll off and, accordingly, it may not proceed as we expect, which could cause our results to fluctuate or have other unexpected impacts on our business.
Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation in the jurisdictions where we are subject to taxation could be materially different from our historical income tax provisions and accruals.
Further, we often make elections for tax purposes which may ultimately not be upheld. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation in the jurisdictions where we are subject to taxation could be materially different from our historical income tax provisions and accruals.
There is risk that laws and regulations or any particular regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal environment may necessitate changes to our practices that may, in some cases, increase our costs and limit our ability to grow or to improve our results of operations.
There is risk that laws and regulations or any particular regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal environment may necessitate changes to our practices that may, in some cases, increase our costs and limit our ability to grow or to improve our results of operations. 28 We may be affected by mandatory participation in plans that could result in contributions from insurance subsidiaries we own.
If we are listed less prominently in, or removed altogether from, search result listings for any reason, the traffic to our websites would decline and we may not be able to replace this traffic, which in turn would harm our business, operating results and financial condition.
If we are listed less prominently in, or do not appear for any reason in these online information sources, the traffic to our websites would decline and we may not be able to replace this traffic, which in turn would harm our business, operating results and financial condition.
In addition, our use and retention of personal information could lead to civil liability exposure in the event of any disclosure of such information due to hacking, viruses, inadvertent action or other use or disclosure. Several companies have been subject to civil actions, including class actions, relating to this exposure.
In addition, our use and retention of personal information could lead to civil liability exposure in the event of any disclosure of such information due to hacking, viruses, inadvertent action or other use or disclosure.
Our average pet acquisition cost and the number of new pets we enroll depends on a number of factors and assumptions, including the effectiveness of our sales execution and marketing initiatives, changes in costs of media, the mix of our pet acquisition expenditures and the competitive environment. Our average pet acquisition cost has significantly varied over time.
Our average pet acquisition cost and the number of new pets we enroll depends on a number of factors and assumptions, including the effectiveness of marketing initiatives, including communication of our value proposition, and sales execution by us and our channel partners, changes in costs of media, the mix of our pet acquisition expenditures and the competitive environment.
As of December 31, 2024, we had U.S. federal net operating loss carryforwards of approximately $256.9 million that will begin to expire in 2026.
As of December 31, 2025, we had U.S. federal net operating loss carryforwards of approximately $253.6 million that will begin to expire in 2027.
For payments via credit and debit card and mobile payment applications, we pay interchange and other fees, which may increase over time.
We accept payments from our members through automatic fund transfers, via credit and debit card, and mobile payment applications. For payments via credit and debit card and mobile payment applications, we pay interchange and other fees, which may increase over time.
Future issuances of shares of our common stock, or the perception that these sales may occur, could depress the market price of our common stock and result in dilution to existing holders of our common stock. Acquisitions, strategic investments, partnerships, or alliances could also result in dilutive issuances of equity securities.
Future securities issuances could result in significant dilution to our stockholders and impair the market price of our common stock. Future issuances of shares of our common stock, or the perception that these sales may occur, could depress the market price of our common stock and result in dilution to existing holders of our common stock.
If we do not retain our existing members or if our marketing initiatives do not result in enrolling more pets or result in enrolling pets that inherently have a lower retention rate, we may not be able to maintain our retention and new pet acquisition rates.
Generally, we see greater conversion through our contact center and if we are unable to drive more potential members to call our contact center, our conversion rates may decline. 13 If we do not retain our existing members or if our marketing initiatives do not result in enrolling more pets or result in enrolling pets that inherently have a lower retention rate, we may not be able to maintain our retention and new pet acquisition rates.
The ultimate cost of paying veterinary invoices and the related administration may vary materially from recorded reserves, and such variance may result in adjustments to the reserve for veterinary invoices, which could have a material effect on our operating results and resources available for acquiring additional members. 16 As more veterinary hospitals install and use our patented proprietary software, the number of veterinary invoices we receive, and our associated expenses, are likely to increase.
The ultimate cost of paying veterinary invoices and the related administration may vary materially from recorded reserves, and such variance may result in adjustments to the reserve for veterinary invoices, which could have a material effect on our operating results and resources available for acquiring additional members.
We have in the past, and may in the future identify material weaknesses in our internal controls which, if not remediated appropriately or timely, could result in an inability to effectively and timely complete our financial statements, which may result in a loss of investor confidence and an adverse impact to our stock price .
Moreover, any attempts to rebuild our reputation and restore the value of our brands may be costly and time consuming, and such efforts may not ultimately be successful. 18 We have in the past, and may in the future identify material weaknesses in our internal controls which, if not remediated appropriately or timely, could result in an inability to effectively and timely complete our financial statements, which may result in a loss of investor confidence and an adverse impact to our stock price .
Each year, additional U.S. jurisdictions promulgate or amend privacy-related laws and regulations. However, in general, we are unable to predict far in advance what additional legislation, standards or regulation in the area of privacy and security of personal information could be enacted or its effect on our operations and business.
However, in general, we are unable to predict far in advance what additional legislation, standards or regulation in the area of privacy and security of personal information could be enacted or its effect on our operations and business. Law and regulations of the Internet, email and texting could adversely affect our business.
Any new laws or regulations or new interpretations of existing laws or regulations relating to the Internet could harm our business and we could be forced to incur substantial costs in order to comply with them, which would harm our business, operating results and financial condition. 28 Additionally, we use phone solicitation, email, and texting to market our services to potential members and/or as a means of communicating with our existing members.
Any new laws or regulations or new interpretations of existing laws or regulations relating to the Internet could harm our business and we could be forced to incur substantial costs in order to comply with them, which would harm our business, operating results and financial condition.
Our patented proprietary software is designed to integrate directly with most practice management software systems used by veterinary hospitals and allow us to receive and pay veterinary invoices directly to the hospital. We have found that installation and use of our patented software by a veterinary hospital could increase the number of invoices we receive from that hospital.
As more veterinary hospitals install and use our patented proprietary software, the number of veterinary invoices we receive, and our associated expenses, are likely to increase. Our patented proprietary software is designed to integrate directly with most practice management software systems used by veterinary hospitals and allow us to receive and pay veterinary invoices directly to the hospital.
Furthermore, our efforts to enforce or protect our patent rights may be ineffective, could result in substantial costs and diversion of resources, could result in the invalidation of our patent rights, and could substantially harm our operating results. In addition, patents have a limited lifespan (generally 20 years after they are filed in the United States).
Such claims may involve substantial cost, and they may distract management from operating our business. In addition, our efforts may be ineffective, could result in the invalidation of our patent rights, and could substantially harm our operating results. In addition, patents have a limited lifespan (generally 20 years after they are filed in the United States).

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe provide regular, mandatory training for all team members regarding general security concepts, cybersecurity, and physical threats. The training is designed to equip team members to identify and properly respond to a variety of cybersecurity threats and risks, as well as to communicate our processes. • Governance. We maintain a management Risk Committee that assists with our ERM function.
Biggest changeAll team members complete regular, mandatory training on security fundamentals, cybersecurity threats, physical security risks, and appropriate response practices. • Governance. Our management Risk Committee supports the ERM program and provides regular updates to the Board of Directors.
We address cybersecurity risks through an approach that focuses on preserving the confidentiality, integrity, and availability of our assets, including the information we collect and store, by identifying, preventing, and mitigating cybersecurity threats and effectively responding to cybersecurity incidents as they occur. Risk Management and Strategy Our cybersecurity risk management program focuses on the following key areas: • Technical Safeguards.
Our approach focuses on protecting the confidentiality, integrity, and availability of our systems and data by identifying, preventing, mitigating, and responding to cybersecurity threats and incidents. Risk Management and Strategy Our cybersecurity risk management program focuses on the following areas: • Technical Safeguards.
We utilize technical safeguards that are designed to protect our assets from cybersecurity threats. These safeguards include firewalls, intrusion prevention and detection systems, Managed Detection and Response, antimalware and access controls solutions, which we evaluate and improve through security assessments and threat intelligence. • Incident Response and Recovery Planning.
We implement multiple layers of technical controls—including firewalls, intrusion detection and prevention systems, Managed Detection and Response (MDR), anti-malware tools, and access-control systems. We continuously evaluate and improve these safeguards through security assessments and threat intelligence. • Incident Response and Recovery. We maintain formal incident response and recovery plans that outline our approach to cybersecurity events.
Additionally, he has attained professional certifications in information security, auditing and assessment, and threat intelligence. Cybersecurity threats, including those related to previous cybersecurity incidents, have not materially affected and are not reasonably likely to affect us, our business strategy, operations, or financial condition.
During the period covered by this report, cybersecurity threats, including those related to past incidents, have not materially affected our business strategy, operations, or financial condition, and as of the date of this report we do not believe such threats are reasonably likely to have a material impact in the future.
These efforts include a wide range of activities, such as audits, assessments, tabletop exercises, threat modeling and vulnerability testing focused on evaluating the effectiveness of our cybersecurity measures and planning. We regularly engage independent third parties to assess our cybersecurity measures, including audits and reviews of our information security control environment and operating effectiveness.
This structure allows management to make timely decisions about business impacts and disclosures when necessary. We routinely evaluate the effectiveness of our cybersecurity measures through audits, assessments, tabletop exercises, threat modeling, and vulnerability testing. Independent third parties also conduct audits and reviews of our control environment and operating effectiveness.
The results of such assessments are reported to management's Risk Committee and to our board of directors. We adjust our cybersecurity documentation, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews.
Results are shared with the management Risk Committee and the Board, and we update our documentation, processes, and controls based on these findings. Governance The Board of Directors, in collaboration with the management Risk Committee, oversees cybersecurity risk within the broader ERM program.
Our cybersecurity processes are fully integrated into our ERM program and are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and industry standards and regulations, including the NYDFS Cybersecurity Regulation and PCI DSS.
Item 1C. Cybersecurity Our Board of Directors oversees our enterprise risk management ("ERM") program, and cybersecurity is a core component of that oversight. Our cybersecurity practices are fully integrated into our ERM framework and follow recognized standards, including those developed by NIST, ISO, and applicable industry regulations such as the NYDFS Cybersecurity Regulation and PCI DSS.
We maintain a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including software and services vendors, Territory Partners and other external users of our systems and those of third parties that could adversely impact our business in the event of a cybersecurity incident. • Education.
These plans are regularly tested and refined to ensure their effectiveness. • Third-Party Risk Management. We apply a risk-based approach to evaluating and managing cybersecurity risks arising from third parties, including vendors, service providers, Territory Partners, and other external users whose systems or actions could affect our operations. • Education.
To facilitate the success of our cybersecurity risk management program, we deploy multidisciplinary teams to address cybersecurity threats and to respond to cybersecurity incidents. Through ongoing communications with these teams, our Information Security Committee monitors the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents in real-time and report such threats and incidents to management's Risk Committee when appropriate.
Our Information Security team, led by the CISO and supported by the management Risk Committee, executes our cybersecurity program and coordinates incident response and recovery activities. Multidisciplinary teams monitor prevention, detection, mitigation, and remediation efforts in real time and escalate issues to the Risk Committee as needed.
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Item 1C. Cybersecurity As part of its oversight of our company, our board of directors is involved in overseeing our risk management program. Cybersecurity is an important component of overall enterprise risk management (“ERM”).
Added
The Chief Information Security Officer ("CISO"), who reports to the Chief Information Officer ("CIO"), leads our cybersecurity program and provides frequent briefings to the CEO, executive leadership, and the Board’s Audit Committee. • Collaboration. Our cybersecurity processes are designed to identify, prevent, escalate, and mitigate threats through cross-functional coordination.
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We have established and maintained incident response and recovery plans that address how we respond to cybersecurity incidents, and we test and evaluate these plans on a regular basis. • Third-Party Risk Management.
Added
The Board receives regular updates from the Risk Committee and the CISO on topics such as emerging threats, standards, vulnerability assessments, third-party evaluations, and overall program status. Any cybersecurity incident meeting established reporting thresholds is promptly escalated to the Board and monitored until resolved.
Removed
We also utilize a virtual Chief Information Security Officer (“vCISO”) and other members of senior management and our IT team to support our risk management program. Our board of directors receives regular reports regarding our ERM function to support its oversight responsibilities, and we ensure our business units receive appropriate updates that may impact operations. • Collaboration.
Added
The Audit Committee of the Board of Directors, in collaboration with management, reviews our major financial and cyber risk exposures and the steps management has taken to monitor such exposures, including our procedures and any related policies, with respect to risk assessment and risk management.
Removed
Our processes are designed to identify, prevent, and mitigate cybersecurity threats and incidents and provide for prompt escalation when appropriate. This approach is cross-functional, drawing on the skills and experiences of our diverse team, and it is designed to allow management to make timely decisions regarding public disclosure and business matters. We periodically assess and test our cybersecurity processes.
Added
For a discussion of the risks we face relating to cybersecurity threats, please see "Risk Factors."
Removed
Governance Our board of directors, in coordination with our internal Risk Committee, oversees our ERM function, including the management of risks arising from cybersecurity threats.
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Our board of directors receives regular updates on cybersecurity matters from management's Risk Committee and from the Information Security Committee, which is comprised of Information Technology and Security leadership and oversees operational aspects of our cybersecurity program.
Removed
Those updates to our board of directors address a wide range of topics that may include information on recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, and information security considerations with respect to our partners and third parties.
Removed
Our board of directors and management's Risk Committee also receive prompt information regarding any cybersecurity incident that meets established reporting thresholds and ongoing updates on any such incident until it has been addressed.
Removed
Our Information Security Committee and vCISO annually report on the status of our cybersecurity program and meet with our board of directors to discuss our approach to cybersecurity and risk management. 33 Our Information Security Committee and vCISO, in coordination with management's Risk Committee, work collaboratively to implement a program designed to protect our assets from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with our incident response and recovery plans.
Removed
Our vCISO has served in various information technology, security, and privacy roles for over 25 years, including as the Chief Information Security Officer for several large public companies. Our vCISO holds undergraduate and graduate degrees in business administration and law, including specialties in information systems management and legal risk and compliance.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Information with respect to this item may be found in Note 8 of Item 8, “Financial Statements and Supplementary Data”, under the caption, “Legal Proceedings” which information is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 34 PART II
Biggest changeItem 3. Legal Proceedings 32 Information with respect to this item may be found in Note 8 of Item 8, “Financial Statements and Supplementary Data”, under the caption, “Legal Proceedings” which information is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 33 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stockholder return on the following graph is not necessarily indicative of future performance. 35 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Trupanion Inc. $ 100.00 $ 325.65 $ 359.17 $ 129.30 $ 83.00 $ 131.12 S&P Small Cap 600 Index $ 100.00 $ 109.57 $ 137.26 $ 113.35 $ 129.09 $ 137.90 NASDAQ-100 Technology Sector Index $ 100.00 $ 138.58 $ 175.96 $ 105.70 $ 176.19 $ 188.76 Russell 2000 Index $ 100.00 $ 118.67 $ 134.92 $ 105.83 $ 121.81 $ 134.01 36 Item 6. [Reserved] 37
Biggest changeThe stockholder return on the following graph is not necessarily indicative of future performance. 34 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Trupanion Inc. $ 100.00 $ 110.29 $ 39.70 $ 25.49 $ 40.26 $ 31.22 S&P Small Cap 600 Index $ 100.00 $ 125.27 $ 103.45 $ 117.81 $ 125.85 $ 131.18 NASDAQ-100 Technology Sector Index $ 100.00 $ 126.98 $ 76.27 $ 127.14 $ 136.21 $ 166.80 Russell 2000 Index $ 100.00 $ 113.69 $ 89.18 $ 102.64 $ 112.93 $ 125.68 35 Item 6. [Reserved] 36
Securities Authorized for Issuance under Equity Compensation Plans The information called for by this item is incorporated by reference to our Proxy Statement for the Annual Meeting of Stockholders to be held in 2025.
Securities Authorized for Issuance under Equity Compensation Plans The information called for by this item is incorporated by reference to our Proxy Statement for the Annual Meeting of Stockholders to be held in 2026.
This chart compares the stockholder return on an investment of $100 over the five years from December 31, 2019 through December 31, 2024 for (1) our common stock, (2) the S&P Small Cap 600 Index, (3) the NASDAQ-100 Technology Sector Index, and (4) the Russell 2000 Index.
This chart compares the stockholder return on an investment of $100 over the five years from December 31, 2020 through December 31, 2025 for (1) our common stock, (2) the S&P Small Cap 600 Index, (3) the NASDAQ-100 Technology Sector Index, and (4) the Russell 2000 Index.
The shares we issue are subject to various restrictions, including a minimum holding period of two years and customary transfer restrictions for shares acquired in a private placement. During the quarter ended December 31, 2024, we issued 2,881 shares of our common stock to the distributor in respect of product sales that occurred in the quarter ended September 30, 2024.
The shares we issue are subject to various restrictions, including a minimum holding period of two years and customary transfer restrictions for shares acquired in a private placement. During the quarter ended December 31, 2025, we issued 3,620 shares of our common stock to the distributor in respect of product sales that occurred in the quarter ended September 30, 2025.
Holders of Record As of February 14, 2025, there were 24 registered stockholders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, whose shares are held of record by banks, brokers, and other financial institutions.
Holders of Record As of February 6, 2026, there were 23 registered stockholders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, whose shares are held of record by banks, brokers, and other financial institutions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+38 added−20 removed54 unchanged
Biggest changeConsolidated Statements of Operations Data: Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 (in thousands) Revenue: Subscription business $ 227,783 $ 218,986 $ 208,618 $ 201,134 $ 191,537 $ 182,906 $ 173,253 $ 165,210 Other business 109,524 108,470 106,182 104,987 104,320 102,947 97,313 91,119 Total revenue 337,307 327,456 314,800 306,121 295,857 285,853 270,566 256,329 Cost of revenue: Subscription business 181,614 177,365 175,740 172,132 158,631 157,444 151,520 146,091 Other business 102,770 100,712 98,791 97,762 97,162 93,176 89,673 83,892 Total cost of revenue (1) 284,384 278,077 274,531 269,894 255,793 250,620 241,193 229,983 Operating expenses: Technology and development (1) 8,172 7,933 8,190 6,960 5,969 5,302 5,232 4,900 General and administrative (1) 16,828 16,977 15,253 14,673 13,390 12,664 13,136 21,017 New pet acquisition expense (1) 18,354 18,308 17,874 16,843 17,189 17,772 20,769 21,642 Goodwill impairment charges 5,299 — — — — — — — Depreciation and amortization 3,924 4,381 4,376 3,785 3,029 2,990 3,253 3,202 Total operating expenses 52,577 47,599 45,693 42,261 39,577 38,728 42,390 50,761 Gain (loss) from investment in joint venture 2 (34) (47) (103) (79) 4 (73) (71) Operating income (loss) 348 1,746 (5,471) (6,137) 408 (3,491) (13,090) (24,486) Interest expense 3,427 3,820 3,655 3,596 3,697 3,053 2,940 2,387 Other expense (income), net (4,773) (3,538) (3,220) (2,843) (1,256) (2,465) (2,078) (1,902) Income (loss) before income taxes 1,694 1,464 (5,906) (6,890) (2,033) (4,079) (13,952) (24,971) Income tax expense (benefit) 38 39 (44) (38) 130 (43) (238) (191) Net income (loss) $ 1,656 $ 1,425 $ (5,862) $ (6,852) $ (2,163) $ (4,036) $ (13,714) $ (24,780) (1) Includes stock-based compensation expense as follows (in thousands): Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 (in thousands) Cost of revenue $ 1,337 $ 1,401 $ 1,395 $ 1,390 $ 1,478 $ 1,176 $ 1,307 $ 1,318 Technology and development 1,160 1,259 1,261 1,254 861 650 627 708 General and administrative 4,261 4,125 3,861 3,449 3,269 3,281 2,948 8,219 New pet acquisition expense 1,536 1,555 2,129 2,059 1,693 1,785 1,755 2,086 Total stock-based compensation expense $ 8,294 $ 8,340 $ 8,646 $ 8,152 $ 7,301 $ 6,892 $ 6,637 $ 12,331 53 Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 Other Financial and Operational Data: Total Business: Total pets enrolled (at period end) 1,677,570 1,688,903 1,699,643 1,708,017 1,714,473 1,712,177 1,679,659 1,616,865 Subscription Business: Total subscription pets enrolled (at period end) 1,041,212 1,032,042 1,020,934 1,006,168 991,426 969,322 943,958 906,369 Monthly average revenue per pet $ 76.02 $ 74.27 $ 71.72 $ 69.79 $ 67.07 $ 65.82 $ 64.41 $ 63.58 Average pet acquisition cost (PAC) $ 261 $ 243 $ 231 $ 207 $ 217 $ 212 $ 236 $ 247 Average monthly retention 98.25 % 98.29 % 98.34 % 98.41 % 98.49 % 98.55 % 98.61 % 98.65 % Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 (as a percentage of revenue) Revenue 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % Cost of revenue 84 85 87 88 86 88 89 90 Operating expenses: Technology and development 2 2 3 2 2 2 2 2 General and administrative 5 5 5 5 5 4 5 8 New pet acquisition expense 5 6 6 6 6 6 8 8 Goodwill impairment charges 2 — — — — — — — Depreciation and amortization 1 1 1 1 1 1 1 1 Total operating expenses 15 14 15 14 14 13 16 19 Gain (loss) from investment in joint venture — — — — — — — — Operating income (loss) — 1 (2) (2) — (1) (5) (10) Interest expense 1 1 1 1 1 1 1 1 Other expense (income), net (1) (1) (1) (1) — (1) (1) (1) Income (loss) before income taxes 1 — (2) (2) (1) (1) (5) (10) Income tax expense (benefit) — — — — — — — — Net income (loss) — % — % (2) % (2) % (1) % (1) % (5) % (10) % Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 (as a percentage of subscription revenue) Subscription business revenue 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % Subscription business cost of revenue 80 81 84 86 83 86 87 88 54 Liquidity and Capital Resources The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Net cash provided by (used in) operating activities $ 48,287 $ 18,638 $ (8,000) Net cash provided by (used in) investing activities (13,457) 7,639 (67,516) Net cash provided by (used in) financing activities (3,957) 59,126 60,743 Effect of foreign exchange rates on cash, cash equivalents, and restricted cash, net (1,877) 424 (1,459) Net change in cash, cash equivalents, and restricted cash $ 28,996 $ 85,827 $ (16,232) Our primary requirements for liquidity are paying veterinary invoices, funding and growing our operations, funding our capital requirements, investing in new member acquisition, investing in enhancements to our member experience, and servicing debt.
Biggest changeConsolidated Statements of Operations Data: Three Months Ended Dec. 31, 2025 Sep. 30, 2025 Jun. 30, 2025 Mar. 31, 2025 Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 (in thousands) Revenue: Subscription business $ 261,422 $ 252,697 $ 242,156 $ 233,064 $ 227,783 $ 218,986 $ 208,618 $ 201,134 Other business 115,431 114,223 111,401 108,911 109,524 108,470 106,182 104,987 Total revenue 376,853 366,920 353,557 341,975 337,307 327,456 314,800 306,121 Cost of revenue: Subscription business 204,782 200,766 195,488 189,845 181,614 177,365 175,740 172,132 Other business 107,044 106,100 103,242 101,027 102,770 100,712 98,791 97,762 Total cost of revenue (1) 311,826 306,866 298,730 290,872 284,384 278,077 274,531 269,894 Operating expenses: Technology and development (1) 11,303 9,887 8,586 8,072 8,172 7,933 8,190 6,960 General and administrative (1) 18,323 18,311 20,122 19,892 16,828 16,977 15,253 14,673 New pet acquisition expense (1) 23,103 21,946 19,843 20,516 18,354 18,308 17,874 16,843 Goodwill impairment charges 1,129 — — — 5,299 — — — Depreciation and amortization 4,032 4,051 3,962 3,791 3,924 4,381 4,376 3,785 Total operating expenses 57,890 54,195 52,513 52,271 52,577 47,599 45,693 42,261 Gain (loss) from investment in joint venture — — — (305) 2 (34) (47) (103) Operating income (loss) 7,137 5,859 2,314 (1,473) 348 1,746 (5,471) (6,137) Interest expense 4,076 2,790 3,682 3,211 3,427 3,820 3,655 3,596 Other (income), net (3,232) (3,530) (11,914) (3,240) (4,773) (3,538) (3,220) (2,843) Income (loss) before income taxes 6,293 6,599 10,546 (1,444) 1,694 1,464 (5,906) (6,890) Income tax expense (benefit) 663 726 1,133 39 38 39 (44) (38) Net income (loss) $ 5,630 $ 5,873 $ 9,413 $ (1,483) $ 1,656 $ 1,425 $ (5,862) $ (6,852) (1) Includes stock-based compensation expense as follows (in thousands): 52 Three Months Ended Dec. 31, 2025 Sep. 30, 2025 Jun. 30, 2025 Mar. 31, 2025 Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 (in thousands) Veterinary invoice expense (2) $ 620 $ 677 $ 774 $ 770 $ 835 $ 847 $ 854 $ 924 Other cost of revenue (2) 605 585 605 489 502 554 541 466 Technology and development 1,710 1,705 1,470 1,151 1,160 1,259 1,261 1,254 General and administrative 5,025 4,971 5,047 4,528 4,261 4,125 3,861 3,449 New pet acquisition expense 1,567 1,561 1,560 2,892 1,536 1,555 2,129 2,059 Total stock-based compensation expense $ 9,527 $ 9,499 $ 9,456 $ 9,830 $ 8,294 $ 8,340 $ 8,646 $ 8,152 (2) Veterinary invoice expense and Other cost of revenue together comprise stock-based compensation expense included within Total cost of revenue (in thousands).
We generate leads for our subscription business segment from a diverse set of member acquisition channels, which we then seek to convert into members through our contact center, website and other direct-to-consumer activities. These channels include leads from third-parties such as veterinarians and referrals from existing members. Veterinary hospitals represent our largest referral source.
We generate leads for our subscription business segment from a diverse set of member acquisition channels, which we then seek to convert into members through our contact center, website and other direct-to-consumer activities. These channels include referrals from third-parties such as veterinarians and existing members. Veterinary hospitals represent our largest referral source.
We offset sign-up fee revenue because it is a one-time charge to new members collected at the time of enrollment used to partially offset initial setup costs, which are included in new pet acquisition expenses. We exclude other business segment pet acquisition expense because that does not relate to subscription enrollments.
We offset sign-up fee revenue because it is a one-time charge to some new members collected at the time of enrollment used to partially offset initial setup costs, which are included in new pet acquisition expenses. We exclude other business segment pet acquisition expense because that does not relate to subscription enrollments.
Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties, low and medium average revenue per pet products marketed under the brand names Furkin and PHI Direct in Canada, and a Trupanion branded product in Germany and Switzerland.
Within our subscription business, we also currently provide "Powered by Trupanion" pet insurance product offerings marketed by third parties, low and medium average revenue per pet products marketed under the brand names Furkin and PHI Direct in Canada, and a Trupanion branded product in Germany and Switzerland.
We offset sign-up fee revenue because it is a one-time charge to new members collected at the time of enrollment used to partially offset initial setup costs, which are included in new pet acquisition expenses.
We offset sign-up fee revenue because it is a one-time charge to some new members collected at the time of enrollment used to partially offset initial setup costs, which are included in new pet acquisition expenses.
While our board of directors has approved the program, any repurchase activity is subject to quarterly assessment and board approval, based on various factors including available cash, our stock price relative to our estimated intrinsic value, forecasted operating results, and available opportunities to deploy capital. We repurchased no shares under this program during the year ended December 31, 2024.
While our board of directors has approved the program, any repurchase activity is subject to quarterly assessment and board approval, based on various factors including available cash, our stock price relative to our estimated intrinsic value, forecasted operating results, and available opportunities to deploy capital. We repurchased no shares under this program during the year ended December 31, 2025.
We have certain contractual obligations in the normal course of business, including obligations and commitments relating to our Credit Facility, non-cancellable vendor purchase agreements, as well as future payments of veterinary invoices. Refer to Note 9, Reserve for Veterinary Invoices, included in Item 8 of Part II of this 10-K, for further details on anticipated cash outflows.
We have certain contractual obligations in the normal course of business, including obligations and commitments relating to our credit arrangements, non-cancellable vendor purchase agreements, as well as future payments of veterinary invoices. Refer to Note 9, Reserve for Veterinary Invoices, included in Item 8 of Part II of this 10-K, for further details on anticipated cash outflows.
We believe the reserve amount as of December 31, 2024 is adequate, and we do not believe that there are any reasonably likely changes in the facts or circumstances underlying key assumptions that would result in the reserve balance being insufficient in an amount that would have a material impact on our reported results, financial position or liquidity.
We believe the reserve amount as of December 31, 2025 is adequate, and we do not believe that there are any reasonably likely changes in the facts or circumstances underlying key assumptions that would result in the reserve balance being insufficient in an amount that would have a material impact on our reported results, financial position or liquidity.
These factors are derived from historical paid loss triangles and reflect observed claim settlement patterns and any operational or external changes affecting claim payments including, but not limited to: • the number of veterinary invoices we expect to receive, • the average cost of those veterinary invoices, • the time elapsed between the date of loss and the date of payment, • the appropriate segmentation between product lines or claim processing method, and • the expected cost to process and administer claim payments As of each reporting date, we also utilize subsequent claims payment activities to monitor and reevaluate previously established reserves.
These factors are derived from historical paid loss triangles and reflect observed claim settlement patterns and any operational or external changes affecting claim payments including, but not limited to: • the number of veterinary invoices we expect to receive, • the average cost of those veterinary invoices, • the time elapsed between the date of loss and the date of payment, • the members chosen deductible, • the appropriate segmentation between product lines or claim processing method, and • the expected cost to process and administer claim payments As of each reporting date, we also utilize subsequent claims payment activities to monitor and reevaluate previously established reserves.
We monitor average monthly retention because it provides a measure of member satisfaction and allows us to calculate the implied average subscriber life in months. 40 Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance.
We monitor average monthly retention because it provides a measure of member satisfaction and allows us to calculate the implied average subscriber life in months. 39 Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
We may enter into additional relationships in this segment in the future, if we believe they will be beneficial, which could impact our operating results. 46 Results of Operations The following tables set forth our results of operations for the periods presented both in absolute dollars and as a percentage of total revenue for those periods.
We may enter into additional relationships in this segment in the future, if we believe they will be beneficial, which could impact our operating results. 45 Results of Operations The following tables set forth our results of operations for the periods presented both in absolute dollars and as a percentage of total revenue for those periods.
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 $0.3 million and $0.7 million for the three months ended December 31, 2024 and 2023, respectively.
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, $0.3 million and $0.7 million for the three months ended December 31, 2025, 2024 and 2023, respectively.
We monitor monthly average revenue per pet because it is an indicator of the per pet unit economics of our subscription business. 39 Average pet acquisition cost. Average pet acquisition cost ("PAC") is calculated as net acquisition cost divided by the total number of new subscription pets enrolled in that period.
We monitor monthly average revenue per pet because it is an indicator of the per pet unit economics of our subscription business. 38 Average pet acquisition cost. Average pet acquisition cost ("PAC") is calculated as net acquisition cost divided by the total number of new subscription pets enrolled in that period.
Cost of Revenue Cost of revenue in each of our segments is comprised of the following: Veterinary invoice expense Veterinary invoice expense includes our costs to review and pay veterinary invoices, administer the payments, and provide member services, and other operating expenses directly or indirectly related to the claims process.
Cost of Revenue Cost of revenue in each of our segments is comprised of the following: Veterinary invoice expense Veterinary invoice expense includes our costs to review and pay veterinary invoices, administer the payments, and provide member services, and other operating expenses directly or indirectly related to this process.
Total pets enrolled reflects the number of pets enrolled in one of the insurance products offered in our subscription business segment and our other business segment at the end of each period presented. We monitor total pets enrolled because it provides an indication of the growth of our consolidated business. Total subscription pets enrolled.
Total pets enrolled reflects the number of pets enrolled in one of the insurance products offered in our subscription business segment or our other business segment at the end of each period presented. We monitor total pets enrolled because it provides an indication of the growth of our consolidated business. Total subscription pets enrolled.
Technology and development Technology and development expenses primarily consist of personnel costs and related expenses for our technology staff, which includes information technology development and infrastructure support, including third-party services. It also includes expenses associated with development in new geographies and new products and offerings.
Technology and development Technology and development expenses primarily consist of personnel costs and related expenses for our technology staff, which includes information technology development, security, infrastructure support, and third-party services. It also includes expenses associated with development in new geographies and new products and offerings.
As our business grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements will also increase, though risk-based capital requirements also take our overall rate of growth into consideration. Recently, our other business segment growth has slowed and, currently, we expect that to continue, which would reduce capital requirements.
As our business in the U.S. grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements will also increase, though risk-based capital requirements also take our overall rate of growth into consideration. Recently, our other business segment growth has slowed and, we currently expect that to continue, which would reduce capital requirements.
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 $1.5 million and $1.3 million for the years ended December 31, 2024 and 2023, respectively.
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 $0.8 million, $1.5 million and $1.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
(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 43 When determining our PAC, we calculate net acquisition cost for a more comparable metric across periods.
(2) Excludes the portion of stock-based compensation expense attributable to the other business segment (3) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant 42 When determining our PAC, we calculate net acquisition cost for a more comparable metric across periods.
The NAIC requirements provide a method for analyzing the minimum amount of risk-based capital (statutory capital and surplus plus other adjustments) appropriate for an insurance company to support its overall business operations, taking into account the risk characteristics of the company’s assets, liabilities and certain other items .
These regulatory requirements provide a method for analyzing the minimum amount of capital (statutory capital and surplus plus other adjustments) appropriate for an insurance company to support its overall business operations, taking into account the risk characteristics of the company’s assets, liabilities and certain other items .
As such, our average monthly retention rate as of December 31, 2024 is an average of each month’s retention from January 1, 2024 through December 31, 2024.
As such, our average monthly retention rate as of December 31, 2025 is an average of each month’s retention from January 1, 2025 through December 31, 2025.
Overview We provide medical insurance for cats and dogs in the United States, Canada, certain countries in Continental Europe, and Australia. Through our data-driven, vertically-integrated approach, we develop and offer high value medical insurance products, priced specifically for each pet’s unique characteristics and coverage level. Our growing and loyal membership base provides us with highly predictable and recurring revenue.
Overview We provide medical insurance for cats and dogs in the United States, Canada, and certain countries in Continental Europe. Through our data-driven, vertically-integrated approach, we develop and offer high-value medical insurance products, priced to take into account each pet’s unique characteristics and coverage level. Our growing and loyal membership base provides us with highly predictable and recurring revenue.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
Investing Cash Flows Net cash used by investing activities was $13.5 million for the year ended December 31, 2024, primarily consisting of $9.7 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing, and internal policy management improvements and $5.8 million in purchases, net of sales and maturities, of investment securities.
Net cash used in investing activities was $13.5 million for the year ended December 31, 2024, primarily consisting of purchases of investment securities of $133.5 million as well as $9.7 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing, and internal policy management improvements, partially offset by $127.7 million in sales and maturities of investment securities.
As required by the Office of the Superintendent of Financial Institutions regulations related to our reinsurance agreement with Accelerant Insurance Company of Canada, we are required to maintain a Canadian Trust account with the greater of CAD $2.0 million or 120% of unearned Canadian premium plus 20% of outstanding Canadian claims, including all incurred but not reported claims.
As required by OSFI regulations related to our reinsurance agreement with Accelerant, we are required to maintain a Canadian Reinsurance Trust account with the greater of CAD $2.0 million or 120% of unearned Canadian premium plus 20% of outstanding Canadian claims, including all incurred but not reported claims.
The ultimate liability, however, may be in excess of or less than the amount we have reserved. For the year ended December 31, 2024, we paid $60.1 million for veterinary invoices dated on or before December 31, 2023, including related processing costs. Our reserve estimate for these expenses was $63.2 million as of December 31, 2023.
The ultimate liability, however, may be in excess of or less than the amount we have reserved. For the year ended December 31, 2025, we paid $46.6 million for veterinary invoices dated on or before December 31, 2024, including related processing costs. Our reserve estimate for these expenses was $51.6 million as of December 31, 2024.
The 15% increase in veterinary invoice expense was driven by an increase in total subscription pet months for policies underwritten by Trupanion and a 7% increase in veterinary invoice expense per pet. The 17% increase in other cost of revenue was primarily driven by general increases in costs attributable to growth in our membership and subscription revenue.
The 12% increase in veterinary invoice expense was primarily driven by an 8% increase in veterinary invoice expense per pet and an increase in total subscription pet months for policies underwritten by Trupanion. The 10% increase in other cost of revenue was primarily due to general increases in costs attributable to growth in our membership and subscription revenue.
New pet acquisition expense New pet acquisition expenses primarily consist of costs, including personnel costs, to educate veterinarians and consumers about the benefits of Trupanion, to generate leads and to convert leads into enrolled pets, as well as print, online and promotional advertising costs.
New pet acquisition expense New pet acquisition expenses primarily consist of costs to acquire a pet (including costs associated directly to supporting the first year of a member), personnel costs, costs to educate veterinarians and consumers about the benefits of Trupanion, costs to generate leads and to convert leads into enrolled pets, as well as print, online and promotional advertising costs.
As of December 31, 2024, the account held CAD $19.9 million. WICL Segregated Account Trupanion Germany and WICL Segregated Account Trupanion Switzerland were established in the third quarter of 2024 by WICL, with Trupanion, Inc. as the shareholder, for purposes of entering into reinsurance agreements with underwriters in Germany and Switzerland, respectively.
WICL Segregated Account Trupanion Germany and WICL Segregated Account Trupanion Switzerland were established in the third quarter of 2024 by WICL, with Trupanion, Inc. as the shareholder, for purposes of entering into reinsurance agreements with underwriters in Germany and Switzerland, 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.
(2) Excludes the portion of stock-based compensation expense attributable to the other business segment. (3) 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 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
Other cost of revenue Other cost of revenue for the subscription business segment includes direct and indirect member service expenses, Territory Partner fees upon policy renewals, payment processing fees and premium tax expenses.
Other cost of revenue Other cost of revenue for the subscription business segment includes direct and indirect member service expenses, Territory Partner commissions per member renewal, payment processing fees and premium tax expenses.
Most of the assets in our insurance entities are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate.
In addition to minimum capital requirements the majority of assets in our insurance entities are subject to dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate.
General and Administrative Expenses Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages) General and administrative $ 63,731 $ 60,207 $ 39,379 6% 53% Percentage of total revenue 5 % 5 % 4 % Year ended December 31, 2024 compared to year ended December 31, 2023.
General and Administrative Expenses Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except percentages) General and administrative $ 76,648 $ 63,731 $ 60,207 20% 6% Percentage of total revenue 5 % 5 % 5 % Year ended December 31, 2025 compared to year ended December 31, 2024.
New Pet Acquisition Expense Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except pet and per pet data) New pet acquisition expense $ 71,379 $ 77,372 $ 89,500 (8)% (14)% Percentage of total revenue 6 % 7 % 10 % Subscription Business: Total subscription pets enrolled (at period end) 1,041,212 991,426 869,862 5 14 Average pet acquisition cost (PAC) $ 235 $ 228 $ 289 3 (21) Year ended December 31, 2024 compared to year ended December 31, 2023.
New Pet Acquisition Expense Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except pet and per pet data) New pet acquisition expense $ 85,408 $ 71,379 $ 77,372 20% (8)% Percentage of total revenue 6 % 6 % 7 % Subscription Business: Total subscription pets enrolled (at period end) 1,096,173 1,041,212 991,426 5 5 Average pet acquisition cost (PAC) $ 288 $ 235 $ 228 23 3 Year ended December 31, 2025 compared to year ended December 31, 2024.
Cost of revenue for the other business segment increased from 92% to 93% of revenue year-over-year. 50 Technology and Development Expenses Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages) Technology and development $ 31,255 $ 21,403 $ 25,133 46% (15)% Percentage of total revenue 2 % 2 % 3 % Year ended December 31, 2024 compared to year ended December 31, 2023.
Total cost of revenue for the other business segment decreased from 94% to 93% of revenue year-over-year. 49 Technology and Development Expenses Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except percentages) Technology and development $ 37,848 $ 31,255 $ 21,403 21% 46% Percentage of total revenue 3 % 2 % 2 % Year ended December 31, 2025 compared to year ended December 31, 2024.
Gain (loss) from investment in joint venture Gain (loss) from investment in joint venture consists of the share of income and losses from our equity method investment in a joint venture, as well as income and expenses associated with administrative services provided to the joint venture. Stock-based compensation Stock-based compensation is included in the cost and expense line items above.
Gain (loss) from investment in joint venture Gain (loss) from investment in joint venture consists of the share of income and losses from our equity method investment in a joint venture in Australia, as well as income and expenses associated with administrative services provided to the joint venture.
Net cash provided by investing activities was $7.6 million for the year ended December 31, 2023, primarily consisting of $24.3 million in sales and maturities of investment securities, net of purchases, offset by $18.3 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing, and internal policy management improvements.
Investing Cash Flows Net cash used in investing activities was $95.9 million for the year ended December 31, 2025, primarily consisting of purchases of investment securities of $256.0 million as well as $14.1 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements, partially offset by $172.6 million in sales and maturities of investment securities.
This increase was primarily driven by a 17% increase in monthly average revenue per pet in this segment, partially offset by a decrease in pet months in this segment primarily reflecting the expected run off of pets we historically insured for a third-party. 49 Cost of Revenue Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages, pet and per pet data) Cost of Revenue: Subscription business: Veterinary invoice expense $ 624,428 $ 543,196 $ 436,880 15% 24% Other cost of revenue 82,423 70,490 60,804 17 16 Total cost of revenue $ 706,851 $ 613,686 $ 497,684 15 23 Other business: Veterinary invoice expense $ 324,720 $ 287,859 $ 212,857 13 35 Other cost of revenue 75,315 76,044 72,453 (1) 5 Total cost of revenue $ 400,035 $ 363,903 $ 285,310 10 28 Percentage of Revenue by Segment: Subscription business: Veterinary invoice expense 73 % 76 % 73 % Other cost of revenue 10 10 10 Total cost of revenue 83 86 83 Other business: Veterinary invoice expense 76 73 69 Other cost of revenue 18 19 23 Total cost of revenue 94 92 92 Total pets enrolled (at period end) 1,677,570 1,714,473 1,537,573 (2) 12 Total subscription pets enrolled (at period end) 1,041,212 991,426 869,862 5 14 Monthly average revenue per pet $ 72.98 $ 65.26 $ 63.82 12 2 Year ended December 31, 2024 compared to year ended December 31, 2023.
This increase was primarily driven by a 20% increase in monthly average revenue per pet in this segment, partially offset by a decrease in pet months primarily reflecting the expected run-off of pets we historically insured for Pets Best. 48 Cost of Revenue Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except percentages, pet and per pet data) Cost of Revenue: Subscription business: Veterinary invoice expense $ 700,154 $ 624,428 $ 543,196 12% 15% Other cost of revenue 90,726 82,423 70,490 10 17 Total cost of revenue $ 790,880 $ 706,851 $ 613,686 12 15 Other business: Veterinary invoice expense $ 328,821 $ 324,720 $ 287,859 1 13 Other cost of revenue 88,593 75,315 76,044 18 (1) Total cost of revenue $ 417,414 $ 400,035 $ 363,903 4 10 Percentage of Revenue by Segment: Subscription business: Veterinary invoice expense 71 % 73 % 76 % Other cost of revenue 9 10 10 Total cost of revenue 80 83 86 Other business: Veterinary invoice expense 73 76 73 Other cost of revenue 20 18 19 Total cost of revenue 93 94 92 Total pets enrolled (at period end) 1,647,565 1,677,570 1,714,473 (2) (2) Total subscription pets enrolled (at period end) 1,096,173 1,041,212 991,426 5 5 Monthly average revenue per pet $ 80.79 $ 72.98 $ 65.26 11 12 Year ended December 31, 2025 compared to year ended December 31, 2024.
The following tables reconcile GAAP new pet acquisition expense to non-GAAP net acquisition cost (in thousands) for the years ended December 31, 2024, 2023, and 2022, and for each of the last eight fiscal quarters: Year Ended December 31, 2024 2023 2022 New pet acquisition expense $ 71,379 $ 77,372 $ 89,500 Net of sign-up fee revenue (4,061) (4,527) (4,984) Excluding: Stock-based compensation expense (6,908) (7,000) (9,116) Other business pet acquisition expense (39) (200) (541) Pet acquisition expense for commission-based policies (3,345) (3,443) (443) Net acquisition cost $ 57,026 $ 62,202 $ 74,416 Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 New pet acquisition expense $ 18,354 $ 18,308 $ 17,874 $ 16,843 $ 17,189 $ 17,772 $ 20,769 $ 21,642 Net of sign-up fee revenue (906) (1,100) (1,036) (1,019) (1,035) (1,084) (1,189) (1,219) Excluding: Stock-based compensation expense (1,482) (1,503) (2,066) (1,857) (1,567) (1,679) (1,722) (2,032) Other business pet acquisition expense (8) (8) (10) (13) (77) (10) (62) (51) Pet acquisition expense for commission-based policies (1,125) (634) (754) (832) (802) (826) (888) (927) Net acquisition cost $ 14,833 $ 15,063 $ 14,008 $ 13,122 $ 13,708 $ 14,173 $ 16,908 $ 17,413 Components of Operating Results General We operate in two reporting segments: subscription business and other business.
The following tables reconcile GAAP new pet acquisition expense to non-GAAP net acquisition cost (in thousands) for the years ended December 31, 2025, 2024, and 2023, and for each of the last eight fiscal quarters: Year Ended December 31, 2025 2024 2023 New pet acquisition expense $ 85,408 $ 71,379 $ 77,372 Net of sign-up fee revenue (4,307) (4,061) (4,527) Excluding: Stock-based compensation expense (1) (7,446) (6,908) (7,000) Other business pet acquisition expense (90) (39) (200) Pet acquisition expense for commission-based policies (3,184) (3,345) (3,443) Net acquisition cost $ 70,381 $ 57,026 $ 62,202 Three Months Ended Dec. 31, 2025 Sep. 30, 2025 Jun. 30, 2025 Mar. 31, 2025 Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 New pet acquisition expense $ 23,103 $ 21,946 $ 19,843 $ 20,516 $ 18,354 $ 18,308 $ 17,874 $ 16,843 Net of sign-up fee revenue (1,049) (1,157) (1,061) (1,040) (906) (1,100) (1,036) (1,019) Excluding: Stock-based compensation expense (1) (1,530) (1,527) (1,516) (2,873) (1,482) (1,503) (2,066) (1,857) Other business pet acquisition expense (8) (5) (74) (3) (8) (8) (10) (13) Pet acquisition expense for commission-based policies (869) (790) (927) (598) (1,125) (634) (754) (832) Net acquisition cost $ 19,647 $ 18,467 $ 16,265 $ 16,002 $ 14,833 $ 15,063 $ 14,008 $ 13,122 Components of Operating Results General We operate in two reporting segments: subscription business and other business.
The 13% increase in veterinary invoice expense was primarily driven by a 21% increase in veterinary invoice expense per pet, offset by a decrease in pet months in this segment primarily reflecting the expected run off of pets we historically insured for a third-party. The 1% decrease in other cost of revenue was primarily driven by decreases in premium-based expenses.
The 1% increase in veterinary invoice expense was primarily driven by a 16% increase in veterinary invoice expense per pet, partially offset by a decrease in pet months in this segment primarily reflecting the expected run-off of pets we historically insured for Pets Best.
Total subscription pets enrolled reflects the number of pets in active memberships at the end of each period presented. We monitor total subscription pets enrolled because it provides an indication of the growth of our subscription business. Monthly average revenue per pet.
Total subscription pets enrolled reflects the number of pets enrolled in one of the insurance products offered in our subscription business segment at the end of each period presented. We monitor total subscription pets enrolled because it provides an indication of the growth of our subscription business.
Total Other Expense (Income), Net Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages) Interest expense $ 14,498 $ 12,077 $ 4,267 20% 183% Other expense (income), net (14,374) (7,701) (3,072) 87 151 Total other (income) expense, net $ 124 $ 4,376 $ 1,195 (97)% 266% Percentage of total revenue — % — % — % Year ended December 31, 2024 compared to year ended December 31, 2023.
Total Other Expense (Income), Net Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except percentages) Interest expense $ 13,759 $ 14,498 $ 12,077 (5)% 20% Other (income), net (21,916) (14,374) (7,701) 52 87 Total other (income) expense, net $ (8,157) $ 124 $ 4,376 (6,678)% (97)% Percentage of total revenue 1 % — % — % Year ended December 31, 2025 compared to year ended December 31, 2024.
If our capital surplus grows relative to the rate of growth of our business, we may also generate cash for operations and growth, via dividends or other methods, from one or more of our underwriting entities.
Financing could include equity, equity-linked, or debt financing. Additional financing may not be available to us on acceptable terms, or at all. If our capital surplus grows relative to the rate of growth of our business, we may also generate cash for operations and growth, via dividends or other methods, from one or more of our underwriting entities.
Regulation As of December 31, 2024, our insurance entities collectively held $125.5 million in cash and cash equivalents, to be used for operating expenses of our insurance entities, $146.4 million in short-term investments and $270.2 million in other current assets.
As of December 31, 2025, our insurance entities collectively held $88.1 million in cash and cash equivalents, to be used for operating expenses of our insurance entities, $232.6 million in short-term investments and $299.6 million in other current assets.
Year Ended December 31, 2024 2023 2022 (in thousands) Revenue: Subscription business $ 856,521 $ 712,906 $ 596,610 Other business 429,163 395,699 308,569 Total revenue 1,285,684 1,108,605 905,179 Cost of revenue: Subscription business 706,851 613,686 497,684 Other business 400,035 363,903 285,310 Total cost of revenue (1) 1,106,886 977,589 782,994 Operating expenses: Technology and development (1) 31,255 21,403 25,133 General and administrative (1) 63,731 60,207 39,379 New pet acquisition expense (1) 71,379 77,372 89,500 Goodwill impairment charges 5,299 — — Depreciation and amortization 16,466 12,474 10,921 Total operating expenses 188,130 171,456 164,933 Gain (loss) from investment in joint venture (182) (219) (253) Operating loss (9,514) (40,659) (43,001) Interest expense 14,498 12,077 4,267 Other expense (income), net (14,374) (7,701) (3,072) Loss before income taxes (9,638) (45,035) (44,196) Income tax expense (benefit) (5) (342) 476 Net loss $ (9,633) $ (44,693) $ (44,672) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Cost of revenue $ 5,523 $ 5,279 $ 6,484 Technology and development 4,934 2,846 4,742 General and administrative 15,696 17,717 12,831 New pet acquisition expense 7,279 7,319 9,336 Total stock-based compensation expense $ 33,432 $ 33,161 $ 33,393 47 Year Ended December 31, 2024 2023 2022 (as a percentage of revenue) Revenue 100 % 100 % 100 % Cost of revenue 86 88 87 Operating expenses: Technology and development 2 2 3 General and administrative 5 5 4 New pet acquisition expense 6 7 10 Goodwill impairment charges — — — Depreciation and amortization 1 1 1 Total operating expenses 14 15 18 Gain (loss) from investment in joint venture — — — Operating loss (1) (4) (5) Interest expense 1 1 — Other expense (income), net (1) (1) — Loss before income taxes (1) (4) (5) Income tax expense (benefit) — — — Net loss (1) % (4) % (5) % Stock-based compensation expense: Year Ended December 31, 2024 2023 2022 (as a percentage of revenue) Cost of revenue — % — % 1 % Technology and development — — % 1 General and administrative 1 2 % 1 New pet acquisition expense 1 1 % 1 Total stock-based compensation expense 2 % 3 % 4 % Year Ended December 31, 2024 2023 2022 (as a percentage of subscription revenue) Subscription business revenue 100 % 100 % 100 % Subscription business cost of revenue 83 86 83 48 Comparison of the years ended December 31, 2024, 2023, and 2022 Revenue Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages, pet and per pet data) Revenue: Subscription business $ 856,521 $ 712,906 $ 596,610 20% 19% Other business 429,163 395,699 308,569 8 28 Total revenue $ 1,285,684 $ 1,108,605 $ 905,179 16 22 Percentage of Revenue by Segment: Subscription business 67 % 64 % 66 % Other business 33 36 34 Total revenue 100 % 100 % 100 % Total pets enrolled (at period end) 1,677,570 1,714,473 1,537,573 (2) 12 Total subscription pets enrolled (at period end) 1,041,212 991,426 869,862 5 14 Monthly average revenue per pet $ 72.98 $ 65.26 $ 63.82 12 2 Average monthly retention 98.25 % 98.49 % 98.69 % Year ended December 31, 2024 compared to year ended December 31, 2023.
Year Ended December 31, 2025 2024 2023 (in thousands) Revenue: Subscription business $ 989,338 $ 856,521 $ 712,906 Other business 449,967 429,163 395,699 Total revenue 1,439,305 1,285,684 1,108,605 Cost of revenue: Subscription business 790,880 706,851 613,686 Other business 417,414 400,035 363,903 Total cost of revenue (1) 1,208,294 1,106,886 977,589 Operating expenses: Technology and development (1) 37,848 31,255 21,403 General and administrative (1) 76,648 63,731 60,207 New pet acquisition expense (1) 85,408 71,379 77,372 Goodwill impairment charges 1,129 5,299 — Depreciation and amortization 15,836 16,466 12,474 Total operating expenses 216,869 188,130 171,456 Loss from investment in joint venture (305) (182) (219) Operating income (loss) 13,837 (9,514) (40,659) Interest expense 13,759 14,498 12,077 Other (income), net (21,916) (14,374) (7,701) Income (loss) before income taxes 21,994 (9,638) (45,035) Income tax expense (benefit) 2,561 (5) (342) Net income (loss) $ 19,433 $ (9,633) $ (44,693) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2025 2024 2023 (in thousands) Veterinary invoice expense (2) $ 2,841 $ 3,460 $ 3,667 Other cost of revenue (2) 2,284 2,063 1,612 Technology and development 6,036 4,934 2,846 General and administrative 19,571 15,696 17,717 New pet acquisition expense 7,580 7,279 7,319 Total stock-based compensation expense $ 38,312 $ 33,432 $ 33,161 (2) Veterinary invoice expense and Other cost of revenue together comprise stock-based compensation expense included within Total cost of revenue. 46 Year Ended December 31, 2025 2024 2023 (as a percentage of revenue) Revenue 100 % 100 % 100 % Cost of revenue 84 86 88 Operating expenses: Technology and development 3 2 2 General and administrative 5 5 5 New pet acquisition expense 6 6 7 Goodwill impairment charges — — — Depreciation and amortization 1 1 1 Total operating expenses 15 14 15 Loss from investment in joint venture — — — Operating income (loss) 1 (1) (4) Interest expense (1) 1 1 Other expense (income), net 2 (1) (1) Income (loss) before income taxes 2 (1) (4) Income tax expense (benefit) — — — Net income (loss) 2 % (1) % (4) % Stock-based compensation expense: Year Ended December 31, 2025 2024 2023 (as a percentage of revenue) Cost of revenue — % — % — % Technology and development — — — General and administrative 1 1 2 New pet acquisition expense 1 1 1 Total stock-based compensation expense 2 % 2 % 3 % Year Ended December 31, 2025 2024 2023 (as a percentage of subscription revenue) Subscription business revenue 100 % 100 % 100 % Subscription business cost of revenue 80 83 86 47 Comparison of the years ended December 31, 2025, 2024, and 2023 Revenue Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except percentages, pet and per pet data) Revenue: Subscription business $ 989,338 $ 856,521 $ 712,906 16% 20% Other business 449,967 429,163 395,699 5 8 Total revenue $ 1,439,305 $ 1,285,684 $ 1,108,605 12 16 Percentage of Revenue by Segment: Subscription business 69 % 67 % 64 % Other business 31 33 36 Total revenue 100 % 100 % 100 % Total pets enrolled (at period end) 1,647,565 1,677,570 1,714,473 (2) (2) Total subscription pets enrolled (at period end) 1,096,173 1,041,212 991,426 5 5 Monthly average revenue per pet $ 80.79 $ 72.98 $ 65.26 11 12 Average monthly retention 98.34 % 98.25 % 98.49 % Year ended December 31, 2025 compared to year ended December 31, 2024.
WICL Segregated Account AX was established by WICL, with Trupanion, Inc. as the shareholder, to enter into a reinsurance agreement with Accelerant Insurance Company of Canada, formerly known as Omega General Insurance Company.
WICL Segregated Account AX was established by WICL, with Trupanion, Inc. as the shareholder, to enter into a reinsurance agreement with Accelerant for our business activity in Canada.
Subscription payments are paid at the beginning of each subscription period. In most cases, our members authorize us to directly charge their credit card, debit card or bank account through automatic funds transfer. Subscription revenue is recognized on a pro rata basis over the policy term.
In most cases, our members authorize us to directly charge their credit card, debit card or bank account through automatic funds transfer. Subscription revenue is recognized on a pro rata basis over the policy term. Membership may be canceled at any time without penalty, and we issue a refund for the unused portion of the canceled membership.
Financing Cash Flows Net cash used by financing activities was $4.0 million for the year ended December 31, 2024, primarily consisting of $2.5 million in shares withheld to satisfy tax withholdings and $1.4 million in repayments on the Credit Facility.
Net cash used in financing activities was $4.0 million for the year ended December 31, 2024, primarily consisting of $2.5 million in shares withheld to satisfy tax withholdings and $1.4 million in repayments on the Prior Credit Facility. 54 Long-Term Debt Prior Credit Facility Our Prior Credit Facility provided us with up to $150.0 million of credit, and we had outstanding term loans totaling $116.2 million prior to repayment.
Year Ended December 31, 2024 2023 2022 Total Business: Total pets enrolled (at period end) 1,677,570 1,714,473 1,537,573 Subscription Business: Total subscription pets enrolled (at period end) 1,041,212 991,426 869,862 Monthly average revenue per pet $ 72.98 $ 65.26 $ 63.82 Average pet acquisition cost (PAC) $ 235 $ 228 $ 289 Average monthly retention 98.25 % 98.49 % 98.69 % Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 Total Business: Total pets enrolled (at period end) 1,677,570 1,688,903 1,699,643 1,708,017 1,714,473 1,712,177 1,679,659 1,616,865 Subscription Business: Total subscription pets enrolled (at period end) 1,041,212 1,032,042 1,020,934 1,006,168 991,426 969,322 943,958 906,369 Monthly average revenue per pet $ 76.02 $ 74.27 $ 71.72 $ 69.79 $ 67.07 $ 65.82 $ 64.41 $ 63.58 Average pet acquisition cost (PAC) $ 261 $ 243 $ 231 $ 207 $ 217 $ 212 $ 236 $ 247 Average monthly retention 98.25 % 98.29 % 98.34 % 98.41 % 98.49 % 98.55 % 98.61 % 98.65 % Total pets enrolled and total subscription pets enrolled include certain pet enrollments in European markets, where policies are currently underwritten by third parties and Trupanion is acting as an insurance broker.
Year Ended December 31, 2025 2024 2023 Total Business: Total pets enrolled (at period end) 1,647,565 1,677,570 1,714,473 Subscription Business: Total subscription pets enrolled (at period end) 1,096,173 1,041,212 991,426 Monthly average revenue per pet $ 80.79 $ 72.98 $ 65.26 Average pet acquisition cost (PAC) $ 288 $ 235 $ 228 Average monthly retention 98.34 % 98.25 % 98.49 % Three Months Ended Dec. 31, 2025 Sep. 30, 2025 Jun. 30, 2025 Mar. 31, 2025 Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Total Business: Total pets enrolled (at period end) 1,647,565 1,654,414 1,660,455 1,667,637 1,677,570 1,688,903 1,699,643 1,708,017 Subscription Business: Total subscription pets enrolled (at period end) 1,096,173 1,082,412 1,066,354 1,052,845 1,041,212 1,032,042 1,020,934 1,006,168 Monthly average revenue per pet $ 83.56 $ 82.01 $ 79.93 $ 77.53 $ 76.02 $ 74.27 $ 71.72 $ 69.79 Average pet acquisition cost (PAC) $ 320 $ 290 $ 276 $ 267 $ 261 $ 243 $ 231 $ 207 Average monthly retention 98.34 % 98.33 % 98.29 % 98.28 % 98.25 % 98.29 % 98.34 % 98.41 % Total pets enrolled and total subscription pets enrolled include certain pet enrollments in European markets, where policies are currently underwritten by third parties and Trupanion is acting as an insurance broker.
As of December 31, 2024, we had $307.4 million in cash, cash equivalents and short-term investments, of which $272.0 million was held by our insurance entities. Outside of insurance entities, we held $35.4 million in cash, cash equivalents and short-term investments with an additional $15.0 million available under our Credit Facility. Our insurance entities maintained $288.0 million of capital surplus.
As of December 31, 2025, we had $370.7 million in cash, cash equivalents and short-term investments, of which $320.7 million was held by our insurance entities. Outside of insurance entities, we held $50.0 million in cash, cash equivalents and short-term investments with an additional $5.0 million available under our PNC Facility.
All of the assets and liabilities of WICL Segregated Account Trupanion Germany and WICL Segregated Account Trupanion Switzerland are legally segregated from other assets and liabilities within WICL, and all shares of the segregated accounts are owned by Trupanion, Inc. 56 Though we are not directly regulated by the BMA, WICL's regulation and compliance impacts us as it could have an adverse impact on our ability to secure dividends from our WICL segregated accounts.
Though we are not directly regulated by the BMA, WICL's regulation and compliance impacts us as it could have an adverse impact on our ability to secure dividends from our WICL segregated accounts. WICL is regulated by the BMA under the Insurance Act of 1978 ("Insurance Act") and the Segregated Accounts Company Act of 2000.
This increase was primarily due to a 12% increase in monthly average revenue per pet and an increase in subscription pet months (the sum of pets enrolled for each month during a period) for policies underwritten by Trupanion. Revenue from our other business segment increased by $33.5 million, or 8%, to $429.2 million for the year ended December 31, 2024.
This increase was primarily due to an 11% increase in monthly average revenue per pet and an increase in subscription pet months (the sum of pets enrolled for each month during a period) for policies underwritten by Trupanion.
Depreciation and amortization expense increased by $4.0 million, or 32%, to $16.5 million for the year ended December 31, 2024 primarily driven by an increase in in-service internally developed software projects during the period.
Depreciation and amortization expense decreased by $0.6 million, or 4%, to $15.8 million for the twelve months ended December 31, 2025, primarily driven by fewer internally developed software projects placed in-service during the period.
A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered. We apply judgment in the determination of the consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
We apply judgment in the determination of the consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
We define non-GAAP fixed expenses as the total of technology and development expense and general and administrative expense, less stock-based compensation expense, non-recurring transaction and restructuring expense, and development expenses related to exploring and developing new products and offerings that generally are in the pre-revenue stage or not at scale. 41 The following tables present the reconciliation of our non-GAAP financial measures from corresponding GAAP measures for the periods presented (in thousands): Year Ended December 31, 2024 2023 2022 Veterinary invoice expense $ 949,148 $ 831,055 $ 649,737 Less: Stock-based compensation expense (1) (3,335) (3,450) (4,054) Other business cost of paying veterinary invoices (4) (324,720) (287,858) (212,857) Subscription cost of paying veterinary invoices (non-GAAP) $ 621,093 $ 539,747 $ 432,826 % of subscription revenue 72.5 % 75.7 % 72.5 % Other cost of revenue $ 157,738 $ 146,534 $ 133,257 Less: Stock-based compensation expense (1) (1,955) (1,544) (2,232) Other business variable expenses (4) (75,050) (75,756) (72,453) Subscription variable expenses (non-GAAP) $ 80,733 $ 69,234 $ 58,572 % of subscription revenue 9.4 % 9.7 % 9.8 % Technology and development expense $ 31,255 $ 21,403 $ 25,133 General and administrative expense 63,731 60,207 39,379 Less: Stock-based compensation expense (1) (19,742) (19,869) (17,135) Non-recurring transaction or restructuring expenses (2) — (4,175) (372) Development expenses (3) (5,624) (5,100) (7,789) Fixed expenses (non-GAAP) $ 69,620 $ 52,466 $ 39,216 % of total revenue 5.4 % 4.7 % 4.3 % New pet acquisition expense $ 71,379 $ 77,372 $ 89,500 Less: Stock-based compensation expense (1) (6,908) (7,000) (9,116) Other business pet acquisition expense (4) (39) (200) (541) Subscription acquisition cost (non-GAAP) $ 64,432 $ 70,172 $ 79,843 % of subscription revenue 7.5 % 9.8 % 13.3 % (1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses.
Year Ended December 31, 2025 2024 2023 Veterinary invoice expense $ 1,028,975 $ 949,148 $ 831,055 Less: Stock-based compensation expense (1) (2,802) (3,335) (3,450) Other business cost of paying veterinary invoices (2) (328,821) (324,720) (287,858) Subscription cost of paying veterinary invoices (non-GAAP) $ 697,352 $ 621,093 $ 539,747 % of subscription revenue 70.5 % 72.5 % 75.7 % Other cost of revenue $ 179,319 $ 157,738 $ 146,534 Less: Stock-based compensation expense (1) (2,260) (1,955) (1,544) Other business variable expenses (2) (88,558) (75,050) (75,756) Subscription variable expenses (non-GAAP) $ 88,501 $ 80,733 $ 69,234 % of subscription revenue 8.9 % 9.4 % 9.7 % Technology and development expense $ 37,848 $ 31,255 $ 21,403 General and administrative expense 76,648 63,731 60,207 Less: Stock-based compensation expense (1) (24,958) (19,742) (19,869) Non-recurring transaction or restructuring expenses (3) — — (4,175) Development expenses (4) (5,349) (5,624) (5,100) Fixed expenses (non-GAAP) $ 84,189 $ 69,620 $ 52,466 % of total revenue 5.8 % 5.4 % 4.7 % New pet acquisition expense $ 85,408 $ 71,379 $ 77,372 Less: Stock-based compensation expense (1) (7,446) (6,908) (7,000) Other business pet acquisition expense (2) (90) (39) (200) Subscription acquisition cost (non-GAAP) $ 77,872 $ 64,432 $ 70,172 % of subscription revenue 7.9 % 7.5 % 9.8 % (1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses.
Within this segment, we also offer products in certain countries in Continental Europe, which are currently underwritten by third parties who pay us commissions that we recognize as revenue. Going forward our intent is to assume full insurance risk for these products, either through direct underwriting or reinsurance arrangements.
Within this segment, we also offer products in certain countries in Continental Europe, which are currently underwritten by third parties who pay us commissions that we recognize as revenue.
Total cost of revenue for our subscription business segment increased $93.2 million, or 15%, to $706.9 million for the year ended December 31, 2024. This increase was driven by a $81.2 million, or 15%, increase in veterinary invoice expense and a $11.9 million, or 17%, increase in other cost of revenue.
Total cost of revenue for our subscription business segment increased by $84.0 million, or 12%, to $790.9 million, for the twelve months ended December 31, 2025. This increase was driven by a $75.7 million, or 12%, increase in veterinary invoice expense and an $8.3 million, or 10%, increase in other cost of revenue.
Refer to Note 10, Debt, included in Item 8 of Part II of this report, for further details, including interest and future principal repayments. Critical Accounting Policies and Significant Estimates Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
Critical Accounting Policies and Significant Estimates Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
This increase was primarily due a $6.8 million reduction in capitalized expenditures related to internally-developed software projects launched in early 2024, a $1.0 million increase in general compensation and other employee-related expenses, a $1.3 million increase in infrastructure-related expenses, and an increase of $0.8 million in development expense.
This increase was primarily due to a $4.7 million increase in general compensation and other employee-related expenses, a $1.3 million reduction in capitalized expenditures related to internally developed software projects, and a $0.7 million increase in new product exploration and development expenses. Technology and development expenses increased from 2% to 3% of total revenue year-over-year.
The largest source of revenue within this segment is from our long-standing contractual relationship with Pets Best, a third-partner we have worked with since 2015. Additional products in this segment include the U.S. Department of Veterans Affairs program and employer-sponsored programs. Revenue We generate revenue in our subscription business segment primarily from subscription payments for our pet medical insurance.
This business segment has and targets, a significantly lower margin profile than our subscription business and is not part of our core business strategy. The largest source of revenue within this segment is from our long-standing contractual relationship with Pets Best, a third party insurance provider we have worked with since 2015. Additional products in this segment include the U.S.
New pet acquisition expense as a percentage of revenue was 6% for the year ended December 31, 2024 compared to 7% in the same period last year, as we were able to stay disciplined with our discretionary pet acquisition spend, while still managing to grow total enrolled subscription pets, excluding those related to managing general agent policies, by 5%. 51 Depreciation and Amortization Year Ended December 31, % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages) Depreciation and amortization $ 16,466 $ 12,474 $ 10,921 32% 14% Percentage of total revenue 1 % 1 % 1 % Year ended December 31, 2024 compared to year ended December 31, 2023.
New pet acquisition expense as a percentage of revenue remained constant at 6% as we were able to stay disciplined with our discretionary pet acquisition spend. 50 Depreciation and Amortization Year Ended December 31, % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 (in thousands, except percentages) Depreciation and amortization $ 15,836 $ 16,466 $ 12,474 (4)% 32% Percentage of total revenue 1 % 1 % 1 % Year ended December 31, 2025 compared to year ended December 31, 2024.
Sign-up fees are related to Trupanion’s obligation to provide insurance coverage and are recognized over the policy term. We also generate a portion of our subscription business segment revenue through commissions earned in our European markets, where policies are currently underwritten by third parties and Trupanion is acting as an insurance broker.
We also generate a portion of our subscription business segment revenue through commissions earned in certain European markets, where policies are currently underwritten by third parties and Trupanion is acting as an insurance broker. We generate revenue in our other business segment primarily from writing policies on behalf of third parties where we do not undertake direct consumer marketing.
The increase was primarily driven by a $36.9 million, or 13%, increase in veterinary invoice expense, partially offset by a $0.7 million, or 1%, decrease in other cost of revenue.
This increase was driven by a $4.1 million, or 1%, increase in veterinary invoice expense and a $13.3 million, or 18% increase in other cost of revenue.
Contractual Obligations We enter into long-term contractual obligations and commitments in the normal course of business, consisting primarily of debt obligations and non-cancellable vendor service agreements.
Contractual Obligations We enter into long-term contractual obligations and commitments in the normal course of business, consisting primarily of debt obligations and non-cancellable vendor service agreements. In November 2025, we entered into the PNC Agreement, which provides up to $120.0 million of credit, including $100.0 million term loan and $20.0 million revolving loan facility.
Membership may be canceled at any time without penalty, and we issue a refund for the unused portion of the canceled membership. In addition to subscription payments, we generate a small amount of revenue from charging a one-time sign-up fee to new members collected at the time of enrollment to partially offset initial setup costs.
In addition to subscription payments, we generate a small amount of revenue from charging a one-time sign-up fee collected at the time of new enrollment to partially offset initial setup costs. Sign-up fees are related to Trupanion’s obligation to provide insurance coverage and are recognized over the policy term.
Stock-based compensation will vary depending on corporate performance and terms of the awards under our equity incentive plan. For example, when we have delivered strong performance, stock-based compensation may increase as a result of incentive-based awards under our equity incentive plan. Factors Affecting Our Performance Average monthly retention.
For example, when we have delivered strong performance, stock-based compensation may increase as a result of incentive-based awards under our equity incentive plan. Factors Affecting Our Performance Average monthly retention. Our performance depends on our ability to continue to retain our existing and newly enrolled pets and is impacted by our ability to provide a best-in-class value and member experience.
All of the assets and liabilities of WICL Segregated Account AX are legally segregated from other assets and liabilities within WICL, and all shares of the segregated account are owned by Trupanion, Inc. In April 2024, our parent company received a dividend of $8.6 million from WICL Segregated Account AX as permitted under our agreements with WICL.
All of the assets and liabilities of WICL Segregated Account AX are legally segregated from other assets and liabilities within WICL, and all shares of the segregated account are owned by Trupanion, Inc.
Technology and development expenses increased by $9.9 million, or 46%, to $31.3 million for the year ended December 31, 2024.
Technology and development expenses increased by $6.6 million, or 21%, to $37.8 million for the twelve months ended December 31, 2025.
For further details on goodwill impairment charges refer to Note 4, Goodwill and Intangible Assets, included in Item 8 of this report. 45 Depreciation and amortization Depreciation and amortization expenses consist of depreciation of property, equipment, and software developed for internal use, as well as amortization of finite-lived intangible assets.
Depreciation and amortization Depreciation and amortization expenses consist of depreciation of property, equipment, and software developed for internal use, as well as amortization of finite-lived intangible assets.
This loss was subsequently determined to be recovered, and was reversed through other expense during the year ended December 31, 2024. Stock-Based Compensation Year ended December 31, 2024 compared to year ended December 31, 2023. Stock-based compensation is included in the cost and expense line items in the consolidated statements of operations, discussed above.
Stock-Based Compensation Year ended December 31, 2025 compared to year ended December 31, 2024. Stock-based compensation is included in the cost and expense line items in the consolidated statements of operations, discussed above. Stock-based compensation expense increased from $33.4 million to $38.3 million for the twelve months ended December 31, 2025.
Total revenue increased by $177.1 million, or 16%, to $1,285.7 million for the year ended December 31, 2024. Revenue from our subscription business segment increased by $143.6 million, or 20%, to $856.5 million for the year ended December 31, 2024.
Total revenue increased by $153.6 million, or 12%, to $1,439.3 million for the twelve months ended December 31, 2025. Revenue from our subscription business segment increased by $132.8 million, or 16%, to $989.3 million for the twelve months ended December 31, 2025.
Stock-based compensation expense in total was $33.4 million for the year ended December 31, 2024, an increase from $33.2 million in the prior year period. The amount of stock-based compensation recognized largely reflects the timing and vesting of our annual performance grants, calculated according to our equity incentive plan.
The amount of stock-based compensation recognized largely reflects the timing and vesting of our annual performance grants, calculated according to our equity incentive plan. 51 Quarterly Results of Operations The following tables contain selected quarterly financial information for the years ended December 31, 2025 and 2024.
Our “Territory Partners” travel through their territories to have face-to-face visits with veterinarians and their staff. Territory Partners are dedicated to cultivating direct veterinary relationships and helping those veterinarians understand the benefits of high-quality medical insurance.
Our “Territory Partners” create relationships with veterinary hospital teams through face-to-face visits. Territory Partners are dedicated to cultivating direct veterinary relationships and helping those veterinarians understand the benefits of high-quality medical insurance. Veterinarians then educate pet parents, who visit our website or call our contact center to learn more about, and potentially enroll in, a Trupanion product.
General and administrative expenses increased by $3.5 million, or 6%, to $63.7 million for the year ended December 31, 2024. This increase was driven by increases of $6.6 million in general compensation and other employee-related expenses, $2.7 million in professional services, and $2.3 million in underwriting fees related to our Canadian business.
This increase was driven by increases of $12.1 million in general compensation and other employee-related expenses and $1.9 million in underwriting fees related to our Canadian business, partially offset by a $0.8 million decrease in professional services and a $0.3 million decrease in other miscellaneous expenses. General and administrative expenses remained constant at 5% of total revenue year-over-year.
(4)Excludes the portion of stock-based compensation expense attributable to the other business segment. 42 Three Months Ended Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 Veterinary invoice expense $ 245,663 $ 238,814 $ 231,102 $ 233,569 $ 217,739 $ 212,441 $ 206,738 $ 194,137 Less: Stock-based compensation expense (1) (800) (830) (843) (862) (885) (870) (856) (839) Other business cost of paying veterinary invoices (4) (85,378) (82,507) (75,622) (81,213) (77,572) (72,694) (72,443) (65,149) Subscription cost of paying veterinary invoices (non-GAAP) $ 159,485 $ 155,477 $ 154,637 $ 151,494 $ 139,282 $ 138,877 $ 133,439 $ 128,149 % of subscription revenue 70.0 % 71.0 % 74.1 % 75.3 % 72.7 % 75.9 % 77.0 % 77.6 % Other cost of revenue $ 38,721 $ 39,263 $ 43,429 $ 36,325 $ 38,054 $ 38,179 $ 34,455 $ 35,846 Less: Stock-based compensation expense (1) (476) (536) (523) (420) (386) (282) (428) (448) Other business variable expenses (4) (17,336) (18,126) (23,091) (16,498) (19,301) (20,482) (17,230) (18,743) Subscription variable expenses (non-GAAP) $ 20,909 $ 20,601 $ 19,815 $ 19,407 $ 18,367 $ 17,415 $ 16,797 $ 16,655 % of subscription revenue 9.2 % 9.4 % 9.5 % 9.6 % 9.6 % 9.5 % 9.7 % 10.1 % Technology and development expense $ 8,172 $ 7,933 $ 8,190 $ 6,960 $ 5,969 $ 5,302 $ 5,232 $ 4,900 General and administrative expense 16,828 16,977 15,253 14,673 13,390 12,664 13,136 21,017 Less: Stock-based compensation expense (1) (5,277) (5,258) (4,949) (4,258) (3,797) (3,754) (3,497) (8,821) Non-recurring transaction or restructuring expenses (2) — — — — — (8) (65) (4,102) Development expenses (3) (1,322) (1,474) (1,655) (1,178) (1,683) (1,594) (925) (898) Fixed expenses (non-GAAP) $ 18,401 $ 18,178 $ 16,839 $ 16,197 $ 13,879 $ 12,610 $ 13,881 $ 12,096 % of total revenue 5.5 % 5.6 % 5.3 % 5.3 % 4.7 % 4.4 % 5.1 % 4.7 % New pet acquisition expense $ 18,354 $ 18,308 $ 17,874 $ 16,843 $ 17,189 $ 17,772 $ 20,769 $ 21,642 Less: Stock-based compensation expense (1) (1,482) (1,503) (2,066) (1,857) (1,567) (1,679) (1,722) (2,032) Other business pet acquisition expense (4) (8) (8) (10) (13) (77) (10) (62) (51) Subscription acquisition cost (non-GAAP) $ 16,864 $ 16,797 $ 15,798 $ 14,973 $ 15,545 $ 16,083 $ 18,985 $ 19,559 % of subscription revenue 7.4 % 7.7 % 7.6 % 7.4 % 8.1 % 8.8 % 11.0 % 11.8 % (1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses.
(4) Consists of costs related to product exploration and development that are pre-revenue and historically have been insignificant 41 Three Months Ended Dec. 31, 2025 Sep. 30, 2025 Jun. 30, 2025 Mar. 31, 2025 Dec. 31, 2024 Sep. 30, 2024 Jun. 30, 2024 Mar. 31, 2024 Veterinary invoice expense $ 262,818 $ 263,127 $ 255,580 $ 247,450 $ 245,663 $ 238,814 $ 231,102 $ 233,569 Less: Stock-based compensation expense (1) (614) (666) (758) (763) (800) (830) (843) (862) Other business cost of paying veterinary invoices (2) (81,452) (85,394) (82,706) (79,269) (85,378) (82,507) (75,622) (81,213) Subscription cost of paying veterinary invoices (non-GAAP) $ 180,752 $ 177,067 $ 172,116 $ 167,418 $ 159,485 $ 155,477 $ 154,637 $ 151,494 % of subscription revenue 69.1 % 70.1 % 71.1 % 71.8 % 70.0 % 71.0 % 74.1 % 75.3 % Other cost of revenue $ 49,008 $ 43,739 $ 43,150 $ 43,422 $ 38,721 $ 39,263 $ 43,429 $ 36,325 Less: Stock-based compensation expense (1) (600) (579) (601) (482) (476) (536) (523) (420) Other business variable expenses (2) (25,589) (20,702) (20,531) (21,736) (17,336) (18,126) (23,091) (16,498) Subscription variable expenses (non-GAAP) $ 22,819 $ 22,458 $ 22,018 $ 21,204 $ 20,909 $ 20,601 $ 19,815 $ 19,407 % of subscription revenue 8.7 % 8.9 % 9.1 % 9.1 % 9.2 % 9.4 % 9.5 % 9.6 % Technology and development expense $ 11,303 $ 9,887 $ 8,586 $ 8,072 $ 8,172 $ 7,933 $ 8,190 $ 6,960 General and administrative expense 18,323 18,311 20,122 19,892 16,828 16,977 15,253 14,673 Less: Stock-based compensation expense (1) (6,617) (6,551) (6,393) (5,396) (5,277) (5,258) (4,949) (4,258) Development expenses (3) (1,798) (1,199) (946) (1,406) (1,322) (1,474) (1,655) (1,178) Fixed expenses (non-GAAP) $ 21,211 $ 20,448 $ 21,369 $ 21,162 $ 18,401 $ 18,178 $ 16,839 $ 16,197 % of total revenue 5.6 % 5.6 % 6.0 % 6.2 % 5.5 % 5.6 % 5.3 % 5.3 % New pet acquisition expense $ 23,103 $ 21,946 $ 19,843 $ 20,516 $ 18,354 $ 18,308 $ 17,874 $ 16,843 Less: Stock-based compensation expense (1) (1,530) (1,527) (1,516) (2,873) (1,482) (1,503) (2,066) (1,857) Other business pet acquisition expense (2) (8) (5) (74) (3) (8) (8) (10) (13) Subscription acquisition cost (non-GAAP) $ 21,565 $ 20,414 $ 18,253 $ 17,640 $ 16,864 $ 16,797 $ 15,798 $ 14,973 % of subscription revenue 8.2 % 8.1 % 7.5 % 7.6 % 7.4 % 7.7 % 7.6 % 7.4 % (1) Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses.
Development is favorable when losses ultimately settle for less than the amount reserved, or subsequent estimates indicate a basis for reducing loss reserves on unresolved claims. 57 As of December 31, 2024, our reserve for veterinary invoices was $51.6 million, consisting of $49.3 million for the amount we expect to pay in the future for veterinary invoices dated between January 1, 2024 and December 31, 2024, inclusive of related processing costs, and a reserve of $2.3 million for invoices dated prior to January 1, 2024.
As of December 31, 2025, our reserve for veterinary invoices was $55.9 million, consisting of $53.4 million for the amount we expect to pay in the future for veterinary invoices dated between January 1, 2025 and December 31, 2025, inclusive of related processing costs, and a reserve of $2.5 million for invoices dated prior to January 1, 2025.
We provide a full suite of services and support for these products and they are designed to align with the target margin profile of our subscription business segment. Within our subscription business segment we also offer products in certain countries in Continental Europe, which are underwritten by third parties who pay us commissions that we recognize as revenue.
Within this segment we also offer products in certain countries in Continental Europe, which are currently underwritten by third parties who pay us commissions that we recognize as revenue. 43 Our other business segment generates revenue from other product offerings, primarily by underwriting policies on behalf of third parties with whom we generally have a business-to-business relationship.
Our other business segment is comprised of revenue from other product offerings, with third parties with whom we generally have a business-to-business relationship. This business segment has, and targets, a lower margin profile than our subscription segment and is not part of our core business strategy.
This business segment has, and targets, a significantly lower margin profile than our subscription business segment and is not part of our core business strategy. The largest source of revenue within this segment is from our long-standing contractual relationship as an underwriter for Pets Best, a third-party insurance provider we have worked with since 2015.
An insurance company found to have insufficient statutory capital based on its risk-based capital ratio may be subject to varying levels of additional regulatory oversight depending on the level of capital inadequacy. APIC must hold certain capital amounts in order to comply with the statutory regulations and, therefore, we cannot use these amounts for general operating purposes without regulatory approval.
An insurance entity cannot use this capital for general operating expenses without regulatory approval. An insurance company found to have insufficient statutory capital based on its risk-based or minimum capital test requirements or otherwise fails to satisfy other applicable statutory requirements may be subject to varying levels of additional regulatory oversight.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−1 removed3 unchanged
Biggest changeAs of December 31, 2024, our aggregate outstanding indebtedness was $128.9 million. A hypothetical 100 basis point interest rate increase would increase our annual interest expense by $1.3 million. Our fixed maturities portfolio is also exposed to interest rate risk. Changes in interest rates have a direct impact on the market valuation of these securities.
Biggest changeAdditionally, we are exposed to interest rate risk as a result of our debt. Our PNC Facility bears interest at a floating base rate plus an applicable margin. As of December 31, 2025, our aggregate outstanding indebtedness was $111.8 million. A hypothetical 100 basis point interest rate increase would increase our annual interest expense by $1.1 million.
Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The following is a discussion of our primary market risk exposures and how those exposures are managed as of December 31, 2024. Our market risk sensitive instruments are primarily entered into for purposes other than trading.
Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The following is a discussion of our primary market risk exposures and how those exposures are managed as of December 31, 2025. Our market risk sensitive instruments are primarily entered into for purposes other than trading.
To date, we have not entered into any material foreign currency hedging contracts although we may do so in the future. Other foreign currency risk in European currencies is currently immaterial. 59
To date, we have not entered into any material foreign currency hedging contracts although we may do so in the future. Currently, our European foreign currency risk is immaterial. 59
As our operations in Canada or the United States grow on an absolute basis and/or relative to one another, our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates.
Foreign Currency Exchange Risk We generate approximately 16% of our revenue in Canada. As our operations in Canada or the United States grow on an absolute basis and/or relative to one another, our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates.
A hypothetical change of this magnitude would have increased or decreased our total revenues by approximately $20.7 million, total expenses by approximately $19.3 million, and have a net impact of $1.4 million on income or loss for the year ended December 31, 2024.
A hypothetical change of this magnitude would have increased or decreased our total revenues by approximately $23.3 million, total expenses by approximately $22.3 million, and would have had a net impact of $1.0 million on income for the year ended December 31, 2025.
Certain securities are held in an unrealized loss position, but we do not intend to sell and believe we will not be required to sell any of these securities held in an unrealized loss position before their anticipated recovery. We manage interest rate risk by investing in securities with relatively short durations.
Changes in interest rates have a direct impact on the market valuation of our fixed maturity investment securities. Certain securities are held in an unrealized loss position, but we do not intend to sell and believe we will not be required to sell any of these securities before their anticipated recovery.
A hypothetical 100 basis point interest rate increase would not have a material effect on the fair value of our investments. Foreign Currency Exchange Risk We generate approximately 16% of our revenue in Canada.
We manage interest rate risk by investing in securities with relatively short durations. A hypothetical 100 basis point interest rate increase would not have a material effect on the fair value of our investments. For additional information regarding our investments, refer to Note 5, Investments, included in Item 8 of this report.
Removed
For additional information regarding our investments, refer to Note 5, Investments, included in Item 8 of this report. Additionally, we are exposed to interest rate risk as a result of our debt and our investment activities. Our Credit Facility bears interest at a floating base rate plus an applicable margin.

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