Risks Related to Our Business and Industry

~~Our results of operations may be adversely impacted by the COVID-19 pandemic.~~

The global spread of the COVID-19 pandemic, including the spread of recent variants, and related containment efforts have created significant economic disruption. While, to date, the pandemic has not had a material adverse impact on our business, it could impact our growth rates and our volume of claims in the future.

•The economic impact on consumers resulting from the COVID-19 pandemic, including the spread of recent variants, and related public health measures may result in decreased new enrollments in our subscription and increased cancellations, as consumers may shift their spending in response to economic uncertainty. Such a shift could materially adversely affect us if we are unable to adjust our products to match consumer needs.

•Governmental lockdowns, restrictions or new regulations have and could in the future impact the ability of our Territory Partners to conduct face-to-face visits with veterinarians and their staff. The extent and/or duration of these restrictions and limitations could impact our ability to promote and support our subscription through the veterinary channel.

•While we have not seen definitive evidence, some veterinarians have reported that pets may contract COVID-19. The extent to which COVID-19 may be communicable among humans, dogs and cats and its health impact on pets is somewhat uncertain, and an increase in COVID-19 among pets may cause our veterinary invoice expense to increase.

•While we are not currently experiencing any meaningful decreases in veterinary invoice expenses, several insurance companies within the property and casualty insurance industry have provided refunds to policyholders in light of reduced claims trends they are experiencing, and it is possible that state insurance regulators may require us to provide refunds or otherwise change our behavior.

•The duration of the pandemic, whether it may recur, and its other long-term impacts are highly uncertain and cannot be predicted. These risks and uncertainties make it challenging to manage our growth, maintain business relationships, price our subscription plans and otherwise plan for our business.

Beginning in spring 2020, in accordance with local and state directives, we shifted our operations from our corporate office facility located in Seattle, Washington and substantially all of our personnel began working from home. As COVID-19 related restrictions eased and more people received vaccinations, we began the process of transitioning those personnel who are comfortable working in an office setting back to our corporate office facility but a significant number of our personnel continue to work from home. While we learned that we can work very effectively in a fully-remote environment, the partial return to in-office work and the potential transition to permanent remote working arrangements for some employees may result in increased costs, decreased efficiency, deterioration of corporate culture, greater exposure to cybersecurity threats, or other operational risks. Similarly, many of our Territory Partners, our vendors, the businesses for which we write policies in our other business segment, and our strategic partners may continue to work from home, and many veterinary hospitals are working at reduced staffing levels and hours of operation.

In addition, our management team has spent, and will likely continue to spend, significant time, attention and resources monitoring the COVID-19 pandemic and associated global economic uncertainty and seeking to manage its effects on our business and workforce. Our efforts to re-open our corporate office facility safely may also expose our employees and other third parties to health risks and us to associated liability, and they will involve additional financial burdens.

The impacts of COVID-19 and related economic conditions on our results remain highly uncertain and in many ways outside of our control. The scope, duration and magnitude of the direct and indirect effects of COVID-19 are evolving rapidly and in ways that are difficult, if possible, to anticipate.

We have incurred significant cumulative net losses since our inception and may not be able to achieve or maintain profitability in the future.

We have incurred significant cumulative net losses since our inception. We incurred net losses of ~~$35.5 million and $5.8~~$44.7 million in the years ended December 31, ~~2021~~2023 and ~~2020, respectively,~~2022, and as of December 31, ~~2021,~~2023, we had an accumulated deficit of ~~$126.9~~$216.3 million. We have funded our operations through equity financings and borrowings under a revolving ~~line~~lines of credit and term ~~loans and, since 2016, positive cash flows from operations.~~loans. 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. We expect to make significant expenditures and investments in new pet acquisition and product initiatives and these expenditures may not result in additional growth. Our ~~recent~~ growth in revenue and membership may not be sustainable or may decrease, and we may not generate sufficient revenue to ~~maintain~~consistently achieve profitability. Additionally, we budget for our expenses based, in significant part, on our estimates of future revenue and many of these expenses are fixed in the short term. As a result, we may be unable to adjust our spending in a timely manner if our revenue falls short of our estimates. Accordingly, any significant shortfall of revenue in relation to our estimates could have an immediate negative effect on our financial results.

We may not maintain our current rate of revenue growth.

Our revenue has increased quickly and substantially in recent ~~periods.~~years. 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;

•maintain positive relationships with veterinarians and other lead sources;

•maintain positive relationships with and increase the number and efficiency of Territory ~~Partners;~~Partners in all of our target markets;

•successfully integrate entities we acquire into our business;

•expand 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;

•price our subscriptions in relation to actual operating expenses and achieve required regulatory approval for pricing changes;

•recruit, integrate and retain skilled, qualified and experienced sales ~~department~~ professionals who can demonstrate our value proposition to new and existing members;

•provide our members with superior ~~member~~ service, including timely and efficient payment of veterinary invoices, and by recruiting, integrating and retaining skilled and experienced personnel who can efficiently review veterinary invoices and process payments;

•generate new relationships and manage and maintain existing relationships and programs in our other business segment;

•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 ~~related~~unfavorable changes in economic ~~impacts;~~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.

You should not rely on our historical rate of revenue growth as an indication of our future performance.

We base our decisions regarding new pet acquisition expenditures primarily on the projected internal rate of return on marketing spend. Our estimates and assumptions may not accurately reflect our future results - we may overspend on new pet acquisition, and we may not be able to recover our pet acquisition costs or generate profits from these investments.

We have made and plan to continue to make significant investments to grow our member base. We spent ~~$69.5~~$77.4 million in new pet acquisition expense to acquire new members for the year ended December 31, ~~2021.~~2023. 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 increased over time and has significantly varied in the past. In the future, our average pet acquisition cost may continue to rise or fall and vary significantly ~~vary~~ period to period based upon specific marketing initiatives. We also regularly test new member acquisition channels and marketing initiatives, including direct-to-consumer initiatives, which often are more expensive than our traditional veterinarian-focused marketing channels and generally increase our average acquisition costs.

In addition, we base our decisions regarding our new pet acquisition expenditures primarily on our internal rate of return generated on an average pet. This analysis depends substantially on estimates and assumptions based on our historical experience with pets enrolled in earlier periods, including our key operating metrics. If our estimates and assumptions regarding our internal rate of return and the lifetime value of the pets that we project to acquire and our related decisions regarding investments in new pet acquisition prove incorrect, or if our calculation of internal rate of return and lifetime value of the pets that we project to acquire differs significantly from that of pets acquired in prior periods, we may be unable to recover our new pet acquisition expenses or generate profits from our investment in acquiring 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 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. If we cannot generate profits from this investment, we may need to alter our growth ~~strategy,~~strategies, and our growth rate and operating results may be adversely affected.

~~We depend in part on Internet search engines~~ In addition, even if we decrease our average pet acquisition cost, our operating margins may differ from our expectations due to attract potential new members to visit our website. If Internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, our new member growth could decline, and our business and operating results could be harmed.

We derive a significant amount of traffic to our website from consumers who search for pet medical insurance through Internet search engines, such as Google, Bing and Yahoo!. A critical factor in attracting consumers searching for pet medical insurance on the Internet to our website is whether we are prominently displayed in response to an Internet searchincorrect assumptions relating to ~~pet insurance. Algorithmic search result listings are determined and displayed in accordance with a set of formulas~~existing members adding new pets or ~~algorithms developed by the particular Internet search engine, which may change from time to time. If we are listed less prominently in, or removed altogether from, search result listings~~referring friends, expenses 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 decide to attempt to replace this traffic, we may be required to increase our pet acquisition expenditures, including by utilizing paid search advertising. Certain of our competitors have spent additional funds to promote their products in search results over us. If we decide to respond by purchasing search advertising, our pet acquisition costs would increase which may harm our business, operating results and financial condition.

~~If we are unable to grow our~~ member ~~base and maintain high member retention rates, our growth prospects and revenue will be adversely affected.~~

Our ability to grow our business depends on retaining and expanding our member base. For the year ended December 31, 2021, we generated 71.0% of our revenue from subscriptions. In order to continue to increase our membership, we must continue to convince prospective members of the benefits of pet insurance in general and our subscription in particular. To maintain our existing member base, we need to continue to reinforce the value of our subscription.

We utilize Territory Partners, who are paid fees based on enrollments in their regions, to communicate the benefits of medical insurance to veterinarians through, prior to the COVID-19 pandemic, in-person visits and more recently, through a hybrid of remote and in-person communications. Veterinarians then educate pet owners, who visit our website or call our contact center to learn more about these benefits, and potentially become members. We also invest in other third-party and direct to consumer member acquisition channels, though we have limited experience with some of them. We plan to expand the number of our Territory Partnerssupport, and other lead-generation sources and to engage in other marketing activities, including direct to consumer advertising and increasing our social media footprint, which are likely to increase our acquisition costs. In addition, these plans may face unexpected delays, costs or other challenges, such as decreased ability of Territory Partners to conduct in-person visits with veterinarians.

We seek to convert consumers who visit our website and call our contact center into members. The rate at which we convert these visitors into members is a significant factor in the growth of our member base. A number of factors, ~~have influenced, and could in the future influence, the conversion rates for any given period,~~ some of which ~~are outside of our control. These factors include:~~

•~~the competitiveness of our subscription, including its perceived value, simplicity, and fairness;~~

•~~as we add more products, consumer confusion;~~

•changes in consumer shopping behaviors due to circumstances outside of our control, such as economic conditions, the COVID-19 pandemic and containment efforts, and consumers’ ability or willingness to pay for our product;

•regulatory requirements, including those that make the experience on our website cumbersome or difficult to navigate or that hinder our ability to speak with potential members quickly and in a way that is conducive to conversion;

•~~system failures or interruptions in our website or contact center; and~~

•~~changes in the mix of consumers who learn about us through various member acquisition channels.~~

We have made and plan to continue to make substantial investments in features and functionality for our website and training and staffing for our contact center that are designed to generate traffic, increase member engagement and improve member service. These activities do not directly generate revenue, however, and we may never realize any benefit from these investments. If the expenses that we incur in connection with these activities do not result in sufficient growth in members to offset the cost, our business, operating results and financial condition will be adversely affected.

We have historically experienced high average monthly retention rates. For example, our average monthly retention rate between 2010 and 2021 was 98.6%. We expect to continue to make significant expenditures relating to the retention of existing members, including an increase in the number of inside account managers and development and implementation of new technology platforms designed to encourage retention of these members.

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. Members we obtain through aggressive promotions or other channels that involve relatively less meaningful contact between us and the member are more likely to terminate their subscription. In the past, we have experienced reduced retention rates during periods of rapid member growth, as our retention rate generally has been lower during the first year of member enrollment. Members may choose to terminate their subscription for a variety of reasons, including perceived or actual lack of value, delays or other unsatisfactory experiences in how we review and process veterinary invoice payments, unsatisfactory member service, an economic downturn, increased subscription fees, loss of a pet, a more attractive offer from a competitor, changes in our subscription or other reasons, including reasons that are outside of our control. Our cost of acquiring a new member is substantially greater than the cost involved in maintaining our relationship with an existing member. If we are not able to successfully retain existing members and limit terminations, our revenue and operating margins will be adversely impacted and our business, operating results and financial condition would be harmed.

~~We rely significantly on Territory Partners, veterinarians and other third parties, including strategic partners, to generate leads.~~

In order for us 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, existing members, complementary online and other businesses, animal shelters, breeders and veterinary affiliates, including veterinarian purchasing groups and associations and other referral sources, and continue to scale and improve our processes, programs and procedures that support them. Those processes, programs and procedures could become increasingly complex and difficult to manage as we grow.

Veterinary leads represent our largest member acquisition channel. We spend significant time and resources attracting qualified Territory Partners and providing them with current information about our business and they, in turn, communicate the benefits of medical insurance for pets to veterinarians. Our relationship with our Territory Partners may be terminated at any time (for instance, if they feel unsupported or undervalued by us), and, if terminated, we may not recoup the costs associated with educating them about our subscription or be able to maintain any relationships they may have developed with veterinarians within their territories. Sometimes a single relationship may be used to cover multiple territories so that a terminated relationship with a Territory Partner could significantly affect our company. Further, if we experience an increase in the rate at which Territory Partner relationships are terminated, we may not develop or maintain relationships with veterinarians as quickly as we have in the past or need to in order to implement our business strategy and our growth and financial performance could be adversely affected.

Our ability to generate leads through veterinary hospitals could be negatively impacted if our policy is 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.

If we fail to establish or are unable to maintain our existing member acquisition channels and/or continue to add new member acquisition channels, if the cost of our existing sources increases or does not scale as we anticipate, or if we are unable to continue to use any existing channels or programs in any jurisdiction, including our exam day offer program, our member levels and pet acquisition expenses may be adversely affected.

~~Territory Partners are independent contractors and, as such, may pose additional risks to our business.~~

Territory Partners are independent contractors and, accordingly, we do not directly provide the same direction, motivation and oversight over Territory Partners as we otherwise could if Territory Partners were our own employees. Further, Territory Partners may themselves employ or engage others; we refer to these partners and their associates, collectively, as our Territory Partners. We do not control a Territory Partner’s employment or engagement of others, and it is possible that the actions of their employees and/or contractors could create threatened or actual legal proceedings against us. Moreover, Territory Partners may not require, or applicable law may not permit that employees or other service providers engaged by Territory Partners be subject to non-compete obligations and these employees and service providers may provide services to our competitors.

Territory Partners may decide not to participate in our marketing initiatives and/or training opportunities, accept our introduction of new solutions or comply with our policies and procedures applicable to them, any of which may adversely affect our ability to develop relationships with veterinarians and grow our membership. Our sole recourse against Territory Partners who fail to perform is to terminate their contract, which 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. We do not pay or withhold any employment tax with respect to or on behalf of Territory Partners or extend any benefits to them that we generally extend to our employees, and we otherwise treat Territory Partners as independent contractors. Applicable authorities or the Territory Partners have in the past questioned and may in the future challenge this classification. Further, the applicable laws or regulations, including tax laws or interpretations, may change. If it were determined that we had misclassified any of our Territory Partners, we may be subjected to penalties and/or be required to pay withholding taxes, extend employee benefits, provide compensation for unpaid overtime, or otherwise incur substantially greater expenses with respect to Territory Partners. In addition, the costs associated with defending, settling, or resolving pending and future lawsuits (including demands for arbitration) relating to the independent contractor status of Territory Partners could be material to our business.

~~Any of the foregoing circumstances could have a material adverse impact on our operating results and financial condition.~~

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.

The pricing of our subscriptions reflects amounts we expect to pay for a pet’s medical care and we derive these prices from assumptions that we make based on our analytics platform. Our analytics platform draws upon pet data we collect and we use this data to price our policy in response to a number of factors, including a pet’s species, breed, age, gender and location. Factors related to pet location include the current and assumed changes in the cost and availability of veterinary technology and treatments and local veterinary hospital preferences. Some data that feeds into our analytics platform is provided by third-party sources and these sources may limit or prevent us from accessing the data. Additionally, the assumptions we make about breeds and other factors in pricing may prove to be inaccurate and, accordingly, these pricing analytics may not accurately reflect the expense that we will ultimately incur. Furthermore, if any of our competitors develop similar or better data systems, adopt similar or better underwriting criteria and pricing models or receive our data, our competitive advantage could decline or be lost.

The prices of our subscriptions also reflect assumptions and estimates regarding our own operating costs and expenses. We monitor and manage our pricing and overall sales mix to achieve our target returns. If the actual costs, including veterinary invoice expenses, operating costs and expenses within anticipated pricing allowances, are greater than our assumptions and estimates such that the premiums we collect are insufficient to cover these expenses, then our ~~profitability~~results could be adversely affected and our revenue may be insufficient to consistently maintain profitability. Conversely, if our pricing assumptions differ from actual results such that we overprice risks, our competitiveness and growth prospects could be adversely affected.

In addition, many states have adopted laws or are considering proposed legislation that, among other things, limit the ability of insurance companies to effect rate increases or to cancel, reduce or not renew existing policies, and many state regulators have the power to reduce, or to disallow increases in premium rates. Mostmost states require licensure and regulatory approval prior to marketing new insurance products. Our practice has been to regularly reevaluate and adjust the price of our subscriptions, with ~~any pricing changes implemented at least annually,~~a goal of achieving our targeted payout ratio, subject to the review and approval of applicable state regulators, who may reduce or disallow our pricing changes. Such review has ~~often~~ in the past resulted (for instance, during the COVID-19 pandemic), and may in the future result, in delayed implementation of pricing changes, ~~and prevent us from making changes we believe are necessary to achieve our targeted payout ratio,~~ which could adversely affect our operating results and financial condition. ~~If external factors caused veterinary invoice expenses to significantly decrease, the review and approval of our proposed pricing may be impacted.~~ In addition, we may be prevented by regulators from ~~limiting~~implementing significant pricing changes, requiring us to raise rates more ~~quickly~~often than we otherwise may desire. This could damage our reputation with our members and reduce our retention rates, which could significantly damage our brand, result in the loss of expected revenue and otherwise harm our business, operating results and financial condition.

If we are unable to grow our member base and maintain high member retention rates, our growth prospects and revenue will be adversely affected.

Our ability to grow our business depends on retaining and expanding our member base. For the year ended December 31, 2023, we generated 64.0% of our revenue from our subscription business segment. 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 in particular. To maintain our existing member base, we need to continue to reinforce the value of our subscription.

We utilize Territory Partners, who are paid fees based on enrollments and retention in their regions, to communicate the benefits of medical insurance to veterinarians through a combination of remote and in-person communications. Veterinarians then educate pet owners, who visit our website or call our contact center to learn more about these benefits, and potentially become members. We also invest in other third-party and direct-to-consumer member acquisition channels, though we have limited experience with some of them. We intend to maintain our Territory Partner model and structure and we plan to introduce other distribution channels to increase lead generation and to engage in other sales and promotional activities, including direct-to-consumer advertising, all of which are likely to increase our acquisition costs. In addition, these go-to-market plans may face unexpected delays, costs or other challenges, such as decreased ability of Territory Partners to conduct in-person visits with veterinarians.

If we fail to establish new or are unable to maintain our existing member acquisition channels, if the cost of our existing sources increases or does not scale as we anticipate, or if we are unable to continue to use any existing channels or programs in any jurisdiction, including our exam day offer program, our member levels and pet acquisition expenses may be adversely affected.

We seek to convert pet owners who visit our website and call our contact center into members. The rate at which we convert these visitors into members is a significant factor in the growth of our member base. A number of factors have influenced, and could in the future influence, the conversion rates for any given period, some of which are outside of our control. These factors include:

•the pricing and competitiveness of our subscription, including its perceived value, simplicity, and fairness;

•our ability to explain and educate consumers regarding the benefits and differences related to our products, including our offerings marketed by third parties, and any potential consumer confusion as we add more products;

•changes in consumer shopping behaviors due to circumstances outside of our control, such as increased inflation and other economic conditions, the COVID-19 pandemic and containment efforts, and consumers’ ability or willingness to pay for our product;

•legal or regulatory requirements, including those that make the experience on our website cumbersome or difficult to navigate or that hinder our ability to communicate with potential members quickly and in a way that is more conducive to conversion; and

•system failures or interruptions in our website or contact center.

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. These activities do not directly generate revenue, however, and we may never realize any benefit from these investments. If the expenses that we incur in connection with these activities do not result in sufficient growth in members to offset the cost, our business, operating results and financial condition will be adversely affected.

We have historically experienced high average monthly retention rates. For example, our average monthly retention rate between 2010 and 2023 was 98.5%. We expect to continue to make significant expenditures relating to the retention of existing members.

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. Members we obtain through aggressive promotions or other channels that involve relatively less meaningful contact between us and the member are more likely to terminate their subscription. In the past, we have experienced reduced retention rates during periods of rapid member growth, as our retention rate generally has been lower during the first year of member enrollment. Members may choose to terminate their subscription for a variety of reasons, including, loss of a pet, increased subscription fees, perceived or actual lack of value, delays or other unsatisfactory experiences in how we review and process veterinary invoice payments, unsatisfactory member service, a change in the economic environment, a more attractive offer from a competitor, changes in our subscription or other reasons, including reasons that are outside of our control. Our cost of acquiring a new member is substantially greater than the cost involved in maintaining our relationship with an existing member. If we are not able to successfully retain existing members and limit cancellations, our revenue and operating margins will be adversely impacted and our business, operating results and financial condition would be harmed.

We rely significantly on Territory Partners, veterinarians and other third parties, including strategic partners, to generate leads.

In order for us 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 veterinarian 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. Those processes, programs and procedures could become increasingly complex and difficult to manage as we grow.

Veterinary leads represent our largest member acquisition channel. We spend significant time and resources attracting qualified Territory Partners and providing them with current information about our business and they, in turn, communicate the benefits of medical insurance for pets to veterinarians. Our relationship with our Territory Partners may be terminated at any time (for instance, if they feel unsupported or undervalued by us), and, if terminated, we may not recoup the costs associated with educating them about our subscription products, and the relationships with veterinarians developed by that Territory Partner would be unsupported until such time a new Territory Partner is installed. Sometimes a single relationship may be used to cover multiple territories so that a terminated relationship with a Territory Partner could significantly affect our company. Further, if we experience an increase in the rate at which Territory Partner relationships are terminated, we may not develop or maintain relationships with veterinarians as quickly as we have in the past or need to in order to execute our business strategy and our growth and financial performance could be adversely affected.

Territory Partners are independent contractors and, as such, may pose additional risks to our business.

Territory Partners are independent contractors and, accordingly, we do not directly provide the same direction, motivation and oversight over Territory Partners as we otherwise could if Territory Partners were our own employees. Further, Territory Partners may themselves employ or engage others; we refer to these partners and their associates, collectively, as our Territory Partners. We do not control a Territory Partner’s employment or engagement of others, and it is possible that their actions or the actions of their employees and/or contractors could create threatened or actual legal proceedings against us. 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 tonon-compete obligations.

Territory Partners may decide not to participate in our marketing initiatives and/or training opportunities, accept our introduction of new solutions or comply with our policies and procedures applicable to them, any of which may adversely affect our ability to develop relationships with veterinarians and grow our membership. 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. We do not pay or withhold any employment tax with respect to or on behalf of Territory Partners or extend any benefits to them that we generally extend to our employees, and we otherwise treat Territory Partners as independent contractors. Applicable authorities or Territory Partners may in the future challenge this classification. Further, the applicable laws or regulations, including tax laws or interpretations, may change. If it were determined that we had misclassified any of our Territory Partners, we may be subjected to penalties and/or be required to pay withholding taxes, extend employee benefits, provide compensation for unpaid overtime, or otherwise incur substantially greater expenses with respect to Territory Partners. In addition, the costs associated with defending, settling, or resolving pending and future lawsuits or regulatory proceedings (including demands for arbitration) relating to the independent contractor status of Territory Partners could be material to our business.

Any of the foregoing circumstances could have a material adverse impact on our operating results and financial condition.

We operate in a competitive market which could adversely affect our prospects, operating results and financial condition.

We are and will continue to operate in a competitive market. For instance, we compete with pet owners that self-finance unexpected veterinary invoices with savings or credit, as well as traditional “pet insurance” providers and relatively new entrants into our market. The vast majority of pet owners in the United States and Canada do not currently have medical insurance for their pets. We are focused primarily on expanding our share of the overall market, and we view our primary competitive challenge as educating pet owners on why our subscription is a better alternative to self-financing.

Additionally, 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, new entrants backed by large insurance companies have entered (and in some cases exited) the medical insurance for pets market in the past and more may do so in the future. Further, traditional “pet insurance” providers may consolidate or take other actions to mimic the efficiencies from our vertically-integrated structure or create other operational efficiencies, which could lead to increased competition. The success of any of these competitors would, in time, affect our prospects, operating results and financial condition.

Some of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, technical, marketing and other resources than we do. In addition to competing for new enrollments, such competitors may drive up pet acquisition costs and/or make offers that are more attractive to potential employees, referral sources and third-party service providers.

Moreover, some of our existing competitors may consolidate or be acquired, or may enter into new alliances with each other or establish or strengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could adversely affect our ability to compete effectively and result in our loss of market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our business, financial condition, cash flows and results of operations.

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. Failure to compete effectively against our current or future competitors could result in loss of current or potential members, which could adversely affect our pricing, lower our revenue, prevent us from maintaining profitability and diminish our brand strength.

We depend in part on Internet search engines to attract potential new members to visit our website. If Internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, our new member growth could decline, and our business and operating results could be harmed.

We endeavor to drive significant traffic to our website from consumers who search for pet medical insurance through Internet search engines such as Google, Bing and Yahoo!. A critical factor in attracting consumers searching for pet medical insurance on the Internet to our website is whether we are prominently displayed in response to Internet searches relating to medical insurance for pets. Algorithmic search result listings are determined and displayed in accordance with a set of formulas or algorithms developed by the particular Internet search engine, which may change from time to time, and paid search advertisements often receive the most prominent listing. 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 decide to attempt to replace this traffic, we may be required to increase our pet acquisition expenditures, including by utilizing paid search advertising. Certain of our competitors have spent additional funds to promote their products in search results over us. If we decide to respond by purchasing search advertising, our pet acquisition costs would increase which may harm our business, operating results and financial condition.

Our actual veterinary invoice expense may exceed our current reserve established for veterinary invoices and may adversely affect our operating results and financial condition.

We maintain a recorded reserve for veterinary invoices that is based on our best estimates of the amount of veterinary invoices we expect to pay, inclusive of an estimate for veterinary invoices we have not yet received, after considering internal factors, including data from our proprietary data analytics platform, experience with similar cases, actual veterinary invoices paid, historical trends involving veterinary invoice payment patterns, patterns of receipt of veterinary invoices, seasonality, pending levels of unpaid veterinary invoices, veterinary invoice processing programs and contractual terms. We may also consider external factors, including changes in the law, court decisions, changes to regulatory requirements and economic ~~conditions.~~conditions, including the current inflationary environment. 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. Further, in the United States, we do not transfer or cede our risk as an insurer and, therefore, we maintain more risk than we would if we purchased reinsurance.

Rising costs of veterinary care and the increasing availability and usage of more expensive, technologically advanced medical treatments may increase the ~~amounts~~amount of veterinary invoices we ~~receive.~~ receive, especially in the current inflationary environment. Similarly, industry trends may emerge that are difficult to identify or to predict their impact on us, such as consolidated ownership of veterinary hospitals that increase prices more rapidly than we estimate.

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. We may experience volatility in the number of veterinary invoices we receive from time to time, and short-term trends may not continue over the longer term. The number or amount of veterinary invoices may be affected by the level of care and attentiveness an owner provides to the pet, the pet’s breed and age (at enrollment) and other factors outside of our control, as well as fluctuations in member retention rates and by new member initiatives that encourage an increase in veterinary invoices and other new member acquisition activities.

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.

If more veterinary hospitals install and use our patented proprietary software, the number or amounts of veterinary invoices we receive is 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 ~~veterinarian~~veterinary invoices ~~directly.~~directly to the hospital. We believe that it is critical to our long-term success to improve the member experience so we encourage veterinary hospitals to install and use our software. 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 ~~practice.~~hospital. As more veterinary hospitals install our patented software, we expect the number or ~~amounts~~amount of veterinary invoices to increase and result in an increase in our cost of revenue, which may have a material adverse effect on our financial condition.

Our use of capital may be constrained by ~~risk-based~~minimum capital ~~regulations~~requirements or contractual obligations.

Our insurance subsidiaries are ~~subject to risk-based capital regulations that require us~~required to maintain ~~certain~~minimum levels of surplus capital to support our overall business operations in consideration of our size and risk profile. We have in the past and may in the future fail to maintain the amount of risk-based capital required to avoid potentially costly additional regulatory ~~oversight, which was $116.0 million as of December 31, 2021.~~oversight. We are also subject to a contractual obligation related to our reinsurance agreement with Omega, who currently writes our policies in Canada. Under this agreement, we are required to fund a Canadian trust account in accordance with Canadian regulations. ~~As of December 31, 2021, the account held CAD $7.7 million.~~

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 ~~solutions~~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.

Our success depends in part on our ability to review, process, and pay veterinary invoices timely and accurately.

We believe member satisfaction and retention depends in part on our ability to accurately evaluate and pay veterinary invoices in a timely manner. Many factors can affect our ability to do this, including the training, experience and skill of our personnel, our ability to reduce the number of payment requests made for services not included in our subscription, effectiveness of management, our ability to develop or select and implement appropriate procedures, supporting technologies and systems, changes in our policy and veterinarian compliance with our protocols and procedures. 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.

In addition, we use artificial intelligence and machine learning to leverage data so we can automate the payment of veterinary invoices. Although we intend to increase the percentage of veterinary invoices paid without human intervention and process veterinary invoices in seconds, our efforts may be unsuccessful for a number of reasons. The data we gather is extensive, and the development, maintenance and operation of our data analytics engine is novel, expensive and complex. We may face unforeseen difficulties, including material performance problems, undetected defects or technical obstacles, for example, with new capabilities incorporating machine learning. If such problems, defects, or obstacles prevent our proprietary algorithms from operating properly, we may incorrectly pay or deny claims made by our customers. Such errors could result in existing customers canceling their policies, prospective customers declining to purchase our subscription, or improper payments that reduce our resources. Additionally, our artificial intelligence and machine learning algorithms may lead to unintentional bias or discrimination, which could subject us to legal or regulatory liability that has a material and adverse effect on our business, results of operations and financial condition.

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 National Association of Insurance Commissioners ("NAIC") adopted Artificial Intelligence Principles in August 2020. In addition, a number of states have had legislative or regulatory initiatives relating to the use of external data and artificial intelligence in the insurance industry, such as bulletins issued by the California and Connecticut Departments of Insurance advising insurers of their obligations related to unfair discrimination when using data and artificial intelligence. There is also increasing focus on regulating the use of artificial intelligence and machine learning in Europe such as the proposal by the European Commission for regulation on artificial intelligence using a comprehensive risk-based governance framework. Increased focus on regulation in the United States and foreign jurisdictions could subject us to legal or regulatory liability that has a material and adverse effect on our business, results of operations and financial condition.

We may not identify fraudulent or improperly inflated veterinary invoices.

It is possible that ~~a member, or a third-party could submit~~we may pay a veterinary invoice which ~~we would then pay that~~ appears authentic but in fact ~~does not reflect services provided~~reflects false products or ~~products purchased for which the member paid.~~prices. It is also possible that veterinarians will charge insured customers higher amounts than they would charge their non-insured clients for the same service or ~~product.~~product, or may alter medical records or exclude information from records. 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.

~~We are and will continue to be faced with many competitive challenges, any of which could adversely affect our prospects, operating results and financial condition.~~

We compete with pet owners that self-finance unexpected veterinary invoices with savings or credit, as well as traditional “pet insurance” providers and relatively new entrants into our market. The vast majority of pet owners in the United States and Canada do not currently have medical insurance for their pets. We are focused primarily on expanding our share of the overall market, and we view our primary competitive challenge as educating pet owners on why our subscription is a better alternative to self-financing.

Additionally, 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, new entrants backed by large insurance companies, such as Marsh, Nationwide, and Geico, have attempted to enter the pet insurance market in the past and may do so again in the future. Further, traditional “pet insurance” providers may consolidate or take other actions to mimic the efficiencies from our vertically-integrated structure or create other operational efficiencies, which could lead to increased competition.

Some of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, technical, marketing and other resources than we do. Some of our competitors may be able to undertake more extensive marketing initiatives for their brands and services, devote more resources to website and systems development and make offers that are more attractive to potential employees, referral sources and third-party service providers.

To compete effectively, we believe we will need to continue to invest significant resources in pet acquisition, in improving our member service levels, in the online experience and functionalities of our website and in other technologies and infrastructure. Failure to compete effectively against our current or future competitors could result in loss of current or potential members, which could adversely affect our pricing, lower our revenue, prevent us from maintaining profitability and diminish our brand strength.

If we are unable to maintain and enhance our brand recognition and reputation, our business and operating results will be harmed.

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 also believe that the importance of our brand recognition and reputation will continue to increase as competition in our market continues to develop and mature. Our success in this area will depend on a wide range of factors, some of which are out of our control, including the following:

•the efficacy and viability of our pet acquisition ~~programs;~~programs and initiatives;

•the perceived value of our subscription;

•the quality of service provided, including the fairness, ease and timeliness of reviewing and paying veterinary invoices;

•actions of our competitors, Territory Partners, veterinarians and others;

•positive or negative publicity, including regulatory pronouncements and material on the Internet or social media;

•regulatory and other government-related developments; and

•litigation-related developments.

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. ~~For instance, we have found that search engine optimization costs have increased as competitors have spent additional funds to promote their products in search results over us.~~ Our brand promotion activities may not be successful or yield increased revenue, and to the extent that these activities result in increased revenue, the increased revenue may not offset the expenses we incur and our operating results could be harmed. If we do not successfully maintain and enhance our brand, our business may not grow ~~and could be adversely affected,~~ which would harm our ~~business,~~ operating results and financial condition.

Furthermore, negative publicity, whether or not justified, relating to events or activities attributed to us, our employees, Territory Partners, our strategic partners, our affiliates, or others associated with any of these parties, may tarnish our reputation and reduce the value of our brands. Damage to our reputation and loss of brand equity may reduce demand for our services and have an adverse effect on our business, operating results, and financial condition. 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.

1718

We identified 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.

Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting, which must be attested to by our independent registered public accounting firm. Maintaining adequate internal control over financial reporting is critical to effective and timely completion of our financial statements. We have reported material weaknesses in internal control in Part II, Item 9A. As a result, management concluded that our internal control over financial reporting was not effective as of December 31, 2023. We are currently implementing certain remedial measures and assessing others intended to remediate the material weaknesses, but our efforts may not be successful. These measures will result in additional expenses associated with technology, finance personnel, training and other costs. If we are unable to remediate the material weaknesses within a reasonable time or at all, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial or other information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.

We may in the future identify other material weaknesses and significant deficiencies in our internal control over financial reporting, in addition to those identified as of December 31, 2023, which may result in our not detecting errors on a timely basis and our financial statements being materially misstated. If we or our independent registered public accounting firm identify future material weaknesses in our internal control over financial reporting, we are unable to comply with the requirements of Section 404 in a timely manner, we are unable to assert that our internal control over financial reporting is effective or our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. We could also become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

Our business depends on our ability to maintain and scale the infrastructure necessary to operate our technology platform and could be adversely affected by a system ~~failure.~~failure, security breach, loss of data or cyberattack.

Our business depends on our ability to maintain and scale the infrastructure necessary to operate our technology platform, which includes our analytics and pricing engine, systems for managing veterinary invoice payments, customer relationship management system, billing system, contact center phone system and website. We use these technology frameworks to price our subscriptions, enroll members, engage with current members and pay veterinary invoices. Our members ~~review~~research and purchase subscriptions through our website and contact center, and for those veterinary hospitals who have installed our patented proprietary software, we receive and pay ~~veterinarian~~veterinary invoices directly to the hospitals through our patented software. Our reputation and ability to acquire, retain and serve our members and support our partners depends on the reliable performance of our technology platform and the underlying network systems and infrastructure, and on providing best-in-class member service, including through our contact center and website. As our member base continues to grow, the amount of information collected and stored on the systems and infrastructure supporting our technology platform will continue to grow, and we expect to require an increasing amount of network capacity, computing power and information technology personnel to develop and maintain our technology platform and service our departments involved in member interaction.

We have made, and expect to continue to make, substantial investments in equipment and related network infrastructure to handle the operational demands on our technology platform, including increasing data collection, software development, traffic on our website and the volume of calls at our contact center. The operation of the systems and infrastructure supporting our technology platform is expensive and complex and could experience operational failures. In the event that our data collection, member base or amount of traffic on these systems grows more quickly than anticipated, we may be required to incur significant additional costs to increase the capacity in our systems. Further, our development and implementation activities may not be successful, may not be well-received by veterinarians or by new or existing members, particularly if they are costly, cumbersome or unreliable, and we may incur delays or cost overruns or elect to curtail our currently planned expenditures related to them. Even if our system improvements are well-received, they may be or become obsolete due to technological reasons or the availability of alternative solutions in the marketplace. If new solutions and enhancements are not successful on a long-term basis, we may not realize benefits from these investments, and our business and financial condition could be adversely affected.

In addition, any system failure that causes an interruption in or decreases the responsiveness of our services could impair our revenue-generating capabilities, harm our business and operating results and damage our reputation. In addition, any loss or mishandling of data could result in breach of confidence, competitive disadvantage or loss of members, and subject us to potential liability. Any failure of the systems and infrastructure that we rely on could negatively impact our enrollments as well as our relationship with members. 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.

Computer viruses, hackers, employee misconduct, and other external hazards could expose our technology platform to security breaches, cyber-attacks or other disruptions. While we have implemented security measures designed to protect against breaches of security and other interference with our systems and networks, our systems and networks may be subject to breaches or interference and we, and our third-party service providers, will likely continue to experience cybersecurity incidents of varying degrees. Any such event may result in operational disruptions as well as unauthorized access to, the disclosure of, or loss of our proprietary information or our customers’ data and information, which in turn may result in legal claims, regulatory scrutiny and liability, reputational damage, the incurrence of costs to eliminate or mitigate further exposure, the loss of customers or affiliated advisors, or other damage to our business. In addition, the trend toward general public notification of such incidents could exacerbate the harm to our business, financial condition and results of operations. Even if we successfully protect our technology infrastructure and the confidentiality of sensitive data, we could suffer harm to our business and reputation if attempted security breaches are publicized. We cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities, attempts to exploit vulnerabilities in our systems, data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology or other security measures protecting the networks and systems used in connection with our business.

Third parties to whom we outsource certain of our functions are also subject to these risks. While we 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. Moreover, our use of third-party services (e.g. cloud technology and software as a service) can make it more difficult to identify and respond to cyberattacks in any of the above situations due to the dynamic nature of these technologies.

If we fail to effectively manage our growth, our business, operating results and financial condition may suffer.

We have recently experienced, and expect to continue to experience, significant growth, which has placed, and may continue to place, significant demands on our management and our operational and financial systems and infrastructure. We expect that our growth strategy will require us to commit substantial financial, operational and technical resources and this commitment may also result in increased costs (such as member acquisition costs or costs associated with increases in the number or amounts of veterinary invoices received) generated by our business, which could prevent us from achieving profitability and remaining profitable and could impair our ability to compete effectively for business. 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 highly skilled and motivated employees and continue to improve our existing systems for operational and financial management. 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.

Emerging claim and coverage issues may adversely affect our business.

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. These or other changes could impose new financial obligations on us by extending coverage beyond our underwriting intent or otherwise require us to make unplanned modifications to the products and services that we provide, or cause the delay or cancellation of products and services that we provide. In some instances, these changes may not become apparent until sometime after we have issued subscriptions that are affected by the changes. As a result, the full extent of liability under our subscriptions may not be known for many years after the subscription begins.

Our operating results may vary, which could make period-to-period comparisons less meaningful, and make our future results difficult to predict.

We have historically experienced, and may in the future experience, fluctuations in our revenue, expenses and operating ~~results in future periods, particularly as the COVID-19 pandemic evolves.~~results. Our operating results may fluctuate in the future as a result of a number of factors, many of which are beyond our control. These fluctuations may make comparing our operating results on a period-to-period basis less meaningful and make our future results difficult to predict. You should not rely on our past results as an indication of our future performance. In addition, if revenue levels do not meet our expectations, our operating results and ability to execute on our business plan are likely to be harmed.

Seasonal or periodic variations in the behavior of our members also may cause fluctuations in our financial results. Enrollment in our subscription tends to be discretionary in nature and may be sporadic, reflecting overall economic conditions, budgeting constraints, pet-buying patterns and a variety of other factors, many of which are outside our control. For example, we have experienced some effects of seasonal trends in visits to veterinarians in the fourth quarter and in the beginning of the first quarter of each year in connection with the traditional holiday season. While we believe seasonal trends have affected and will continue to affect our quarterly results, our growth may have overshadowed these effects to date. We believe that our business will continue to be subject to seasonality in the future, which may result in fluctuations in our financial results.

Due to these and other factors, our financial results for any quarterly or annual period may not meet our expectations or the expectations of investors or analysts that follow our stock and may not be meaningful indications of our future performance.

Mergers or other strategic transactions involving our competitors could weaken our competitive position, which could adversely affect our ability to compete effectively and harm our results of operations.

Our industry is highly fragmented, and we believe it is likely that some of our existing competitors will consolidate or be acquired. In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties. Any such consolidation, acquisition, alliance or cooperative relationship could adversely affect our ability to compete effectively and lead to pricing pressure and our loss of market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our business, financial condition, cash flows and results of operations.

Changes in the economy may affect consumer spending on our subscription and this may negatively impact our business, operating results and financial condition.

Our business may be affected by changes in the economic environment. ~~Medical insurance for cats and dogs is a discretionary purchase, and members~~Members may reduce or eliminate their ~~discretionary~~ spending during an economic downturn, resulting in an increase in ~~terminations~~subscription cancellations and a reduction in the number of new member enrollments. We may experience a material increase in ~~terminations~~cancellations or a material reduction in our member retention rate in the future, especially in the event of a prolonged recessionary period or a downturn in economic conditions. Conversely, consumers may have more income to pay veterinary costs out-of-pocket and less desire to purchase our subscription during a period of economic growth. In addition, media prices and other costs may ~~increase during a period of~~change with changes in the economic ~~growth,~~environment, which could increase our new pet acquisition expenses. As a result, our business, operating results and financial condition may be significantly affected by changes in the economic environment.

We depend on key personnel to operate our business and, if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.

Our success depends to a significant extent on the continued services of our current management team, ~~including~~such as Margi Tooth, our President, and Darryl Rawlings, our founder, ~~and~~ Chief Executive ~~Officer.~~Officer and Chairperson of the Board. The loss of ~~Mr. Rawlings or several other~~ key executives or employees within a short time frame could have a material adverse effect on our business. We employ all of our employees, including executive officers and key employees on an at-will basis, and their employment can be terminated by us or them at any time, for any reason and without notice, subject ~~in certain cases,~~ to severance payment ~~rights.~~obligations. In order to retain valuable employees, in addition to salary and cash incentives, we have provided stock options and restricted stock that vest over ~~time and~~time. While we may in the future grant equity awards tied to company ~~performance.~~performance, if we do not achieve certain financial goals, we will not grant equity awards and this may affect our ability to retain employees. The value to employees of stock options and restricted stock that vest over time will be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to maintain their retention benefit or counteract offers from other companies. We would be adversely affected if we fail to adequately plan for the succession of our senior management and other key employees. Additionally, if we were to lose a large percentage of our current employees in a relatively short time period, or our employees were to engage in a work stoppage or unionize, we may be unable to hire and train new employees quickly enough to prevent disruptions in our operations, which may result in the loss of members, Territory Partners and/or referral sources.

Our success also depends on our ability to attract, retain and motivate additional skilled management personnel. We plan to continue to expand our work force, which we believe will enhance our business and operating results. As a result of COVID-19, we adopted hybrid work arrangements, which may result in decreased efficiency. Over time, hybrid work arrangements may also decrease the cohesiveness of our teams, which is critical to our corporate culture and to attracting, retaining and motivating skilled management personnel. We believe that there is significant competition for qualified personnel with the skills and knowledge that we require. Many of the other companies with which we compete for qualified personnel have greater financial and other resources than we do. New hires require significant training, capital expenditures and, in most cases, ~~take~~ significant time before they achieve full productivity. New employees may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If we do not successfully hire and integrate new employees in accordance with our plans, our business, operating results and financial condition will be harmed.

We may continue to create, invest in or acquire businesses, products and technologies, which could divert our management’s attention, result in additional dilution to our stockholders, otherwise disrupt our operations or harm our operating results.

We have in the past created, invested in or acquired complementary businesses, products, technologies and new lines of business, and we may continue to do so in the future. Our ability to successfully evaluate and manage investment opportunities, or make and integrate acquisitions or products, is unproven. 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. 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 also ~~recently~~ acquired technology intended to enable us to improve our back-end software and facilitate certain expansion efforts, but technology integration is complicated, expensive and time consuming, and it may not result in us realizing the intended benefits from the acquisition.

The pursuit of potential new products, investments or acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not they are consummated. Further, even if we successfully invest in or acquire additional businesses or technologies, we may not achieve the anticipated benefits from the transaction. The investment or acquisition may also expose us to additional risks, including from unknowingly inheriting liabilities that are not adequately covered by ~~indemnities.~~contractual remedies. Acquisitions or investments could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results.

If we do not spend our development budget efficiently or effectively on commercially successful and innovative offerings and products, we may not realize the expected benefits of our strategy. Further, our development efforts with respect to new products and offerings and integrations of acquired businesses could distract management from current operations, and will divert capital and other resources from our more established products and offerings. If an investment or acquisition fails to meet our expectations, our business, operating results and financial condition may suffer.

We may not realize the benefits of our current and planned strategic relationships.

Our growth strategy includes developing and maintaining strategic relationships with various third parties. For example, in October 2020, we entered into a Strategic Alliance Agreement and certain related agreements with Aflac Incorporated (Aflac). We generally pursue strategic relationships with industry leaders that may offer us expanded access to segments of the pet ~~insurance~~owner market. For these efforts to be successful, we must ~~successfully~~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. 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 ~~partners,~~third parties, negotiating favorable terms in these agreements, or ~~implementing~~achieving the ~~relationship.~~anticipated results over our desired time horizon. In addition, some of our historical strategic relationships ~~may require~~have required us to agree to exclusivity, and or other terms that may limit our ability to pursue opportunities we might otherwise pursue. For example, we have agreed with Aflac not to develop with a third party any worksite employee benefit regarding its pet insurance in the United States or Japan and to work exclusively with Aflac to develop opportunities in Japan’s pet insurance marketplace, which may prevent us from pursuing alternative opportunities. 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.

Strategic ~~partnerships~~relationships also involve various risks, depending on their structure, including the following:

•our strategic partners may not be ~~successful in creating leads;~~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 ~~not experience a consistent correlation between revenues and expenditures related~~overpay strategic partners relative to the ~~partnership;~~business the relationship generates; and

•bad publicity and other issues faced by our strategic partners could negatively impact us.

If we are unsuccessful in our strategic relationships, we may not realize the intended benefits of these ~~relationship,~~relationships, lose the investment we have made in these relationships, face difficulty entering into other relationships, and our business may suffer.

Our business and financial condition is subject to risks related to our writing of policies for unaffiliated third parties.

Our other business segment includes revenues and expenses ~~involving~~related to underwriting policies on behalf of third parties that do not carry reference to the Trupanion brand. The contractual relationships with these third parties may be terminated by either party or the third party may choose to begin a relationship with a different underwriter. Any termination of these relationships could result in a reduction in our revenue. For the year ended December 31, 2023, premiums from policies sourced by general agents accounted for 34% of our total revenue, and one general agent sourced members whose premiums accounted for over 10% of our total revenue. Further, in administering or marketing a product to consumers, if an unaffiliated third ~~parties~~party makes an operating decision that adversely affects its business or brand, our business or brand could also be adversely impacted. We expect to roll off a portion of our other business starting in 2025 subject to certain limitations in order to allow us to utilize capital for other purposes, but we do not control the timing or extent of this roll off and, ~~related marketing~~accordingly, it may not proceed as we expect, which could cause our results to ~~enterprises. We~~fluctuate or have ~~relatively limited experience in writing policies for unaffiliated third parties. This business is not expected to grow at the same rate as~~other unexpected impacts on our ~~core business and may decline.~~ business.

Changes to this business may be volatile due to the nature of the relationships. Further, this business historically has had, and we expect it to continue to have, significantly lower margins than our core business. As a result of this ~~line of~~ business, we are subject to additional regulatory requirements and scrutiny, which increase our costs and risks, and may have an adverse effect on our operations. Further, administration of this business and any similar business in the future may divert our time and attention away from our core business, which could adversely affect our operating results in the aggregate.

For example, the pet insurance policies we write for general agents are subject to materially different terms and conditions than our subscription. They are typically annual policies with monthly payment terms, which can result in accounts receivable balances and payment timing patterns we do not experience in our subscription business. The relationships with these general agents may be terminated by either party and, if terminated, would result in a reduction in our revenue to the extent we cannot enter other relationships and generate equivalent revenue with different general agents. For the year ended December 31, 2021, premiums from policies sourced by general agents accounted for 27% of our total revenue, and one general agent sourced members whose premiums accounted for over 10% of our total revenue. Further, the unaffiliated general agents administer these policies and market them to consumers. If the general agents make operating decisions that adversely affect its business or brand, our business or brand could also be adversely affected.

In Canada, our medical plan is written by Omega General Insurance Company. If Omega were to terminate its underwriting arrangement with us, our business could be adversely affected.

In Canada, our ~~pet~~medical insurance for pets subscription is currently written by Omega, and we assume all premiums written by Omega and the related veterinary invoice expense through an agency agreement and a fronting and administration agreement. We expect to begin to underwrite our own products in Canada through our wholly-owned subsidiary, GPIC Insurance Company (GPIC). If Omega were to terminate our agreement or be unable to write insurance for regulatory or other reasons, in particular before GPIC is duly authorized to write insurance across all Canadian jurisdictions, we may have to terminate subscriptions with our existing Canadian members and/or suspend member enrollment and renewals in ~~Canada until~~Canada. In addition, as we ~~enter~~move business from Omega to GPIC, we may be required to contribute more risk-based capital than expected into a relationship with another third party to write our subscription or we set up an entity able to perform this service, which may take a significant amount of time and require significant expense. We may not be able to enter into a new relationship, and any new relationship would likely be on less favorable terms. Any delay in entry into a new relationship or suspension of member enrollment and renewals could have a material adverse effect on our operating results and financial condition.

~~Changes in foreign exchange rates may adversely affect our revenue and operating results.~~

We offer our subscription in Canada and in the future may offer it in other countries, which exposes us to the risk of changes in currency exchange rates. For the year ended December 31, 2021, approximately 16% of our total revenue was generated in Canada. Fluctuations in the relative strength of the US dollar has in the past and could in the future adversely affect our revenue and operating results.

GPIC.

We are expanding our operations internationally, and we may therefore become subject to a number of risks associated with international expansion and operations.

~~As part of~~We are expanding our ~~growth plan, we have explored,~~operations internationally and expect to continue ~~to explore,~~exploring opportunities ~~to expand our operations internationally.~~outside of North America. For instance, we have entered the Australian market in 2019 through a joint ~~venture~~venture. In August 2022 we purchased Smart Paws, a managing general agent for pet insurance with operations based in Germany and Switzerland, and in November 2022 we ~~are actively exploring entering other countries.~~acquired PetExpert, a managing general agent for pet insurance with operations based in the Czech Republic and Slovakia. We have limited history of marketing, selling, ~~administrating~~administering and supporting our subscription product for consumers outside of the ~~United States, Canada, and Puerto Rico.~~North America. In general, international sales and operations may be subject to a number of risks, including the following:

•regulatory rules and practices, foreign exchange controls, tariffs, tax laws and treaties that are different than those we operate under currently;

•the costs and resources required to modify our subscription appropriately to suit the needs and expectations of residents and veterinarians in such foreign countries;

•our data analytics platform may have limited applicability in foreign countries, which may impact our ability to develop adequate underwriting criteria and accurately price subscriptions in such countries;

•increased expenses incurred in establishing and maintaining office space and equipment for our international operations;

•technological incompatibility between our patented proprietary software and software used by veterinarians;

•difficulties in modifying our business model or subscription in a manner suitable for any particular foreign country, including any modifications to our Territory Partner model to the extent we determine that our existing model is not suitable for use in foreign countries;

•our lack of experience in marketing to consumers and veterinarians and online ~~marketing~~engagement in foreign ~~countries;~~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.

These and other factors could harm our ability to gain future international revenue and ~~consequently,~~increase our expenses, which would materially impact our business and operating results. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources, ~~detracting~~which may detract from management attention and financial resources otherwise available to our existing business. Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business and could have an adverse effect on our operating results and financial condition.

~~Our decision~~Changes in foreign exchange rates may adversely affect our revenue and operating results.

In addition to ~~set up~~the United States, we offer products in Canada, several European countries, and Australia, and we are pursuing operations in several other jurisdictions. These activities expose us to the risk of changes in currency exchange rates. For the year ended December 31, 2023, approximately 15% of our total revenue was generated in Canada. While we have not experienced material exposure to exchange rates in Australia or Europe, that may not continue. 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. Moreover, in the future, we may 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 ~~complicate our business and~~ harm our results of operations.

~~Currently,~~

We currently own one of the insurers through which we are issuing products - APIC, ~~our wholly-owned subsidiary, underwrites memberships~~a New York domiciled insurer. We also own and have regulatory approvals for ~~our U.S. subscription products,~~two new insurers domiciled respectively in Missouri and ~~Omega, a third party, underwrites memberships~~Nebraska, ZPIC Insurance Company and QPIC Insurance Company. We are currently pursuing so-called expansion applications for these entities in most United States jurisdictions. In addition, we own and are pursuing Canadian regulatory approvals for our Canadian ~~subscription products. We have set up two new wholly-owned insurance companies in the U.S.~~insurer GPIC and ~~are in the process of setting up an additional insurance company in Canada and in the future~~ we may ~~decide~~also seek to ~~set up~~acquire or establish other insurers.

Acquisitions and ~~operate additional wholly-owned insurance companies in~~operations of these insurers presents a number of risks, including the ~~U.S., Canada or a different country. The pursuit of acquiring~~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 ~~formation~~acquisition or ~~acquisition~~formation is completed. ~~Further, even~~

•Even if we are successful in forming or acquiring a new insurance subsidiary we may not achieve the anticipated benefits. ~~In addition,~~We may incur additional costs if we decide to sell or dissolve any such subsidiary.

•Each insurance entity will likely require a significant initial minimum capital contribution. It may ~~require additional capital~~take a longer period of time to ~~meet our risk-based capital requirements for the new~~achieve efficiency on these contributions, if ever.

•Each insurance ~~subsidiaries and~~entity will be subject to additional regulatory scrutiny in the jurisdiction of incorporation and any additional jurisdictions in which the insurance subsidiary operates. Failure to comply with laws, regulations and guidelines applicable to a new insurance subsidiary could result in significant liability, result in the loss of revenue and otherwise harm our business, operating results and financial condition.

22•A supervisory regulator may increase the amount of capital we must hold in an insurance subsidiary, especially if it shows material growth. We may not have easy access to such capital, and using it for this purpose may prevent us from investing in our growth and operations, which may require us to modify our operating plan, delay new initiatives, interfere with personnel growth, incur indebtedness or pursue financings, or otherwise modify our operations, any of which could have a material adverse effect on our operating results and financial condition.

•

If ~~we are unable to maintain effective internal control over financial reporting~~the required minimum capital in ~~the future, investors may lose confidence in the accuracy and completeness~~one of our insurers falls below the required threshold, the responsible regulator may take action, or such a reduction may result in a breach of various contractual relationships, including, for example, with the unaffiliated general agents for which we write medical insurance for pets policies, which may give such parties the ability to cancel their contracts with us and/or sue us for damages related to our risk-based capital levels, which could have a material adverse effect on our financial ~~reports and the market price~~condition.

•We may not obtain required regulatory approvals in connection with potentially investing a portion of ~~our common stock may be negatively affected.~~

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 ~~detect errors on a timely basis~~available to us at any time, our business, operating results and ~~our~~ financial ~~statements~~condition may be ~~materially misstated.~~ harmed.

We ~~have had in~~may require additional capital to meet our risk-based capital requirements, operate or expand our business or respond to unforeseen circumstances. Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. For instance, our arrangement with Aflac requires that, before we issue or sell equity to another investor, we are required to provide Aflac an opportunity to purchase equity allowing them to maintain their ownership percentage. This requirement may introduce delays or prevent us from raising funds through the ~~past, and may have in the future, material weaknesses and significant deficiencies in our internal control over financial reporting.~~issuance of securities. If we raise additional funds through the issuance of equity or ~~our independent registered public accounting firm identify future material weaknesses in our internal control over financial reporting, we are unable to comply with~~convertible securities, the ~~requirements~~percentage ownership of Section 404 in a timely manner, we are unable to assert that our internal control over financial reporting is effective or our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market priceholders of our common stock could be ~~negatively affected. We could also become subject~~significantly diluted and these newly issued securities may have rights, preferences or privileges senior to ~~investigations by~~those of holders of our common stock. Further, volatility in the ~~stock exchange~~equity markets may have an adverse effect on ~~which~~ our ~~securities are listed,~~ability to obtain equity financing or the ~~SEC~~cost of such financing and, in the event we require additional debt financing, volatility in the debt markets may have an adverse effect on our ability to obtain debt financing or ~~other~~the cost of such financing. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. If a combination of these factors were to occur, our internal sources of liquidity may prove to be insufficient and, in such case, we may not be able to successfully obtain additional financing on favorable terms. If funds are unavailable to us on reasonable terms when we need them, we may be unable to meet our risk-based capital requirements, train and support our employees, support Territory Partners, maintain the competitiveness of our technology, pursue business opportunities, service our existing debt, pay veterinary invoices or acquire new members, any of which could ~~require additional~~have an adverse effect on our business, operating results and financial ~~and management resources.~~condition.

If our security measures are breached and unauthorized access is obtained to our data, including our members’ data, we may lose our competitive advantage, our systems may be perceived as not being secure and we may incur third-party liability.

Our data repository contains proprietary information that we believe gives us a competitive advantage, including data on veterinary invoices received and other data with respect to members, Territory Partners, veterinarians and other third parties. We also collect and utilize demographic and other information from and about our members when they visit our website, call our contact center and apply for enrollment. Further, we use tracking technologies, including “cookies,” to help us manage and track our members’ interactions and deliver relevant advice and advertising. Security breaches could expose us to a risk of loss of our data and/or disclosure of this data, either publicly or to a third party who could use the information to gain a competitive advantage. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. In the event of a loss of our systems or data, we could experience increased costs, delays, legal liability and reputational harm, which in turn may harm our financial condition, damage our brand and result in the loss of members. Such a disclosure also could lead to litigation and possible liability.

In the course of operating our business, we store and/or transmit our members’ confidential information, including credit card and bank account numbers and other private information. Because the methods used to obtain unauthorized access to private information change frequently and may be difficult to detect for long periods of time, security breaches would expose us to a risk of loss of this information, litigation and possible liability. Our payment services are similarly susceptible to credit card and other payment fraud schemes, including unauthorized use of credit cards, debit cards or bank account information, identity theft or merchant fraud.

If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to our data, including data of our members, our reputation may be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security occurs, the public perception of the effectiveness of our security measures could be harmed.

In addition, cyber-attacks or acts of terrorism could cause disruptions in our business or the economy as a whole. Our servers and systems may also be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data or the unauthorized disclosure of confidential member data. We currently have limited disaster recovery capability, and our business interruption insurance may be insufficient to compensate us for losses that may occur. Such disruptions could negatively impact our ability to run our business, which could have an adverse effect on our operating results and financial condition.

We are subject to a number of risks related to accepting automatic fund transfers and credit card and debit card payments.

We accept payments of subscription fees from our members through automatic fund transfers and payments via credit and debit card ~~transactions.~~and mobile payment applications. For payments via credit and debit card ~~payments,~~and mobile payment applications, we pay interchange and other fees, which may increase over time. An increase in the number of members who utilize credit and debit cards and mobile apps to pay their subscription fees or related credit and debit card fees would reduce our margins and could require us to increase subscription fees, which could cause us to lose members and revenue, or suffer an increase in our operating expenses, either of which could adversely affect our operating results.

If we, or any of our processing vendors or banks have problems with our billing software, or if the billing software malfunctions, it could have an adverse effect on our member satisfaction and could cause one or more of the major credit card companies or banks to disallow our continued use of their payment products. In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our members’ credit cards on a timely basis or at all, or a bank withdraws the incorrect amount or fails to timely transfer the correct amount to us, we could lose revenue and harm our member experience, which could adversely affect our business and operating results. 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.

We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, including the Payment Card Industry Data Security Standard (PCI DSS), a security standard applicable to companies that collect, store or transmit certain data regarding credit and debit cards, holders and transactions. ~~Although we~~We are currently compliant with PCI DSS in ~~the past we were not, and in the future we~~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.~~rules in the future. Any failure to comply with the PCI DSS in the future may violate payment card association operating rules, federal and state laws and regulations, and the terms of our contracts with payment processors and merchant banks. Such failure to comply may subject us to fines, penalties, damages and civil liability, and may result in the loss of our ability to accept credit and debit card payments. In addition, there is no guarantee that PCI DSS compliance will prevent illegal or improper use of our payment systems or the theft, loss or misuse of data pertaining to credit and debit cards, credit and debit card holders and credit and debit card transactions.

If we fail to adequately control fraudulent ~~credit card transactions,~~payment processing, we may face civil liability, diminished public perception of our security measures and significantly higher credit card-related costs, each of which could adversely affect our business, operating results and financial condition.

If we are unable to maintain our chargeback rate at acceptable levels, our credit card fees for chargeback transactions, or our fees for many or all categories of credit and debit card transactions, credit card companies and debit card issuers may increase our fees or terminate their relationship with us. Any increases in our credit card and debit card fees could adversely affect our operating results, particularly if we elect not to raise our subscription fees. The termination of our ability to process payments on any major credit or debit card would significantly impair our ability to operate our business.

We have limited experience owning an office building and may face unexpected costs.

In August 2018, we purchased our ~~home~~headquarters office ~~building.~~building in Seattle, Washington, USA. Prior to this purchase, we had no experience owning an office building. It is difficult to predict all costs associated with maintaining the building and ensuring it is suitable for our use and that of other tenants and maintain compliance with all environmental and other regulations applicable to ownership of real estate. ~~It is possible that the other current~~Following our transition to hybrid work arrangements, we have far fewer people working in our headquarters office, resulting in decreased utilization of our space. Failure to attract and retain tenants for our unused space will result in our not receiving rental income and could also cause a reduction in the ~~building may cease to rent space in~~value of the ~~building, which would decrease rental income we expect to receive from them.~~building. Tenants may also negotiate tenant improvements, requiring capital expenditures that may adversely impact our financial position. In addition, we may identify structural defects or other conditions, or we may determine that remodeling or renovations are necessary given our business operations and objectives. 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.

Environmental, social, and governance (ESG) issues may result in reputational harm and liability.

Companies across all industries are experiencing increased scrutiny and litigation related to their ESG practices, positions, and reporting. Investors, customers, regulators, employees, and other stakeholders have focused increasingly on ESG issues, including, among other things, climate change and greenhouse gas emissions, human and civil rights, and diversity, equity, and inclusion matters. Expectations surrounding appropriate corporate behavior in these areas are continually evolving and often reflect opposing viewpoints. Positions we may take (or choose not to take) on ESG issues may be unpopular with some of our current or potential employees, partners, or customers, which may in the future impact our ability to attract or retain employees, partners, or customers. Further, actions taken by our customers or partners, including through the use or misuse of our products, may result in reputational harm or possible liability to us.

Our disclosures on ESG matters, and any standards we may set for ourselves or a failure to meet these standards, may influence our reputation and the value of our brand. For example, we have elected to share publicly certain information about our ESG initiatives and information, and our commitment to the recruitment, engagement, and retention of a diverse board and workforce. In addition, California recently adopted two new climate-related bills, which require companies doing business in California that meet certain revenue thresholds to publicly disclose certain greenhouse gas emissions data and climate-related financial risk reports, and compliance with such requirements could require significant effort and resources. The SEC has also proposed disclosure requirements regarding, among other ESG topics, the impact our business has on the environment. Our business may face increased scrutiny related to these activities and our related disclosures, including from the investment community, and our failure to achieve progress or manage the dynamic public sentiment and legal landscape in these areas on a timely basis, or at all, could adversely affect our reputation, business, and financial performance.

Failure to adequately protect our intellectual property could substantially harm our business and operating results.

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 patented proprietary software and our intellectual property. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy our digital content, pricing analytics, technology, software, branding and functionality, or obtain and use information that we consider proprietary. Moreover, policing our proprietary rights is difficult and may not always be effective. IfAs we continue to expand internationally, we may need to enforce our rights under the laws of countries that do not protect proprietary rights to as great an extent as do the laws of the United States, which may be expensive and divert management’s attention away from other operations.

Our proprietary software is protected by patents. These patents may not be sufficient to maintain effective product exclusivity because patent rights are limited in time and do not always provide effective protection. 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. Even where our patents rights are enforced, legal remedies available for harm caused to us by infringing products may be inadequate to make us whole. Further, our successful assertion of our patent against one competing product is not necessarily predictive of our future success or failure in asserting the same patent against a second competing product. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available. However, the life of a patent, and the protection it affords, is limited. Once the patent life has expired for our software, our competitors will be able to use our patented technology.

We seek to control access to our proprietary technology, software and documentation by entering into confidentiality and invention assignment agreements with our employees and partners, confidentiality agreements or license agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us, and terms of use with third parties, such as veterinary hospitals desiring to use our technology, software and documentation. These agreements may not prevent disclosure of intellectual property, trade secrets and/or other confidential information, and may not provide an adequate remedy in the event of misappropriation of trade secrets or any unauthorized disclosure of trade secrets and other confidential information. In addition, others may independently discover trade secrets and confidential information and, in such cases, we may not be able to assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights and related confidentiality, license and nondisclosure provisions, and failure to obtain or maintain trade secret protection, or our competitors being able to obtain our trade secrets or to independently develop technology similar to ours or competing technologies, could adversely affect our competitive business position.

Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our intellectual property rights, to protect our domain names and to determine the validity and scope of the proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective, could result in substantial costs and diversion of resources and could substantially harm our operating results.

Assertions by third parties of infringement or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.

Third parties have in the past and may in the future claim that our services or technologies, including our proprietary software, infringe or otherwise violate their intellectual property rights. We may be subject to legal proceedings and claims, including claims of alleged infringement by us of the intellectual property rights of third parties. Any dispute or litigation regarding intellectual property could be expensive and time consuming, regardless of the merits of any claim, and could divert our management and key personnel from our operations.

If we were to discover or be notified that our services or our proprietary software potentially infringe or otherwise violate the intellectual property rights of others, we may need to obtain licenses from these parties in order to avoid infringement. We may not be able to obtain the necessary licenses on acceptable terms, or at all, and any such license may substantially restrict our use of the intellectual property. Moreover, if we are sued for infringement and lose the lawsuit, we could be required to pay substantial damages or be enjoined from offering the infringing services. Any of the foregoing could cause us to incur significant costs and prevent us from selling or properly administering subscriptions or performing under our other contractual relationships.

The outcome of litigation or regulatory proceedings could subject us to significant monetary damages, restrict our ability to conduct our business, harm our reputation and otherwise negatively impact our business.

From time to time, we have been, and in the future may become, subject to litigation, claims and regulatory proceedings and inquiries, including market conduct examinations and investigations by state insurance regulatory agencies and threatened or filed lawsuits by, among others, government agencies, employees, competitors, shareholders, current or former members, or business partners.

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. If we are found liable in any action or proceeding, we may have to pay substantial damages or fines, which may have a material adverse effect on our business, operating results, financial condition and prospects. More critically, an adverse result from a proceeding could require us to change the way we conduct our business, including our marketing and ~~promotional~~sales practices, and such a result may have a greater adverse effect on our business than monetary damages or fines. There may also be negative publicity associated with litigation or regulatory proceedings that could harm our reputation or decrease acceptance of our services. These claims may be costly to defend and may result in assessment of damages, adverse tax consequences and

harm to our reputation.

Our current and future indebtedness could limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy any of our debt service obligations.

In March 2022, we entered into a credit agreement with Piper Sandler Finance, LLC, as administrative agent, that provides us with up to $150.0 million of credit (the Credit Facility). As of December 31, 2023, we issued term loans totaling $135.0 million under the Credit Facility. Substantial 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:

•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.

Our ability to borrow any funds needed to operate and expand our business will depend in part on our ability to generate cash. If our business does not generate sufficient cash flow from operating activities or if future borrowings, under our Credit Facility or otherwise, are not available to us in amounts sufficient to enable us to fund our liquidity needs, our operating results, financial condition and ability to expand our business and meet our risk-based capital requirements may be adversely affected.

Covenants in our Credit Facility may restrict our operations, and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely affected.

Our Credit Facility contains various restrictive covenants, including limitations on our ability to incur other indebtedness or liens, make investments, and merge with or acquire other entities. Our Credit Facility also contains certain financial covenants, including minimum revenue and liquidity thresholds. Our ability to meet these restrictive covenants can be affected by events beyond our control. We are also obligated to pay interest under the Credit Facility at a floating base rate plus an applicable margin, which rate will increase based on prevailing rates. Our Credit Facility provides that our breach or failure to satisfy various covenants and obligations constitutes an event of default. Upon the occurrence of an event of default, our lenders could elect to declare any future amounts outstanding under our Credit Facility to be immediately due and payable. The Credit Facility is secured by substantially all of our assets and those of our subsidiaries. If we are unable to repay those amounts, our financial condition could be adversely affected.

We may have additional tax liabilities.

We are subject to income tax, premium tax, transaction tax and other taxes in the U.S. and foreign jurisdictions. Judgment is required in determining our provision for income taxes, premium tax, transaction tax and other taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. 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. The results of an audit or litigation could have a material effect on our consolidated financial statements in the period or periods in which that determination is made.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, ~~2021,~~2023, we had U.S. federal net operating loss carryforwards of approximately ~~$218.3~~$271.6 million that will begin to expire in 2026. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income taxes may be limited. 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. Pursuant to Sections 382 and 383 of the Code, annual use of our net operating loss carryforwards and credit carryforwards may be limited by previous and future ownership changes.

Risks Related to Compliance with Laws and Regulations

~~We may not maintain the amount of risk-based capital required to avoid additional regulatory oversight, which may adversely affect our ability to operate our business.~~

Memberships in our U.S. subscription product are currently underwritten by APIC. APIC is an insurance company domiciled in the state of New York and licensed by the New York Department of Financial Services (NY DFS). Regulators in the states in which we do business impose risk-based capital requirements on APIC that generally are approved by the National Association of Insurance Commissioners (NAIC) to ensure APIC maintains reasonably appropriate levels of surplus to protect our members against adverse developments in APIC’s financial circumstances, taking into account the risk characteristics of our assets, liabilities and certain other items. Generally, state insurance regulators will compare, on an annual basis as of December 31 or more often as deemed necessary, an insurer’s total adjusted capital and surplus to assess an insurer’s capital adequacy. If an insurer’s risk-based capital falls below a specific threshold, the regulator may take action, which can range from directing an insurer to propose a plan to increase its capital to an acceptable level to placing the insurer under regulatory control.

Applicable regulations regarding risk-based capital may change, and/or the NY DFS may increase APIC’s required levels of risk-based capital in the future. Regardless, we anticipate that we will need to maintain greater amounts of risk-based capital if our pet enrollment continues to grow. Additionally, a reduction in our risk-based capital may result in a breach of various contractual relationships, including, for example, with the unaffiliated general agents for which we write pet insurance policies, which may give such parties the ability to cancel their contracts with us and/or sue us for damages related to our risk-based capital levels, which could have a material adverse effect on our financial condition.

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 may require additional capital to meet our risk-based capital requirements, operate or expand our business or respond to unforeseen circumstances. Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. For instance, our arrangement with Aflac requires that, before we issue or sell equity to another investor, we are required to provide Aflac an opportunity to purchase equity allowing them to maintain their ownership percentage. This requirement may introduce delays or prevent us from raising funds through the issuance of securities. If we raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of our common stock could be significantly diluted and these newly issued securities may have rights, preferences or privileges senior to those of holders of our common stock. Further, volatility in the credit or equity markets may have an adverse effect on our ability to obtain debt or equity financing or the cost of such financing. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. If a combination of these factors were to occur, our internal sources of liquidity may prove to be insufficient and, in such case, we may not be able to successfully obtain additional financing on favorable terms. If funds are unavailable to us on reasonable terms when we need them, we may be unable to meet our risk-based capital requirements, train and support our employees, support Territory Partners, maintain the competitiveness of our technology, pursue business opportunities, service our existing debt, pay veterinary invoices or acquire new members, any of which could have an adverse effect on our business, operating results and financial condition.

Our business is heavily regulated, and if we fail to comply with the numerous applicable laws and regulations our business and operating results could be harmed.

The sale of medical insurance for cats and dogs ~~which is considered a type of property and casualty insurance in most jurisdictions,~~ is heavily ~~regulated by federal, state, provincial and territorial governments in each jurisdiction in which we operate.~~regulated. In the United States, insurance is regulated by each state ~~insurance regulators are charged~~in which we operate, and it is challenging to comply with ~~protecting policyholders~~the requirements of each of these jurisdictions along with the different Canadian federal provincial, and ~~have broad regulatory, supervisory and administrative powers over our business practices. Because~~territorial requirements. As we ~~do business in all 50 states, the District of Columbia, all Canadian provinces and territories, and Puerto Rico,~~expand internationally, compliance with insurance-related laws, rules and regulations isbecomes even more difficult and imposes significant costs on our business. Each ~~jurisdiction’s insurance department typically~~applicable regulator has ~~the~~broad supervisory power ~~among other things, to:~~

•~~grant~~over all insurance-related operations, which can include granting and ~~revoke~~revoking licenses to transact insurance ~~business;~~

•~~conduct inquiries into the insurance-related activities~~business, and ~~conduct of agents and agencies and others in the sales, marketing and promotional channels;~~

•~~require and regulate disclosure in connection with the sale and solicitation of insurance policies;~~

•~~authorize how, by which personnel and under what circumstances insurance premiums can be quoted and published and an insurance policy sold;~~

•~~regulate how sales incentives may be structured;~~

•~~regulate the content of insurance-related advertisements, including web pages, and other marketing practices;~~

•~~approve policy forms, require specific benefits and benefit levels;~~

•~~regulate premium rates;~~

•~~impose~~imposing fines and other ~~penalties; and~~

•~~impose continuing education requirements.~~

While the U.S. federal government does not directly regulate the insurance industry, federal legislation and administrative policies can also affect us. Congress and various federal agencies periodically discuss proposals that would provide for federal oversight of insurance companies. We cannot predict whether any such laws will be enacted or the effect that such laws would have on our business. We also do business in all ten provinces and three territories of Canada. The provincial and territorial insurance regulators have the power to regulate the market conduct of insurers and insurance intermediaries, and the licensing and supervision of insurance agents, and brokers, along with enforcement rights, including the right to assess administrative monetary penalties in certain provinces.

Insurance companies are also regulated at the federal level in Canada, and the Insurance Companies Act prohibits a foreign entity from insuring risks in Canada unless it is authorized by an Order made by the Superintendent of Financial Institutions (Canada) permitting it to do so.penalties.

Due to the complexity, periodic modification and differing interpretations of insurance laws and regulations, we have not always been, and we may not always be, in compliance with them. A regulator’s interpretation of existing laws or regulations may change without notice. 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 ~~subscriptions,~~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.

Moreover, because adverse regulatory actions in one jurisdiction ~~must~~may be required to be reported to other jurisdictions, an adverse regulatory action in one jurisdiction could result in penalties and adversely affect our license status or reputation in other jurisdictions. Even if the allegations in any regulatory or other action against us ultimately are determined to be unfounded, we could incur significant time and expense defending against the allegations, and any related negative publicity could harm consumer and third-party confidence in us, which could significantly damage our brand.

In addition, we have received, and may in the future receive, inquiries from regulators regarding our marketing and business practices. These inquires may include investigations regarding a number of our business practices, including the manner in which we market and sell ~~subscriptions,~~products, the manner in which we write policies for any unaffiliated general agent, and whether any amounts we pay to hospitals or hospital groups (e.g., for electronic claims processing) is appropriate. Any modification of our marketing or business practices in response to regulatory inquiries could harm our business, operating results or financial condition and lead to reputational harm.

~~States~~New laws may ~~adopt new laws~~be adopted that may adversely affect our operating results and financial condition.

~~The NAIC~~Existing laws and regulations impose limits on, for instance, our ability to enact price increases for our products, among other things. New laws may ~~draft model laws that focus on medical insurance for pets. States may enact new laws to adopt what the NAIC drafts, or a state may enact its own new laws or regulations~~be adopted that could further affect our ~~industry. Many states have considered and may continue to consider proposed legislation that could significantly affect our operations, including,~~business, for example our ability to effect rate increases, to cancel or not issue existing policies, to use artificial intelligence or ~~how~~machine learning, or to market our ~~product.~~products in various ways. Implementing changes in order to comply with new laws or regulations could also be time-consuming and costly.

~~We may not receive approval for changes to an existing product, for a proposed new product or for pricing changes, or we may not receive such approvals in a timely manner.~~

Most states require licensure and regulatory approval prior to marketing new insurance products or changing premiums for existing products. From time to time, we seek to make updates to our existing subscription product. We may also introduce new products that make changes that are more extensive to the product approved in a state. With respect to pricing, our practice has been to regularly reevaluate the price of our subscriptions, with any pricing changes implemented at least annually, subject to the review and approval of the state regulators, who may reduce or disallow our pricing changes. Such review has often in the past resulted, and may in the future result, in delayed implementation of pricing changes and prevent us from making changes we believe are necessary to achieve our targeted payout ratio, which could adversely affect our operating results and financial condition. A delayed approval may require us to have larger rate increases in subsequent periods. This could damage our reputation with our members and reduce our retention rates, which could significantly damage our brand, result in the loss of expected revenue and otherwise harm our business, operating results and financial condition.

We may be affected by mandatory participation in plans that could result in contributions from insurance subsidiaries we own.

Certain states have enacted laws that require a property-casualty insurer, which includes a pet insurance company, conducting business in that state to participate in assigned risk plans, reinsurance facilities, joint underwriting associations (JUAs), Fair Access to Insurance Requirements (FAIR) plans and wind pools. In these markets, if the state reinsurance facilities, wind pools, FAIR plans or JUAs recognize a financial deficit, they may in turn have the ability to assess participating insurers, adversely affecting our operating results and financial condition if we are a part of such state reinsurance facilities, wind pools, FAIR plans or JUAs. Additionally, certain ~~states~~jurisdictions require insurers to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the ~~state.~~jurisdiction. Our operating results and financial condition could be adversely affected by any of these factors.

Regulations that require individuals or entities that sell medical insurance for cats and dogs or process claims to be licensed may be interpreted to apply to our business more broadly than we expect them to, which could require us to modify our business practices, create liabilities, damage our reputation, and harm our business.

Insurance regulations generally require that each individual who sells, solicits or negotiates insurance on our behalf must maintain a valid license in the jurisdiction in which the activity occurs. Regulations also generally prohibit paying an insurance commission to an unlicensed person or entity. Regulations may also require certain individuals who process claims to be licensed. These requirements are subject to a variety of interpretations between jurisdictions. We may not interpret and apply the requirements in the same manner as all applicable regulators, and, even if we have, the requirements or regulatory interpretations of those requirements may change. Regulators have in the past and/or may in the future determine that certain of our personnel or third parties were performing licensable activities without the required ~~license, including for example a veterinary hospital employee.~~license. If such persons were not in fact licensed in any such jurisdiction, we could become subject to conviction for an offense or the imposition of an administrative penalty, and liable for significant penalties. Regulators may also deem payments we make to an unlicensed entity or person to be improper. We would also likely be required to modify our business practices and/or pet acquisition programs, or license the affected individuals, which may be impractical or costly and time-consuming to implement. Any modification of our business or marketing practices in response to regulatory licensing requirements could harm our business, operating results or financial condition.

We are subject to numerous laws and regulations, and compliance with one law or regulation may result in non-compliance with another.

We are subject to numerous laws and regulations that are administered and enforced by a number of different governmental authorities, each of which exercises a degree of interpretive latitude, including, in the United States, state insurance regulators, state securities administrators, state attorneys general and federal agencies including the SEC, Internal Revenue Service and the U.S. Department of Justice. Consequently, we are subject to the risk that compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue, particularly when compliance is judged in hindsight. In addition, 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, even absent any particular regulator’s or enforcement authority’s interpretation of a legal issue changing, cause us to change our views regarding the actions we need to take from a legal risk management perspective, thus necessitating changes to our practices that may, in some cases, increase our costs and limit our ability to grow or to improve ~~the profitability~~our results of ~~our business.~~operations. Further, in some cases, these laws and regulations are designed to protect or benefit the interests of a specific constituency rather than a range of constituencies. For example, state insurance laws and regulations generally are intended to protect or benefit purchasers or users of insurance products, not holders of securities, which generally is the jurisdiction of the SEC. In many respects, these laws and regulations limit our ability to grow or to improve ~~the profitability~~our results of ~~our business.~~

operations.

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 ~~U.S. and Canadian federal, state and provincial laws and~~ regulations govern the collection, use, retention, sharing and security of personal information. Claims or allegations that we have violated applicable laws or regulations related to privacy and data security could in the future result in negative publicity and a loss of confidence in us by our members, ~~and~~ our participating service providers or team members, and may subject us to fines by credit card companies and the loss of our ability to accept credit and debit card payments. In addition, we have posted privacy policies and practices concerning the collection, use and disclosure of member data on our website. Several Internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices. 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.

We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols for personal information imposed by law, regulation, self-regulatory bodies, industry standards and contractual obligations. Such laws, standards and regulations, however, are evolving and subject to potentially differing interpretations, and ~~federal, state and provincial legislative and regulatory bodies may expand current or enact~~ new privacy laws ~~or regulations regarding privacy matters.~~are frequently enacted. We are unable to predict 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.

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. In addition, the growth and development of the market for electronic commerce and Internet-related ~~pet insurance~~ advertisements and transactions may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies conducting business and selling subscriptions over the Internet. 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.

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. The laws and regulations governing the use of phone solicitation, email, and texting continue to evolve, and the growth and development of the market for commerce over the Internet may lead to the adoption of additional legislation. Failure to comply with existing or new laws regarding phone solicitation, text or electronic communications with members could lead to significant damages. We have incurred, and will continue to incur, expenses in our efforts to comply with electronic messaging laws. If new laws or regulations are adopted, or existing laws and regulations are interpreted, to impose additional restrictions on our ability to send email to our members or potential members, we may not be able to communicate with them in a cost-effective manner. In addition to legal restrictions on the use of email for commercial purposes, Internet and email service providers and others attempt to block the transmission of unsolicited email, commonly known as “spam.” Many service providers have relationships with organizations whose purpose it is to detect and notify the Internet and email service providers of entities that the organization believes are sending unsolicited email. If an Internet or email service provider identifies messaging and email from us as “spam” as a result of reports from these organizations or otherwise, we could be placed on a restricted list that will block our emails to members or potential members. If we are restricted or unable to communicate by phone, text or email with our members and potential members as a result of legislation, blockage or otherwise, our business, operating results and financial condition would be harmed.

~~Applicable insurance laws regarding the change in control of our company may impede potential acquisitions that our stockholders might consider to be desirable.~~

We are subject to statutes and regulations of the state of New York that generally require that any person or entity desiring to acquire direct or indirect control of APIC obtain prior regulatory approval. These laws may discourage potential acquisition proposals and may delay, deter or prevent a change in control of our company, including through transactions, and in particular unsolicited transactions, that some of our stockholders might consider to be desirable. Similar laws or regulations may also apply in other states in which we may operate.

Our segregated account in Bermuda, WICL segregated account AX, could be adversely impacted by regulatory compliance of an unaffiliated third party.

Wyndham Insurance Company (SAC) Limited (WICL) is a class 3 insurer regulated by the Bermuda Monetary Authority (BMA). WICL’s ability to continue operations and pay dividends could impact the ability of our segregated account to do the same. WICL’s failure to meet regulatory requirements set forth by the BMA could result in our inability to transact business with WICL segregated account AX. Further, WICL could be limited from allowing dividends to be paid out of segregated account AX 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. If our accounting is erroneous or based on assumptions that change or prove to be incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and also to comply with many complex requirements and standards. We devote substantial resources to compliance with accounting requirements and we base our estimates on our best judgment, historical experience, information derived from third parties, and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. However, various factors are causing our accounting to become complex, such as our ~~recent building acquisition, our~~ investments in strategic opportunities and our ~~test~~ expansion into foreign markets. ~~Ongoing~~The ongoing evolution of our business, ~~further~~ international expansion, and entry into complementary businesses, such as pet food, may compound these complexities. Our operating results may be adversely affected if we make accounting errors or our judgments prove to be wrong, assumptions change or actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors or guidance we may have provided, resulting in a decline in our stock price and potential legal claims. 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.

From time to time we have released, and may continue to release, guidance in ~~our~~ quarterly earnings conference call, quarterly earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management. These projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person expresses any opinion or any other form of assurance with respect to the projections. In addition, from time to time we have ~~recently~~ provided, and may continue to provide, information regarding how we think about the drivers of and our method of calculating our intrinsic value, including related statements regarding discounted cash flows and underlying assumptions (such as pet enrollment, revenue per pet, lifetime values of a pet, pet acquisition costs, and other costs and expenses).

These statements are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond our control, including those described in these “Risk Factors” and elsewhere in this report. ~~We intend to~~When we state possible outcomes as high and low ranges, ~~which~~these are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges.

The principal reason that we release guidance and other information regarding our view of the drivers and calculation method of our intrinsic value is to provide a basis for our management to discuss our business and outlook with analysts and investors.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying these statements will not materialize or will vary significantly from actual results. Accordingly, these statements are only estimates of what management believes is reasonable as of the date of release. Actual results may vary and the variations may be material. In light of the foregoing, we urge investors ~~are urged~~ not to rely upon our guidance or other information regarding our view of the drivers and calculation method of our intrinsic value in making an investment decision regarding our common stock. In addition, we do not accept any responsibility for any projections or reports published by any such third parties, and we urge you not to place undue reliance on those statements.

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.

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. Acquisitions, strategic investments, partnerships, or alliances could also result in dilutive issuances of equity securities. In addition, we may issue options, restricted stock units, or other stock-based awards to those providing services to us, and to the extent outstanding or future options are exercised or restricted stock units or other stock-based awards are settled for shares of our common stock, there will be further dilution. These equity incentives are generally granted under our 2014 Equity Incentive Plan, which provides for automatic annual increases in the number of shares or our common stock available for issuance under the plan equal to 4% of our issued and outstanding shares of common stock, or any lesser number determined by our board of directors. Our board of directors most recently approved a 4% increase in 2022. The amount of dilution could be substantial depending upon the size of ~~the~~our future issuances of securities or ~~exercises.~~exercises or settlement of stock-based awards. Furthermore, we may issue additional equity securities that could have rights senior to those of our common stock, such as pursuant to the “blank check” preferred stock contained in our certificate of incorporation. As a result, purchasers of our common stock bear the risk that future issuances of debt or equity securities may reduce the value of and dilute their ownership interest.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the securities or industry analysts who publish research about us or our business downgrade our stock or publish inaccurate or unfavorable evaluations of our company or our stock, the price of our stock could decline. If one or more of these analysts cease coverage of our company, our stock may lose visibility in the market, which in turn could cause our stock price to decline.

The market price of our common stock has been and is likely to continue to be volatile, and you may be unable to sell your shares at or above the price at which you purchased them.

The market price of our common stock has been and is likely to continue to fluctuate widely. Factors affecting the market price of our common stock include:

•variations in our operating results, earnings per share, cash flows from operating activities, and key operating metrics, and how those results compare to analyst expectations;

•forward-looking guidance that we provide to the public and industry and financial analysts related to future revenue and ~~profitability,~~results of operations, and any change in that guidance or our failure to achieve the results reflected in that guidance;

•the net increases in the number of members, either independently or as compared with published expectations of industry, financial or other analysts that cover our company;

•~~announcements of~~ changes to our subscription, strategic alliances, acquisitions or significant agreements by us or by our competitors;

•recruitment or departure of key personnel;

•~~recent private sale~~factors relating to our other business segment;

•issuance of ~~our~~common stock or other securities to ~~Aflac;~~certain partners;

•the economy as a whole and market conditions in our industry;

•trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock;

•publications and public statements by financial analysts and other finance industry professionals and activists;

•the number of shares of our stock trading on a regular basis; and

•any other factors discussed in these risk factors.

In addition, if the market for stock in our industry or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial costs and a diversion of our management’s attention and resources.

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. 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. APIC’s ability to pay dividends is limited by New York state insurance laws, and WICL Segregated Account AX’s ability to pay dividends is limited by our agreements with WICL as well as WICL’s regulatory requirements. Any return to stockholders will therefore be limited to the increase, if any, of our stock price.

Our directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Our directors, five percent or greater stockholders and their respective affiliates beneficially hold a significant amount of our outstanding voting stock. Therefore, these stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you or other stockholders may feel are in your or their best interest as one of our stockholders.

Provisions in our restated certificate of incorporation, restated bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our common stock.

Our restated certificate of incorporation and restated bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions, among other things:

•~~establish a classified~~permit the CEO to also serve as the chair of the board of ~~directors so that not all members of our board are elected at one time;~~directors;

•permit only the board of directors to establish the number of directors and fill vacancies on the board;

•provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;

•require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;

•authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”);

•eliminate the ability of our stockholders to call special meetings of stockholders;

•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

•prohibit cumulative voting; and

•establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock. Moreover, applicable insurance laws require that any person or entity acquiring direct or indirect control of an insurer obtain prior regulatory approval, which may impede potential acquisitions.

We have an Employee Severance and Change in Control Plan that applies to each employee of our company. 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.

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Item 1B. Unresolved Staff Comments

None.

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”). 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. 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. 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 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. 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. We 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. 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. 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. 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. 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.

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. 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. 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. 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. 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.

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. 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 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. 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.

Item 2. Properties

Our principal executive offices are located at 6100 4th Avenue South, Seattle, Washington. We purchased the building in August 2018 and occupy 120,124 square feet.

Item 3. Legal Proceedings

Information with respect to this item may be found in Note 9 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.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Recent Sales of Unregistered Securities

Pursuant to a marketing agreement between us and a strategic distributor, we agreed to issue shares of our common stock to the distributor as partial consideration for sales made through the distributor’s marketing channels of white-label pet insurance and wellness products that we create and administer under the agreement. The number of shares we issue is determined quarterly, based on a percentage of revenue from such product sales divided by the volume weighted average price per share for the preceding quarter or, if lower, for the three months ended December 5, 2021. 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, 2023, we issued 2,000 shares of our common stock to the distributor in respect of product sales that occurred in the quarter ended September 30, 2023. We offered and sold these shares in reliance upon the exemption from the registration set forth under Section 4(a)(2) of the Securities Act, and the regulations promulgated thereunder relating to sales by an issuer not involving any public offering, and in reliance on similar exemptions under applicable state laws.

Market for our Common Stock

Our common stock began trading on the New York Stock Exchange (NYSE) under the symbol “TRUP” on July 18, 2014. Prior to that time, there was no public market for our common stock. On June 17, 2016, we voluntarily transferred the listing of our common stock from the NYSE to the NASDAQ Global Market of the NASDAQ Stock Market LLC (NASDAQ) where our common stock continues to be traded under the symbol “TRUP”.

Dividend Policy

We have never declared or paid cash dividends on our common stock. 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 further determination to pay dividends on our common stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors considers relevant.

Holders of Record

As of February ~~10, 2022,~~19, 2024, there were 29 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.

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 ~~2022.~~2024. See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Stock Performance Graph

The following shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act, except to the extent we specifically incorporate it by reference into such filing.

This chart compares the stockholder return on an investment of $100 over the five years from December 31, ~~2016~~2018 through December 31, ~~2021~~2023 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. All values assume the reinvestment of any dividends; however, no dividends have been declared on our common stock to date. The stockholder return on the following graph is not necessarily indicative of future performance.

12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021
Trupanion Inc. $ 100.00 $ 188.60 $ 161.98 $ 236.86 $ 771.33 $ 850.71
S&P Small Cap 600 Index $ 100.00 $ 111.73 $ 100.83 $ 121.87 $ 133.53 $ 167.28
NASDAQ-100 Technology Sector Index $ 100.00 $ 136.68 $ 128.42 $ 189.69 $ 262.87 $ 333.79
Russell 2000 Index $ 100.00 $ 113.14 $ 98.58 $ 122.62 $ 145.52 $ 165.45


	12/31/2018		12/31/2019		12/31/2020		12/31/2021		12/31/2022		12/31/2023
Trupanion Inc.	$	100.00	$	146.22	$	476.17	$	525.18	$	189.06	$	121.36
S&P Small Cap 600 Index	$	100.00	$	120.86	$	132.43	$	165.89	$	137.00	$	156.02
NASDAQ-100 Technology Sector Index	$	100.00	$	147.71	$	204.70	$	259.92	$	156.13	$	260.26
Russell 2000 Index	$	100.00	$	124.38	$	147.61	$	167.82	$	131.64	$	151.51

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Item 6. ~~Selected Financial Data~~[Reserved]

The selected statements of operations, balance sheet, and other data presented below should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this report. The selected statements of operations and balance sheet data are derived from our audited consolidated financial statements included elsewhere in this report and our previously audited financial statements that are not included herein. Our historical results are not necessarily indicative of the results to be expected in any future period.

Year Ended December 31,
2021 2020 2019 2018 2017
(in thousands)
Consolidated statements of operations data:
Revenue:
Subscription business $ 494,862 $ 387,732 $ 321,163 $ 263,738 $ 218,354
Other business 204,129 114,296 62,773 40,218 24,313
Total revenue 698,991 502,028 383,936 303,956 242,667
Cost of revenue:
Subscription business(1)
407,664 314,875 262,139 215,992 176,883
Other business 186,981 105,252 56,873 36,598 22,734
Total cost of revenue 594,645 420,127 319,012 252,590 199,617
Operating expenses:
Technology and development(1)
16,866 9,947 7,025 5,796 6,226
General and administrative(1)
31,893 21,847 18,384 17,104 16,130
New pet acquisition expense(1)
78,647 47,837 35,451 24,999 19,104
Depreciation and amortization 11,965 7,071 5,632 4,512 4,232
Total operating expenses 139,371 86,702 66,492 52,411 45,692
Loss from investment in joint venture (171) (126) (352) — —
Operating loss (35,196) (4,927) (1,920) (1,045) (2,642)
Interest expense 10 1,381 1,349 1,198 533
Other expense (income), net 14 (581) (1,629) (1,309) (1,244)
Loss before income taxes (35,220) (5,727) (1,640) (934) (1,931)
Income tax expense (benefit) 310 113 169 (7) (428)
Net loss $ (35,530) $ (5,840) $ (1,809) $ (927) $ (1,503)

~~(1)Includes stock-based compensation expense as follows:~~

Year Ended December 31,
2021 2020 2019 2018 2017
(in thousands)
Cost of revenue $ 7,148 $ 1,586 $ 1,050 $ 927 $ 594
Technology and development 3,056 3,795 364 209 216
General and administrative 8,862 2,773 3,312 2,304 1,887
New pet acquisition expense 9,160 758 2,120 1,335 722
Total stock-based compensation expense $ 28,226 $ 8,912 $ 6,846 $ 4,775 $ 3,419

December 31,
2021 2020 2019 2018 2017
(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents $ 87,400 $ 139,878 $ 29,168 $ 26,552 $ 25,706
Short-term investments 126,012 89,862 69,732 54,559 37,590
Working capital 167,258 186,628 67,196 54,773 40,692
Total assets 562,582 498,250 257,200 207,510 105,859
Current and long-term debt — — 26,086 12,862 9,324
Total liabilities 230,382 158,311 120,440 78,337 57,425
Common stock and additional paid-in capital 466,792 439,007 232,731 219,838 134,511
Accumulated deficit (126,890) (91,360) (85,520) (83,711) (82,784)
Total stockholders' equity 332,200 339,939 136,760 129,173 48,434

Year Ended December 31,
2021 2020 2019 2018 2017
Other operational data(1):
Total Business:
Total pets enrolled (at period end) 1,176,778 862,928 646,728 521,326 423,194
Subscription Business:
Total subscription pets enrolled 704,333 577,957 494,026 430,770 371,683
Monthly average revenue per pet $ 63.56 $ 60.37 $ 57.52 $ 54.34 $ 52.07
Lifetime value of a pet, including fixed expenses $ 717 $ 653 $ 523 $ 449 $ 409
Average pet acquisition cost (PAC)(2)
$ 287 $ 247 $ 212 $ 164 $ 152
Average monthly retention 98.74 % 98.71 % 98.58 % 98.60 % 98.63 %

(1) For more information about how we calculate total pets enrolled, total subscription pets enrolled, monthly average revenue per pet, lifetime value of a pet, including fixed expenses, average pet acquisition cost and average monthly retention, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics.”
(2) Average pet acquisition cost is calculated in part based on net acquisition cost, a non-GAAP financial measure. For more information about net acquisition cost and a reconciliation of new pet acquisition expense to net acquisition cost, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K.

This section of this Form 10-K generally discusses ~~2021~~2023 and ~~2020~~2022 items and year-to-year comparisons between ~~2021~~2023 and ~~2020.~~2022. Discussions of ~~2019~~2021 items and year-to-year comparisons between ~~2020~~2022 and ~~2019~~2021 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, ~~2020.~~2022.

Overview

We provide medical insurance for cats and dogs ~~throughout~~in the United States, Canada, ~~Puerto Rico,~~Continental Europe, and Australia. ~~Our~~Through our data-driven, vertically-integrated approach, ~~enables us to provide pet owners with products that~~we develop and offer ~~what we believe is the highest~~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 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 in two business segments: subscription business and other business. We generate revenue in our subscription business segment primarily by subscription fees from direct-to-consumer products. We operate our ~~“Trupanion” branded products. Fees~~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. Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties, and, in Canada, low and medium ARPU products marketed under the brand names Furkin and PHI Direct. We provide a full suite of services and support for these products and they are ~~paid at~~designed to align with the ~~beginning~~target margin profile of ~~each~~our subscription ~~period,~~business segment. Within our subscription business segment we also offer products in Continental Europe, which ~~automatically renews on a monthly basis. We generate revenue in our~~are currently underwritten using third-party underwriters.

Our other business segment ~~primarily by~~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 a different margin profile than our subscription segment and includes revenue from writing policies on behalf of third ~~parties. We do not undertake the marketing efforts for these policies~~parties and ~~have a business-to-business relationship with these third parties. Our other business segment also includes~~ revenue from other products and insurance software ~~solutions that have~~solutions. This segment of our business is not part of our core business strategy and generally has a ~~different margin profile from our subscription business.~~lower margin. Over time it is reasonable to expect changes to this segment which may impact the revenue contribution due to a partner or partners rolling off to new underwriters.

We generate leads for our subscription business segment from a diverse set of member acquisition channels, which we then 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 engage our “Territory Partners” to have face-to-face visits with veterinarians and their staff. Territory Partners are dedicated to cultivating direct veterinary relationships and building awareness of the benefits of high quality medical insurance to veterinarians and their clients. Veterinarians then educate pet owners, who visit our website or call our contact center to learn more about, and potentially enroll in, Trupanion. We also receive a significant number of new leads from existing members adding pets and referring their friends and family members. Our direct-to-consumer acquisition channels serve as important resources for pet owner education and drive new member leads and conversion. We monitor average pet acquisition cost to evaluate the efficiency in acquiring new members and measure effectiveness based on our targeted return on investment.

~~Our Response to the COVID-19 Pandemic~~

We have not experienced a material adverse impact on our business due to COVID-19, but we continue to monitor conditions closely and adapt our operations to meet federal, state and local guidance. Our focus remains on promoting employee health and safety, serving our members and ensuring business continuity. Our Seattle headquarters is now open for those who want to work in that office, in compliance with applicable regulations and guidance.

The impacts of COVID-19 and related economic conditions on our results are highly uncertain and in many ways outside of our control. The scope, duration and magnitude of the direct and indirect effects of COVID-19 are evolving rapidly and in ways that are difficult, if possible, to anticipate. For additional details, see the section titled "Risk Factors."

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Key Operating Metrics

The following tables set forth total pets enrolled and key operating metrics for our subscription business for the years ended December 31, ~~2021, 2020~~2023, 2022 and ~~2019,~~2021, and for each of the last eight fiscal quarters.


		Year Ended December 31,										Year Ended December 31,
		2021			2020			2019				2023		2022		2021
Total Business:	Total Business:
Total pets enrolled (at period end)	Total pets enrolled (at period end)	1,176,778			862,928			646,728
Total pets enrolled (at period end)
Total pets enrolled (at period end)
Subscription Business:	Subscription Business:
Total subscription pets enrolled (at period end)
Total subscription pets enrolled (at period end)
Total subscription pets enrolled (at period end)	Total subscription pets enrolled (at period end)	704,333			577,957			494,026
Monthly average revenue per pet	Monthly average revenue per pet	$	63.56		$	60.37		$	57.52
Lifetime value of a pet, including fixed expenses	Lifetime value of a pet, including fixed expenses	$	717		$	653		$	523
Average pet acquisition cost (PAC)	Average pet acquisition cost (PAC)	$	287		$	247		$	212
Average monthly retention	Average monthly retention	98.74		%	98.71		%	98.58		%	Average monthly retention	98.49	%	98.69	%	98.74	%


		Three Months Ended
		Dec. 31, 2021			Sept. 30, 2021			Jun. 30, 2021			Mar. 31, 2021			Dec. 31, 2020			Sept. 30, 2020			Jun. 30, 2020			Mar. 31, 2020
	Three Months Ended																																															Three Months Ended
	Dec. 31, 2023																												Dec. 31, 2023				Sept. 30, 2023				Jun. 30, 2023				Mar. 31, 2023				Dec. 31, 2022				Sept. 30, 2022				Jun. 30, 2022				Mar. 31, 2022
Total Business:	Total Business:
Total pets enrolled (at period end)	Total pets enrolled (at period end)	1,176,778			1,104,376			1,024,226			943,854			862,928			804,251			744,727			687,435
Total pets enrolled (at period end)
Total pets enrolled (at period end)																											1,714,473				1,712,177				1,679,659				1,616,865				1,537,573				1,439,605				1,348,145				1,267,253
Subscription Business:	Subscription Business:
Total subscription pets enrolled (at period end)
Total subscription pets enrolled (at period end)
Total subscription pets enrolled (at period end)	Total subscription pets enrolled (at period end)	704,333			676,463			643,395			609,835			577,957			552,909			529,400			508,480			991,426				969,322				943,958				906,369				869,862				808,077				770,318				736,691
Monthly average revenue per pet	Monthly average revenue per pet	$63.89			$63.60			$63.69			$62.97			$62.03			$60.87			$59.40			$58.96
Lifetime value of a pet, including fixed expenses	Lifetime value of a pet, including fixed expenses	$	717		$	697		$	681		$	684		$	653		$	615		$	597		$	535
Average pet acquisition cost (PAC)	Average pet acquisition cost (PAC)	$	306		$	280		$	284		$	279		$	272		$	261		$	199		$	247
Average monthly retention	Average monthly retention	98.74		%	98.72		%	98.72		%	98.73		%	98.71		%	98.69		%	98.66		%	98.59		%	Average monthly retention	98.49	%			98.55	%			98.61	%			98.65	%			98.69	%			98.71	%			98.74	%			98.75	%

Total pets enrolled and total subscription pets enrolled include pet enrollments in European markets, where policies are currently underwritten by third parties and Trupanion is acting as an insurance broker. Per pet metrics, however, exclude these European policies, as their revenue is currently earned from commissions, as opposed to the gross underwriting premiums earned by the remainder of our subscription business.

Total pets enrolled. Total pets enrolled reflects the number of subscription pets or pets enrolled in one of the insurance products offered in 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 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. Monthly average revenue per pet is calculated as amounts billed in a given period for subscriptions divided by the total number of subscription pet months in the period. Total subscription pet months in a period represents the sum of all subscription pets enrolled for each month during the period. We monitor monthly average revenue per pet because it is an indicator of the per pet unit economics of our subscription business.

Lifetime value of a pet, including fixed expenses. Lifetime value of a pet, including fixed expenses, is calculated based on subscription revenue less cost of revenue from our subscription business segment for the 12 months prior to the period end date excluding stock-based compensation expense related to cost of revenue from our subscription business segment, sign-up fee revenue and the change in deferred revenue between periods. This amount is also reduced by the fixed expenses related to our subscription business, which are the pro-rata portion of general and administrative and technology and development expenses, less stock-based compensation, based on revenues. This amount, on a per pet basis, is multiplied by the implied average subscriber life in months. Implied average subscriber life in months is calculated as the quotient obtained by dividing one by one minus the average monthly retention rate. We monitor lifetime value of a pet, including fixed expenses, to estimate the value we might expect from new pets over their implied average subscriber life in months, if they behave like the average pet in that respective period. When evaluating the amount of pet acquisition expenses we may want to incur to attract new pet enrollments, we refer to the lifetime value of a pet, including fixed expenses, as well as our estimated internal rate of return calculation for an average pet, which also includes an estimated surplus capital charge, to inform the amount of acquisition spend in relation to the estimated payback period.

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. Net acquisition cost, a non-GAAP financial measure, is calculated in a reporting period as new pet acquisition expense, excluding stock-based compensation expense, ~~and~~ other business segment expense, offset by sign-up fee revenue. We exclude stock-based compensation expense because the amount varies from period to period based on number of awards issued and market-based valuation inputs. 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 monitor average pet acquisition cost to evaluate the efficiency in acquiring new members and measure effectiveness based on our targeted return on investment.

Average monthly retention. Average monthly retention is measured as the monthly retention rate of enrolled subscription pets for each applicable period averaged over the 12 months prior to the period end date. As such, our average monthly retention rate as of December 31, ~~2021~~2023 is an average of each month’s retention from January 1, ~~2021~~2023 through December 31, ~~2021.~~2023. We calculate monthly retention as the number of pets that remain after subtracting all pets that cancel during a month, including pets that enroll and cancel within that month, divided by the total pets enrolled at the beginning of that month. 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.

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 use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken collectively, may be helpful to investors ~~because it provides~~in providing consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for, the directly comparable financial measures prepared in accordance with GAAP.

We calculate these non-GAAP financial measures by excluding certain non-cash or non-recurring expenses. We exclude ~~business combination transaction cost~~non-recurring transactions and restructuring expenses as ~~it is non-recurring and~~they are not indicative of our operating performance. We exclude stock-based compensation as it is non-cash in nature. Although stock-based compensation expenses are expected to remain recurring expenses for the foreseeable future, we believe excluding them allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies. We define non-GAAP development expenses as operating expenses incurred to develop new products and offerings that are pre-revenue. We define non-GAAP fixed expenses as the total of ~~Technology~~technology and ~~Development~~development expense and ~~General~~general and ~~Administrative~~administrative expense, less stock-based compensation expense, ~~business combination~~non-recurring transaction ~~cost,~~ and ~~non-GAAP~~restructuring expense, and development ~~expenses.~~expenses related to exploring and developing new products and offerings that generally are in the pre-revenue stage or not at scale.

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The following tables present the reconciliation of our non-GAAP financial measures from corresponding GAAP measures for the periods ~~presented:~~presented (in thousands):


			Year Ended December 31,
			2021			2020			2019
		Year Ended December 31,																		Year Ended December 31,
		2023													2023			2022				2021
Veterinary invoice expense	Veterinary invoice expense		$	486,062		$	351,124		$	270,947
Less:	Less:
Stock-based compensation expense			(4,538)			(1,118)			(697)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Other business cost of paying veterinary invoices	Other business cost of paying veterinary invoices		(129,614)			(72,119)			(38,532)
Subscription cost of paying veterinary invoices (non-GAAP)	Subscription cost of paying veterinary invoices (non-GAAP)		$	351,910		$	277,887		$	231,718
% of subscription revenue	% of subscription revenue		71.1		%	71.7		%	72.1		%	% of subscription revenue	75.7	%		72.5	%		71.1		%

Other cost of revenue	Other cost of revenue		$	108,583		$	69,003		$	48,065
Other cost of revenue
Other cost of revenue
Less:	Less:
Stock-based compensation expense			(2,610)			(468)			(353)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Other business variable expenses	Other business variable expenses		(57,367)			(33,133)			(18,341)
Subscription variable expenses (non-GAAP)	Subscription variable expenses (non-GAAP)		$	48,606		$	35,402		$	29,371
% of subscription revenue	% of subscription revenue		9.8		%	9.1		%	9.1		%	% of subscription revenue	9.7	%		9.8	%		9.8		%

Technology and development expense	Technology and development expense		$	16,866		$	9,947		$	7,025
Technology and development expense
Technology and development expense
General and administrative expense	General and administrative expense		31,893			21,847			18,384
Less:	Less:
Stock-based compensation expense			(11,918)			(4,553)			(3,676)
Business combination transaction costs			(82)			(522)			—
Development expenses (non-GAAP)			(3,719)			(339)			—
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Non-recurring transaction or restructuring expenses (2)
Development expenses(3)
Fixed expenses (non-GAAP)	Fixed expenses (non-GAAP)		$	33,040		$	26,380		$	21,733
% of total revenue	% of total revenue		4.7		%	5.3		%	5.7		%	% of total revenue	4.7	%		4.3	%		4.7		%

New pet acquisition expense	New pet acquisition expense		$	78,647		$	47,837		$	35,451
New pet acquisition expense
New pet acquisition expense
Less:	Less:
Stock-based compensation expense			(9,160)			(2,773)			(2,120)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Other business pet acquisition expense	Other business pet acquisition expense		(499)			(820)			(414)
Subscription acquisition cost (non-GAAP)	Subscription acquisition cost (non-GAAP)		$	68,988		$	44,244		$	32,917
% of subscription revenue	% of subscription revenue		13.9		%	11.4		%	10.2		%	% of subscription revenue	9.8	%		13.3	%		13.9		%

Technology and development expense			$	16,866		$	9,947		$	7,025
General and administrative expense			31,893			21,847			18,384
Less:
Stock-based compensation expense			(11,918)			(4,553)			(3,676)
Business combination transaction costs			(82)			(522)			—
Fixed expenses (non-GAAP)			(33,040)			(26,380)			(21,733)
Development expenses (non-GAAP)			$	3,719		$	339		$	—
% of total revenue			0.5		%	0.1		%	—		%
(1)Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $1.3 million for the year ended December 31, 2023. (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.
(1)Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $1.3 million for the year ended December 31, 2023. (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.
(1)Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $1.3 million for the year ended December 31, 2023. (2)Consists of business acquisition transaction expenses, severance and legal costs due to certain executive departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
(3)As we enter the next phase of our growth, we expect to invest in initiatives that are pre-revenue, including adding new products and international expansion. These development expenses are costs related to product exploration and development that are pre-revenue and historically have been insignificant.												(3)As we enter the next phase of our growth, we expect to invest in initiatives that are pre-revenue, including adding new products and international expansion. These development expenses are costs related to product exploration and development that are pre-revenue and historically have been insignificant.

4243


			Three Months Ended
			Dec. 31, 2021			Sept. 30, 2021			Jun. 30, 2021			Mar. 31, 2021			Dec. 31, 2020			Sept. 30, 2020			Jun. 30, 2020			Mar. 31, 2020
		Three Months Ended																																																						Three Months Ended
		Dec. 31, 2023																														Dec. 31, 2023					Sept. 30, 2023					Jun. 30, 2023					Mar. 31, 2023					Dec. 31, 2022					Sept. 30, 2022					Jun. 30, 2022			Mar. 31, 2022
Veterinary invoice expense	Veterinary invoice expense		$	132,852		$	125,058		$	118,282		$	109,870		$	98,169		$	91,266		$	82,049		$79,640			Veterinary invoice expense	$	217,739		$		$	212,441		$		$	206,738		$		$	194,137		$		$	176,083		$		$	171,112		$		$	157,616		$144,926			$144,926
Less:	Less:
Stock-based compensation expense			(798)			(769)			(672)			(2,299)			(358)			(337)			(245)			(178)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Other business cost of paying veterinary invoices	Other business cost of paying veterinary invoices		(38,009)			(34,432)			(31,029)			(26,144)			(22,254)			(19,394)			(16,019)			(14,452)
Subscription cost of paying veterinary invoices (non-GAAP)	Subscription cost of paying veterinary invoices (non-GAAP)		$	94,045		$	89,857		$	86,581		$	81,427		$	75,557		$	71,535		$	65,785		$	65,010
% of subscription revenue	% of subscription revenue		70.1		%	70.7		%	71.9		%	71.9		%	71.0		%	72.0		%	71.2		%	72.6		%	% of subscription revenue	72.7		%			75.9		%			77.0		%			77.6		%			72.7		%			73.5		%			72.8		%			71.1	%

Other cost of revenue	Other cost of revenue		$	30,992		$	28,443		$	25,433		$	23,715		$	20,925		$	18,265		$	16,004		$	13,809
Other cost of revenue
Other cost of revenue
Less:	Less:
Stock-based compensation expense			(581)			(542)			(552)			(935)			(168)			(111)			(99)			(90)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Other business variable expenses	Other business variable expenses		(17,208)			(15,315)			(12,940)			(11,904)			(11,079)			(9,039)			(7,440)			(5,575)
Subscription variable expenses (non-GAAP)	Subscription variable expenses (non-GAAP)		$	13,203		$	12,586		$	11,941		$	10,876		$	9,678		$	9,115		$	8,465		$	8,144
% of subscription revenue	% of subscription revenue		9.8		%	9.9		%	9.9		%	9.6		%	9.1		%	9.2		%	9.2		%	9.1		%	% of subscription revenue	9.6		%			9.5		%			9.7		%			10.1		%			9.6		%			9.7		%			9.9		%			10.0	%

Technology and development expense	Technology and development expense		$	4,665		$	4,391		$	4,079		$	3,731		$	3,108		$	2,426		$	2,293		$	2,120
Technology and development expense
Technology and development expense
General and administrative expense	General and administrative expense		8,996			8,246			7,435			7,216			6,502			5,412			5,073			4,860
Less:	Less:
Stock-based compensation expense			(3,293)			(3,020)			(3,122)			(2,483)			(1,275)			(1,241)			(1,208)			(829)
Business combination transaction costs			—			—			—			(82)			(522)			—			—			—
Development expenses (non-GAAP)			(858)			(919)			(1,121)			(821)			(339)			—			—			—
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Non-recurring transaction or restructuring expenses (2)
Development expenses(3)
Fixed expenses (non-GAAP)	Fixed expenses (non-GAAP)		$	9,510		$	8,698		$	7,271		$	7,561		$	7,474		$	6,597		$	6,158		$	6,151
% of total revenue	% of total revenue		4.9		%	4.8		%	4.3		%	4.9		%	5.2		%	5.1		%	5.2		%	5.5		%	% of total revenue	4.7		%			4.4		%			5.1		%			4.7		%			4.1		%			4.0		%			4.3		%			4.9	%

New pet acquisition expense	New pet acquisition expense		$	19,845		$	19,708		$	19,390		$	19,704		$	14,809		$	13,344		$	9,242		$	10,442
New pet acquisition expense
New pet acquisition expense
Less:	Less:
Stock-based compensation expense			(2,136)			(2,112)			(2,181)			(2,731)			(801)			(741)			(675)			(556)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Stock-based compensation expense(1)
Other business pet acquisition expense	Other business pet acquisition expense		(76)			(134)			(118)			(171)			(201)			(265)			(191)			(163)
Subscription acquisition cost (non-GAAP)	Subscription acquisition cost (non-GAAP)		$	17,633		$	17,462		$	17,091		$	16,802		$	13,807		$	12,338		$	8,376		$	9,723
% of subscription revenue	% of subscription revenue		13.1		%	13.7		%	14.2		%	14.8		%	13.0		%	12.4		%	9.1		%	10.9		%	% of subscription revenue	8.1		%			8.8		%			11.0		%			11.8		%			12.5		%			13.2		%			13.9		%			13.7	%

Technology and development expense			$	4,665		$	4,391		$	4,079		$	3,731		$	3,108		$	2,426		$	2,293		$	2,120
General and administrative expense			8,996			8,246			7,435			7,216			6,502			5,412			5,073			4,860
Less:
Stock-based compensation expense			(3,293)			(3,020)			(3,122)			(2,483)			(1,275)			(1,241)			(1,208)			(829)
Business combination transaction costs			—			—			—			(82)			(522)			—			—			—
Fixed expenses (non-GAAP)			(9,510)			(8,698)			(7,271)			(7,561)			(7,474)			(6,597)			(6,158)			(6,151)
Development expenses (non-GAAP)			$	858		$	919		$	1,121		$	821		$	339		$	—		$	—		$	—
% of total revenue			0.4		%	0.5		%	0.7		%	0.5		%	0.2		%	—		%	—		%	—		%
(1)Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $0.7 million for the three months ended December 31, 2023. (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.
(1)Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $0.7 million for the three months ended December 31, 2023. (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.
(1)Trupanion employees may elect to take restricted stock units in lieu of cash payment for their bonuses. We account for such expense as stock-based compensation in accordance with GAAP, but we do not include it in any non-GAAP adjustments. Stock-based compensation associated with bonuses was approximately $0.7 million for the three months ended December 31, 2023. (2)Consists of business acquisition transaction expenses, severance and legal costs due to certain executive departures, and a $3.8 million non-recurring settlement of accounts receivable in the first quarter of 2023 related to uncollected premiums in connection with the transition of underwriting a third-party business to other insurers.
(3)As we enter the next phase of our growth, we expect to invest in initiatives that are pre-revenue, including adding new products and international expansion. These development expenses are costs related to product exploration and development that are pre-revenue and historically have been insignificant.																											(3)As we enter the next phase of our growth, we expect to invest in initiatives that are pre-revenue, including adding new products and international expansion. These development expenses are costs related to product exploration and development that are pre-revenue and historically have been insignificant.

4344

When determining our PAC, we calculate net acquisition cost for a more comparable metric across periods. Net acquisition cost, a non-GAAP financial measure, is calculated in a reporting period as GAAP new pet acquisition expense, excluding stock-based compensation expense, ~~and~~ other business segment expense, and pet acquisition expense for commission-based policies, offset by sign-up fee revenue. We exclude stock-based compensation expense because the amount varies from period to period based on the number of awards issued and market-based valuation inputs. We exclude other business segment pet acquisition expense because it does not relate to subscription enrollments. We exclude pet acquisition expense for commission-based policies because the revenue of these products is earned from commissions from a third party underwriter, as opposed to the gross underwriting premiums earned by the remainder of our subscription business. 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 it does not relate to subscription enrollments.~~

The following tables reconcile GAAP new pet acquisition expense to non-GAAP net acquisition cost (in thousands) for the years ended December 31, ~~2021, 2020,~~2023, 2022, and ~~2019,~~2021, and for each of the last eight fiscal quarters:


		Year Ended December 31,						Year Ended December 31,
		2021		2020		2019		2023	2022	2021
New pet acquisition expense	New pet acquisition expense	$	78,647	$	47,837	$	35,451
Net of sign-up fee revenue	Net of sign-up fee revenue	(4,954)		(3,292)		(2,957)
Excluding:	Excluding:
Stock-based compensation expense	Stock-based compensation expense	(9,160)		(2,773)		(2,120)
Other business segment pet acquisition expense		(499)		(820)		(414)
Stock-based compensation expense
Stock-based compensation expense
Other business pet acquisition expense
Pet acquisition expense for commission-based policies
Net acquisition cost	Net acquisition cost	$	64,034	$	40,952	$	29,960


		Three Months Ended
		Dec. 31, 2021		Sept. 30, 2021		Jun. 30, 2021		Mar. 31, 2021		Dec. 31, 2020		Sept. 30, 2020		Jun. 30, 2020		Mar. 31, 2020
	Three Months Ended																						Three Months Ended
	Dec. 31, 2023																	Dec. 31, 2023	Sept. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022		Sept. 30, 2022	Jun. 30, 2022	Mar. 31, 2022
New pet acquisition expense	New pet acquisition expense	$	19,845	$	19,708	$	19,390	$	19,704	$	14,809	$	13,344	$	9,242	$	10,442
Net of sign-up fee revenue	Net of sign-up fee revenue	(1,162)		(1,268)		(1,260)		(1,264)		(919)		(827)		(781)		(765)
Excluding:	Excluding:
Stock-based compensation expense	Stock-based compensation expense	(2,136)		(2,112)		(2,181)		(2,731)		(801)		(741)		(675)		(556)
Other business segment pet acquisition expense		(76)		(134)		(118)		(171)		(201)		(265)		(191)		(163)
Stock-based compensation expense
Stock-based compensation expense
Other business pet acquisition expense
Pet acquisition expense for commission-based policies
Net acquisition cost	Net acquisition cost	$	16,471	$	16,194	$	15,831	$	15,538	$	12,888	$	11,511	$	7,595	$	8,958

Components of Operating Results

General

We operate in two business segments: subscription business and other business. ~~Our~~We generate revenue in our subscription business segment primarily ~~relates to~~by subscription fees from direct-to-consumer products. We operate our ~~“Trupanion” branded products.~~ 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. Within our subscription business, we also provide "Powered by Trupanion" pet insurance product offerings marketed by third parties and, in Canada, low and medium ARPU products marketed under the brand names Furkin and PHI Direct. 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 Continental Europe, which are currently underwritten using third-party underwriters.

Our other business segment ~~includes~~is comprised of revenue from other product offerings ~~that~~with third parties with whom we generally have a business-to-business ~~relationship and~~relationship. This business segment has different margin ~~profiles~~profile than our subscription segment ~~including~~and includes revenue from writing policies on behalf of third parties and revenue from other products and insurance software solutions.

Revenue

We generate revenue in our subscription business segment primarily from subscription fees for our pet medical insurance. Fees are paid at the beginning of each subscription ~~period, which automatically renews on a monthly basis.~~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 ~~monthly~~ enrollment term. Membership may be canceled at any time without penalty, and we issue a refund for the unused portion of the canceled membership. 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 generate revenue in our other business segment primarily from writing policies on behalf of third parties where we do not undertake the direct consumer marketing. This segment also includes revenue from other products and insurance software solutions that have a different margin profile from our subscription business.

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. We also accrue for veterinary invoices that have been incurred but not yet ~~received.~~received and for the estimated internal costs of processing those invoices. This also includes amounts paid by unaffiliated general agents on our behalf, and an estimate of amounts incurred and not yet paid for our other business segment.

Other cost of revenue

Other cost of revenue for the subscription business segment includes direct and indirect member service expenses, Territory Partner renewal fees, ~~credit card transaction~~payment processing fees and premium tax expenses. Other cost of revenue for the other business segment includes the commissions we pay to unaffiliated general agents, costs to administer the programs in the other business segment and premium taxes on the sales in this segment.

Operating Expenses

Our operating expenses are classified into four categories: technology and development, general and administrative, new pet acquisition expense, and depreciation and amortization. For each category, ~~excluding~~except depreciation and amortization, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses and stock-based compensation expense.

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 ofin new geographies and new products and offerings.

General and administrative

General and administrative expenses consist primarily of personnel costs and related expenses for our finance, actuarial, human resources, regulatory, legal and general management functions, as well as facilities and professional services.

New pet acquisition expense

New pet acquisition expenses primarily consist of costs, including ~~employee compensation,~~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 was previously termed “sales and marketing” on the consolidated statement of operations. This update represents a change in name only. It does not denote a change in method of accounting.

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.

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. Stock-based compensation will vary depending on corporate performance ~~pursuant to~~and terms of the awards under our ~~pre-approved~~ 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. 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. Our ability to retain enrolled pets depends on a number of factors, including the actual and perceived value of our services and the quality of our member experience, the ease and transparency of the process for reviewing and paying veterinary invoices for our members, the rate of veterinary inflation and of our pricing adjustments, and the competitive environment. In addition, other initiatives across our business may temporarily impact retention and make it difficult for us to improve or maintain this metric. For example, if the number of new pets enrolled increases at a faster rate than our historical experience, our average monthly retention rate could be adversely impacted, as our retention rate is generally lower during the first year of member enrollment.

Investment in pet acquisition. We have made and ~~plan to~~may continue to make significant investments to grow our member base. Our net acquisition cost and the number of new members we enroll depends on a number of factors, including the amount we have available and we elect to invest in pet acquisition activities in any particular period in the aggregate and by channel, the frequency of existing members adding a pet or referring their friends or family, 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 in the past significantly varied, and in the future may significantly vary, from period to period based upon specific marketing initiatives and estimated rates of return on pet acquisition spend. We also regularly test new member acquisition channels and marketing initiatives, which may be more expensive than our traditional marketing channels and may increase our average acquisition costs. We continually assess our pet acquisition activities by monitoring the estimated return on PAC spend both on a detailed level by acquisition channel and in the aggregate.

Timing of price adjustments. Our subscription business’s cost-plus model depends on our ability to estimate our operating costs and expenses, including veterinary invoice expenses, and to adjust our pricing to achieve our target returns. We regularly reevaluate and adjust the price of our subscriptions, with a goal of achieving our targeted payout ratio, subject to the review and approval of regulators where applicable. This makes it important for us to accurately estimate our costs and to promptly implement pricing adjustments, which generally roll onto our book of insured pets over the succeeding twelve months following any applicable regulatory approval. As a result, we may have timing mismatches during which our pricing does not reflect our current expense profile. In periods of rapid increases in veterinary invoice expenses, including periods of significant inflation, this timing mismatch may have a significant impact on our margin profile.

Timing of initiatives. Over time, we plan to implement new initiatives to improve our member experience, make modifications to our subscription plan, introduce new coverage plans, pursue pet food or other adjacent opportunities, improve our technology, increase the number of veterinary hospitals using our patented direct pay software, and find other ways to maintain a strong value proposition for our members. ~~These initiatives will sometimes be accompanied by price adjustments, in order to compensate for an increase in benefits received by our members.~~ The implementation of such initiatives could impact our expense profile and result in us incurring expenses that may not always directly coincide with ~~the timing of price adjustments,~~revenue increases, resulting in fluctuations in revenue and profitability in our subscription business segment.

~~Geographic mix~~Mix of sales. The relative mix of our business ~~between the United States~~by geography, pet age, species, breed, and ~~Canada~~other factors impacts the monthly average revenue per pet we receive. ~~Prices for~~For example, prices from our ~~plan in Canada are generally higher than in the United States (in local currencies), which is consistent with~~plans could vary depending on the relative cost of veterinary care in ~~each country.~~different countries or areas or whether the pet is a dog or a cat. As our mix of business between ~~the United States~~products and ~~Canada~~geographies changes, our metrics, such as our monthly average revenue per pet, and our exposure to foreign exchange fluctuations will be impacted. ~~Any expansion into other~~We expect our international ~~markets could have similar effects.~~business, additional product offerings and "Powered by Trupanion" plans to grow and, in turn, we expect these effects to increase.

Other business segment. Our other business segment primarily includes other product offerings that ~~generally have a business-to-business relationship. These products~~ have been, materially different from those in our subscription business segment. We expect this difference to continue. In addition, we expect the ~~past, and may~~growth rate of this segment to be ~~in the future,~~ materially different from our subscription business segment. We do not undertake marketing efforts for and are not the primary interface with the customers of the third parties for whom we write other business segment policies. Our relationships in our other business segment are generally subject to termination provisions and are non-exclusive. Accordingly, we ~~cannot control~~have limited influence on the volume of business ~~even if a contract is not terminated.~~of this segment. Loss of an entire program via contract termination could result in the associated policies and revenue being lost over a period of 12 to 18 months, which could have a material impact on our results of operations. In some cases, we have structured exclusive relationships, but those relationships have been and may continue to be subject to limitations on the number of enrolled pets as to which we will write policies for the third party. We may enter into additional relationships in this segment in the future, ~~to the extent~~if we believe they will be ~~profitable to us,~~beneficial, which could ~~also~~ impact our operating results.

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. The period-to-period comparison of financial results is not necessarily indicative of future results.


		Year Ended December 31,
		2021		2020		2019
		(in thousands)
	Year Ended December 31,									Year Ended December 31,
	2023							2023	2022		2021
	(in thousands)									(in thousands)
Revenue:	Revenue:
Subscription business
Subscription business
Subscription business	Subscription business	$	494,862	$	387,732	$	321,163
Other business	Other business	204,129		114,296		62,773
Total revenue	Total revenue	698,991		502,028		383,936
Cost of revenue:	Cost of revenue:
Subscription business(1)	Subscription business(1)	407,664		314,875		262,139
Subscription business(1)
Subscription business(1)
Other business	Other business	186,981		105,252		56,873
Total cost of revenue	Total cost of revenue	594,645		420,127		319,012
Operating expenses:	Operating expenses:
Technology and development(1)
Technology and development(1)
Technology and development(1)	Technology and development(1)	16,866		9,947		7,025
General and administrative(1)	General and administrative(1)	31,893		21,847		18,384
New pet acquisition expense(1)	New pet acquisition expense(1)	78,647		47,837		35,451
Depreciation and amortization	Depreciation and amortization	11,965		7,071		5,632
Total operating expenses	Total operating expenses	139,371		86,702		66,492
Loss from investment in joint venture		(171)		(126)		(352)
Gain (loss) from investment in joint venture
Operating loss	Operating loss	(35,196)		(4,927)		(1,920)
Interest expense	Interest expense	10		1,381		1,349
Other expense (income), net	Other expense (income), net	14		(581)		(1,629)
Loss before income taxes	Loss before income taxes	(35,220)		(5,727)		(1,640)
Income tax expense		310		113		169
Income tax expense (benefit)
Net loss	Net loss	$	(35,530)	$	(5,840)	$	(1,809)

(1) Includes stock-based compensation expense as follows:


		Year Ended December 31,
		2021		2020		2019
		(in thousands)
	Year Ended December 31,									Year Ended December 31,
	2023							2023	2022		2021
	(in thousands)									(in thousands)
Cost of revenue	Cost of revenue	$	7,148	$	1,586	$	1,050
Technology and development	Technology and development	3,056		758		364
General and administrative	General and administrative	8,862		3,795		3,312
New pet acquisition expense	New pet acquisition expense	9,160		2,773		2,120
Total stock-based compensation expense	Total stock-based compensation expense	$	28,226	$	8,912	$	6,846

4748


	Year Ended December 31,												Year Ended December 31,
		Year Ended December 31,							2023		2022			2021
		2021		2020		2019
		(as a percentage of revenue)
	(as a percentage of revenue)												(as a percentage of revenue)
Revenue	Revenue	100	%	100	%	100	%	Revenue	100	%	100	%		100	%
Cost of revenue	Cost of revenue	85		84		83
Operating expenses:	Operating expenses:
Technology and development
Technology and development
Technology and development	Technology and development	2		2		2
General and administrative	General and administrative	5		4		5
New pet acquisition expense	New pet acquisition expense	11		10		9
Depreciation and amortization	Depreciation and amortization	2		1		1
Total operating expenses	Total operating expenses	20		17		17
Loss from investment in joint venture		—		—		—
Gain (loss) from investment in joint venture
Operating loss	Operating loss	(5)		(1)		(1)
Interest expense	Interest expense	—		—		—
Other expense (income), net	Other expense (income), net	—		—		—
Loss before income taxes	Loss before income taxes	(5)		(1)		—
Income tax expense		—		—		—
Income tax expense (benefit)
Net loss	Net loss	(5)	%	(1)	%	—	%	Net loss	(4)	%	(5)	%		(5)	%


Delaware						83-0480694
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Common stock, $0.00001 par value per share	TRUP	The NASDAQ Stock Market LLC


		Page
PART I

Item 1.	Business	3
Item 1A.	Risk Factors	1011
Item 1B.	Unresolved Staff Comments	3334
Item 1C.	Cybersecurity	34
Item 2.	Properties	3335
Item 3.	Legal Proceedings	3335
Item 4.	Mine Safety Disclosures	3335

PART II

Item 5.	Market for Registrant's Common Equity, Related Stock Holder Matters and Issuer Purchases of Equity Securities	3436
Item 6.	~~Selected Financial Data~~Reserved	3638
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3839
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	5859
Item 8.	Financial Statements and Supplementary Data	5960
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8894
Item 9A.	Controls and Procedures	8894
Item 9B.	Other Information	9097
Item 9C.	Disclosure ~~Regardi~~ngRegarding Foreign Jurisdictions that Prevent Inspections	9097

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	9198
Item 11.	Executive Compensation	9198
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9198
Item 13.	Certain Relationships and Related Transactions, and Director Independence	9198
Item 14.	Principal Accountant Fees and Services	9198

PART IV

Item 15.	Exhibits, Financial Statement Schedules	9299
Item 16.	Form 10-K Summary	94101
	Signatures	95102
	Parent Company Financials	97105


	North America1		Continental Europe2		Australia3
Household dogs and cats (in thousands)	210,000		160,750		8,900
Pet insurance market penetration	3.0	%	8.4	%	9.0	%

1According to IBIS World and Canadian Animal Health Institute, there are approximately 210 million household dogs and cats in the United States and Canada. North American Pet Health Insurance Association estimates that the penetration rate for medical insurance for cats and dogs in North America is approximately three percent. We believe that over the long-term, the North American penetration rate can reach levels comparable to the U.K., where, according to Global Market Insights, approximately one in four cats and dogs has medical insurance. 2According 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. The estimated penetration rate for medical insurance for cats and dogs is approximately eight and a half percent. 3According to PetKeen, there are approximately 8.9 million household dogs and cats in the Australia. The estimated penetration rate for medical insurance for cats and dogs is approximately nine percent.


		Year Ended December 31,									% Change
		2021			2020			2019			2021 vs. 2020	2020 vs. 2019
		(in thousands, except percentages)
	Year Ended December 31,																					Year Ended December 31,							% Change
	2023																2023				2022					2021		2023 vs. 2022		2022 vs. 2021
	(in thousands, except percentages)																										(in thousands, except percentages)
Technology and development	Technology and development	$	16,866		$	9,947		$	7,025		70%	42%	Technology and development	$	21,403	$		$	25,133	$			$	16,866	(15)%		(15)%		49%
Percentage of total revenue	Percentage of total revenue	2		%	2		%	2		%


	12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020		12/31/2021
Trupanion Inc.	$	100.00	$	188.60	$	161.98	$	236.86	$	771.33	$	850.71
S&P Small Cap 600 Index	$	100.00	$	111.73	$	100.83	$	121.87	$	133.53	$	167.28
NASDAQ-100 Technology Sector Index	$	100.00	$	136.68	$	128.42	$	189.69	$	262.87	$	333.79
Russell 2000 Index	$	100.00	$	113.14	$	98.58	$	122.62	$	145.52	$	165.45


	December 31,
	2021		2020		2019		2018		2017
	(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	87,400	$	139,878	$	29,168	$	26,552	$	25,706
Short-term investments	126,012		89,862		69,732		54,559		37,590
Working capital	167,258		186,628		67,196		54,773		40,692
Total assets	562,582		498,250		257,200		207,510		105,859
Current and long-term debt	—		—		26,086		12,862		9,324
Total liabilities	230,382		158,311		120,440		78,337		57,425
Common stock and additional paid-in capital	466,792		439,007		232,731		219,838		134,511
Accumulated deficit	(126,890)		(91,360)		(85,520)		(83,711)		(82,784)
Total stockholders' equity	332,200		339,939		136,760		129,173		48,434


Stock-based compensation expense:	Stock-based compensation expense:	Year Ended December 31,						Stock-based compensation expense:	Year Ended December 31,
		2021		2020		2019
		(as a percentage of revenue)
	2023										2023			2022				2021
	(as a percentage of revenue)														(as a percentage of revenue)
Cost of revenue	Cost of revenue	1	%	—	%	—	%	Cost of revenue	—	%		1	%			1	%
Technology and development	Technology and development	1		1		1
General and administrative	General and administrative	—		—		—��
New pet acquisition expense	New pet acquisition expense	1		1		1
Total stock-based compensation expense	Total stock-based compensation expense	4	%	2	%	2	%	Total stock-based compensation expense	3	%		4	%			4	%


Consolidated Statements of Operations Data:	Consolidated Statements of Operations Data:	Three Months Ended																Consolidated Statements of Operations Data:	Three Months Ended
		Dec. 31, 2021		Sept. 30, 2021		Jun. 30, 2021		Mar. 31, 2021		Dec. 31, 2020		Sept. 30, 2020		Jun. 30, 2020		Mar. 31, 2020
		(in thousands)
	Dec. 31, 2023																			Dec. 31, 2023	Sept. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022		Sept. 30, 2022	Jun. 30, 2022	Mar. 31, 2022
	(in thousands)																								(in thousands)
Revenue:	Revenue:
Subscription business
Subscription business
Subscription business	Subscription business	$	134,120	$	127,077	$	120,373	$	113,292	$	106,416	$	99,379	$	92,453	$	89,484
Other business	Other business	60,259		54,590		47,887		41,393		36,271		30,741		25,467		21,817
Total revenue	Total revenue	194,379		181,667		168,260		154,685		142,687		130,120		117,920		111,301
Cost of revenue:	Cost of revenue:
Subscription business(1)	Subscription business(1)	108,627		103,754		99,746		95,537		85,761		81,098		74,594		73,422
Subscription business(1)
Subscription business(1)
Other business	Other business	55,217		49,747		43,969		38,048		33,333		28,433		23,459		20,027
Total cost of revenue	Total cost of revenue	163,844		153,501		143,715		133,585		119,094		109,531		98,053		93,449
Operating expenses:	Operating expenses:
Technology and development(1)
Technology and development(1)
Technology and development(1)	Technology and development(1)	4,665		4,391		4,079		3,731		3,108		2,426		2,293		2,120
General and administrative(1)	General and administrative(1)	8,996		8,246		7,435		7,216		6,502		5,412		5,073		4,860
New pet acquisition expense(1)	New pet acquisition expense(1)	19,845		19,708		19,390		19,704		14,809		13,344		9,242		10,442
Depreciation and amortization	Depreciation and amortization	2,770		2,944		3,158		3,093		2,301		1,666		1,723		1,381
Total operating expenses	Total operating expenses	36,276		35,289		34,062		33,744		26,720		22,848		18,331		18,803
Gain (loss) from investment in joint venture	Gain (loss) from investment in joint venture	(22)		(69)		5		(85)		(42)		2		(27)		(59)
Operating income (loss)	Operating income (loss)	(5,763)		(7,192)		(9,512)		(12,729)		(3,169)		(2,257)		1,509		(1,010)
Interest expense	Interest expense	9		—		3		(2)		337		324		341		379
Other expense (income), net	Other expense (income), net	236		(61)		(99)		(62)		(48)		(49)		(202)		(282)
Income (loss) before income taxes	Income (loss) before income taxes	(6,008)		(7,131)		(9,416)		(12,665)		(3,458)		(2,532)		1,370		(1,107)
Income tax expense (benefit)	Income tax expense (benefit)	1,034		(312)		(195)		(217)		44		26		17		26
Net income (loss)	Net income (loss)	$	(7,042)	$	(6,819)	$	(9,221)	$	(12,448)	$	(3,502)	$	(2,558)	$	1,353	$	(1,133)


			Page
Report of Independent Registered Public Accounting ~~Fir~~m ~~(PCAOB~~Firm (PCAOB ID: 42)			6061
Consolidated Statements of Operations			6263
Consolidated Statements of Comprehensive Loss			6364
Consolidated Balance Sheets			6465
Consolidated Statements of Stockholders' Equity			6566
Consolidated Statements of Cash Flows			6667
Notes to Consolidated Financial Statements			6768


Description of the Matter			The Company’s reserve for veterinary invoices totaled ~~$39.7~~$63.2 million as of December 31, ~~2021.~~2023. As discussed in Note 1 and Note 10 to the financial statements, the Company’s reserve for veterinary invoices is based on an actuarial analysis of the Company’s historical experience ~~including~~where the Company makes assumptions to estimate the amount the Company will pay for veterinary invoices that haven't been processed or received but that are dated as of, or prior to, its balance sheet date. The estimate of veterinary invoice reserves is subject to a number of ~~veterinary invoices it expects to receive, the average cost of those veterinary invoices, the length of time between the date of the veterinary invoice~~variables, including historical trends involving payment patterns and ~~the date the Company receives the veterinary invoice, the members’ chosen deductibles and the Company’s expected cost to process and administer payments.~~amounts. Auditing the Company’s reserve for veterinary invoices is complex and required the involvement of our actuarial specialists due to the sensitivity of the estimated reserve to ~~management assumptions including frequency and severity of loss and development factors applied~~management's assumptions. Estimating the ultimate cost to ~~paid and reported invoices.~~ settle the veterinary invoice reserve is subjective due to the possibility that the actual veterinary invoice payments may not be comparable to historical trends experienced by the Company.


How We Addressed the Matter in Our Audit			We evaluated the design and tested the operating effectiveness of controls over the reserve for veterinary invoices process, including controls over the completeness and accuracy of the data used in management’s actuarial projections and the review and approval processes that management has in place for the methods and assumptions used by management’s actuaries in estimating the reserves. To evaluate the reserve for veterinary invoices, our audit procedures included, among others, testing the completeness and accuracy of the ~~underlying~~historical veterinary paid invoice data ~~and related contracts.~~used in management's actuarial projections. We involved our actuarial specialists to assist in our evaluation of management’s methodologies and assumptions used in the calculation of the reserve and compared the Company’s recorded reserve to a range of reasonable estimates developed independently by our actuarial specialists.

								Trupanion, Inc. Consolidated Statements of Operations (in thousands, except per share data)
		Year Ended December 31,
		2021		2020		2019
Trupanion, Inc. Consolidated Statements of Operations (in thousands, except share data)								Trupanion, Inc. Consolidated Statements of Operations (in thousands, except share data)
	Year Ended December 31,										Year Ended December 31,
	2023								2023	2022		2021
Revenue	Revenue	$	698,991	$	502,028	$	383,936
Cost of revenue:	Cost of revenue:
Veterinary invoice expense(1)
Veterinary invoice expense(1)
Veterinary invoice expense(1)	Veterinary invoice expense(1)	486,062		351,124		270,947
Other cost of revenue(1)	Other cost of revenue(1)	108,583		69,003		48,065
Total cost of revenue	Total cost of revenue	594,645		420,127		319,012
Operating expenses:	Operating expenses:
Technology and development(1)	Technology and development(1)	16,866		9,947		7,025
Technology and development(1)
Technology and development(1)
General and administrative(1)	General and administrative(1)	31,893		21,847		18,384
New pet acquisition expense(1)	New pet acquisition expense(1)	78,647		47,837		35,451
Depreciation and amortization	Depreciation and amortization	11,965		7,071		5,632
Total operating expenses	Total operating expenses	139,371		86,702		66,492
Loss from investment in joint venture		(171)		(126)		(352)
Gain (loss) from investment in joint venture
Operating loss	Operating loss	(35,196)		(4,927)		(1,920)
Interest expense	Interest expense	10		1,381		1,349
Other expense (income), net	Other expense (income), net	14		(581)		(1,629)
Loss before income taxes	Loss before income taxes	(35,220)		(5,727)		(1,640)
Income tax expense		310		113		169
Income tax expense (benefit)
Net loss	Net loss	$	(35,530)	$	(5,840)	$	(1,809)

Net loss per share:	Net loss per share:
Net loss per share:
Net loss per share:
Basic and diluted
Basic and diluted
Basic and diluted	Basic and diluted	$	(0.89)	$	(0.16)	$	(0.05)
Weighted average shares of common stock outstanding:	Weighted average shares of common stock outstanding:
Basic and diluted	Basic and diluted	40,137,505		35,858,869		34,645,345
Basic and diluted
Basic and diluted


(1)Includes stock-based compensation expense as follows:	(1)Includes stock-based compensation expense as follows:
Veterinary invoice expense
Veterinary invoice expense
Veterinary invoice expense	Veterinary invoice expense	4,538	1,118	697
Other cost of revenue	Other cost of revenue	2,610	468	353
Technology and development	Technology and development	3,056	758	364
General and administrative	General and administrative	8,862	3,795	3,312
New pet acquisition expense	New pet acquisition expense	9,160	2,773	2,120


Trupanion, Inc. Consolidated Balance Sheets (in thousands, except share data)	Trupanion, Inc. Consolidated Balance Sheets (in thousands, except share data)					Trupanion, Inc. Consolidated Balance Sheets (in thousands, except share data)
		December 31,					December 31,
		2021		2020
	2023							2023	2022
Assets	Assets
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	87,400	$	139,878
Short-term investments	Short-term investments	126,012		89,862
Accounts and other receivables, net of allowance for doubtful accounts of $342 and $271		165,217		99,065
Accounts and other receivables, net of allowance for credit loss of $1,085 at December 31, 2023 and $540 at December 31, 2022
Prepaid expenses and other assets	Prepaid expenses and other assets	12,325		8,222
Total current assets	Total current assets	390,954		337,027
Restricted cash	Restricted cash	13,469		6,319
Long-term investments, at fair value		7,061		5,566
Property and equipment, net		77,950		72,602
Long-term investments
Property, equipment, and internal-use software, net
Intangible assets, net	Intangible assets, net	22,663		27,134
Other long-term assets	Other long-term assets	17,776		16,557
Goodwill	Goodwill	32,709		33,045
Total assets	Total assets	$	562,582	$	498,250
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	8,952	$	6,059
Accrued liabilities and other current liabilities	Accrued liabilities and other current liabilities	28,162		22,864
Reserve for veterinary invoices	Reserve for veterinary invoices	39,671		28,929
Deferred revenue	Deferred revenue	146,911		92,547
Long-term debt - current portion
Total current liabilities	Total current liabilities	223,696		150,399
Long-term debt
Deferred tax liabilities	Deferred tax liabilities	2,827		4,705
Other liabilities	Other liabilities	3,859		3,207
Total liabilities	Total liabilities	230,382		158,311
Stockholders’ equity:	Stockholders’ equity:
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 41,408,350 and 40,475,185 shares issued and outstanding at December 31, 2021; 40,383,972 and 39,450,807 shares issued and outstanding at December 31, 2020		—		—
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 42,887,052 and 41,858,866 shares issued and outstanding at December 31, 2023 and 42,041,344 and 41,013,158 shares issued and outstanding at December 31, 2022
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 42,887,052 and 41,858,866 shares issued and outstanding at December 31, 2023 and 42,041,344 and 41,013,158 shares issued and outstanding at December 31, 2022
Common stock: $0.00001 par value per share, 100,000,000 shares authorized; 42,887,052 and 41,858,866 shares issued and outstanding at December 31, 2023 and 42,041,344 and 41,013,158 shares issued and outstanding at December 31, 2022
Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding	Preferred stock: $0.00001 par value per share, 10,000,000 shares authorized; no shares issued and outstanding	—		—
Additional paid-in capital	Additional paid-in capital	466,792		439,007
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	3,077		3,071
Accumulated deficit	Accumulated deficit	(126,890)		(91,360)
Treasury stock, at cost: 933,165 shares at December 31, 2021 and 2020		(10,779)		(10,779)
Treasury stock, at cost: 1,028,186 shares at December 31, 2023 and 2022
Total stockholders’ equity	Total stockholders’ equity	332,200		339,939
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	562,582	$	498,250


			(855)			727 - 9079


~~Land~~			~~Not depreciable~~
~~Land improvements~~			~~10 years~~
~~Building~~			~~39 years~~
~~Software~~			~~3 to 5 years~~
~~Office equipment~~			~~3 to 5 years~~


		As of December 31,			As of December 31,
		2021	2020	2019	2023	2022	2021
Stock options	Stock options	807,205	1,459,290	2,097,978
Restricted stock awards and restricted stock units	Restricted stock awards and restricted stock units	1,087,627	782,755	581,943


	~~October 30,~~November 16,
	~~2020~~2022
Current assets, net of cash acquired	$	~~1,469~~295
Property and equipment and other long-term assets	~~171~~27
Amortizable intangible assets	~~19,512~~5,121
Goodwill	~~31,352~~9,541
~~Other long-term assets~~	~~1,421~~
Current liabilities and short-term loan	~~(1,269)~~(1,677)
Deferred tax liability and other liabilities	~~(4,361)~~(1,056)
Total consideration transferred, net of cash acquired	$	~~48,295~~12,251


	Subscription Business		Other Business		Total
Balance as of January 1, 2022	$	32,709	$	—	$	32,709
Acquisitions	12,159		—		12,159
Effects of foreign currency	(2,885)		—		(2,885)
Balance as of December 31, 2022	41,983		—		41,983


Effects of foreign currency	1,730		—		1,730
Balance as of December 31, 2023	$	43,713	$	—	$	43,713


			Gross Carrying Value		Accumulated Amortization		Net Carrying Value
December 31, 2021:
		Gross Carrying Value														Gross Carrying Value							Accumulated Amortization							Net Carrying Value				Weighted Average Useful Life Remaining as of December 31, 2023
December 31, 2023:
Licenses
Licenses
Licenses	Licenses		$	4,773	$	—	$	4,773		$	4,773			$		$	—			$			$	4,773			N/A				N/A
Leases	Leases		2,959		(2,539)		420		Leases			848			(848)				(848)			—					—		—				—
Trade name	Trade name		1,373		(160)		1,213		Trade name			1,294			(412)				(412)			882					882		6.8				6.8
Developed technologies	Developed technologies		11,516		(2,721)		8,795		Developed technologies			17,278			(9,023)				(9,023)			8,255					8,255		2.6				2.6
Customer relationships	Customer relationships		7,589		(1,771)		5,818		Customer relationships			8,379			(4,855)				(4,855)			3,524					3,524		2.1				2.1
Patents, trademarks, and other	Patents, trademarks, and other		2,373		(729)		1,644		Patents, trademarks, and other			2,459			(1,148)				(1,148)			1,311					1,311		5.0				5.0
Total Intangibles	Total Intangibles		$	30,583	$	(7,920)	$	22,663	Total Intangibles			$	35,031		$			$	(16,286)		$				$	18,745		2.8				2.8
December 31, 2020:
December 31, 2022:
Licenses
Licenses
Licenses	Licenses		$	4,773	$	—	$	4,773
Leases	Leases		2,959		(2,213)		746
Leases
Leases
Trade name
Trade name
Trade name	Trade name		1,387		(23)		1,364
Developed technologies	Developed technologies		11,512		(352)		11,160
Developed technologies
Developed technologies
Customer relationships
Customer relationships
Customer relationships	Customer relationships		7,667		(256)		7,411
Patents, trademarks, and other	Patents, trademarks, and other		2,037		(357)		1,680
Patents, trademarks, and other
Patents, trademarks, and other
Total Intangibles	Total Intangibles		$	30,335	$	(3,201)	$	27,134
Total Intangibles
Total Intangibles


Year ending December 31:	Year ending December 31:
2022		$	4,775
2023		4,411
2024
2024
2024	2024	3,988
2025	2025	3,293
2026	2026	163
2027
2028
Thereafter	Thereafter	733
Total	Total	$	17,363


	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
As of December 31, 2021
Long-term investments:
Foreign deposits	$	6,050	$	—	$	—	$	6,050
Municipal bond	1,000		11		—		1,011
	$	7,050	$	11	$	—	$	7,061
Short-term investments:
U.S. Treasury securities	$	8,671	$	—	$	(9)	$	8,662
Certificates of deposit	3,295		—		—		3,295
U.S. government funds	114,046		—		—		114,046
	$	126,012	$	—	$	(9)	$	126,003

	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
As of December 31, 2020
Long-term investments:
Foreign deposits	$	4,564	$	—	$	—	$	4,564
Municipal bond	1,000		2		—		1,002
	$	5,564	$	2	$	—	$	5,566
Short-term investments:
U.S. Treasury securities	$	6,494	$	—	$	(2)	$	6,492
Certificates of deposit	1,696		—		—		1,696
U.S. government funds	81,672		—		—		81,672
	$	89,862	$	—	$	(2)	$	89,860



Balance as of January 1, 2022	$	—
(Addition to) allowance for credit losses	—
Balance as of December 31, 2022	—
(Addition to) allowance for credit losses	(1,674)
Balance as of December 31, 2023	$	(1,674)


		As of December 31, 2021									As of December 31, 2023
		Fair Value		Level 1		Level 2		Level 3			Fair Value	Level 1	Level 2	Level 3
Assets	Assets
Money market funds	Money market funds	32,255		32,255		—		—
Money market funds
Money market funds
Fixed maturities:	Fixed maturities:
Mortgage-backed securities and collateralized mortgage obligations
Mortgage-backed securities and collateralized mortgage obligations
Mortgage-backed securities and collateralized mortgage obligations
Other asset-backed securities
Corporate bonds
Foreign deposits	Foreign deposits	6,050		6,050		—		—
Municipal bond		1,011		—		1,011		—
Preferred shares in variable interest entity		8,442		—		—		8,442

U.S. Treasury securities
U.S. Treasury securities
U.S. Treasury securities
Preferred stock investment
Total	Total	$	47,758	$	38,305	$	1,011	$	8,442



		As of December 31, 2020								As of December 31, 2022
		Fair Value		Level 1		Level 2		Level 3			Fair Value	Level 1	Level 2	Level 3
Assets	Assets
Money market funds	Money market funds	99,054		99,054		—		—
Money market funds
Money market funds
Fixed maturities:	Fixed maturities:
Mortgage-backed securities and collateralized mortgage obligations
Mortgage-backed securities and collateralized mortgage obligations
Mortgage-backed securities and collateralized mortgage obligations
Other asset-backed securities
Corporate bonds
Foreign deposits	Foreign deposits	4,564		4,564		—		—
Municipal bond	Municipal bond	1,002		—		1,002		—
Preferred shares in variable interest entity		7,949		—		—		7,949
U.S. Treasury securities
Preferred stock investment
Total	Total	$	112,569	$	103,618	$	1,002	$	7,949


	Preferred Stock Investment
Balance as of January 1, 2021	$	7,949
Unrealized gain included in other comprehensive income (loss)	493
Balance as of December 31, 2021	$	8,442
Unrealized loss included in other comprehensive income (loss)	(4,327)
Balance as of December 31, 2022	$	4,115
Reversal of cumulative unrealized loss included in other comprehensive income (loss)	2,885
Credit loss included in earnings	(1,674)
Balance as of December 31, 2023	$	5,326


	Year Ended December 31,
Subscription	2021		2020		2019
Reserve at beginning of year	$	19,925	$	15,541	$	13,875
Veterinary invoice expense during the period related to:
Current year	357,859		278,776		231,831
Prior years	(1,411)		229		585
Total veterinary invoice expense	356,448		279,005		232,416
Amounts paid during the period related to:
Current year	333,182		259,971		217,538
Prior years	16,109		13,387		12,494
Total paid	349,291		273,358		230,032
Non-cash expenses	4,675		1,263		718
Reserve at end of period	$	22,407	$	19,925	$	15,541


		Cumulative veterinary invoice expenses																			Cumulative veterinary invoice expenses		Reserve	Cumulative number of veterinary invoices
										Cumulative veterinary invoice expenses						Reserve	Cumulative number of veterinary invoices

			As of December 31,								As of December 31,
			As of December 31,
			As of December 31,
			As of December 31,																	As of December 31,
Subscription	Subscription		2018		2019		2020		2021		2021		2021	Subscription	2020			2021	2022			2023
Year of Occurrence	Year of Occurrence		(unaudited)		(unaudited)		(unaudited)
2018			$	191,211	$	191,696	$	191,792	$	191,302	$	—	886,880
2019					$	233,629	$	234,006	$	233,824	$	664	1,054,693
2020
2020
2020	2020						$	281,272	$	280,343	$	1,741	1,179,573
2021	2021								$	356,725	$	20,002	1,348,961
									$	1,062,194	$	22,407
2022
2023
									$


Year Ending December 31,	December 31, 2023
2024	$	1,350
2025	1,350
2026	1,350
2027	72,113
2028	57,125
Thereafter	—
Total	$	133,288


		Number of Options	Weighted Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)
Outstanding as of January 1, 2019		2,621,503	$	9.01	$	43,136
Granted		—	—		—
Exercised		(510,268)	5.28		13,151
Forfeited		(13,257)	18.23		—
Outstanding as of December 31, 2019		2,097,978	9.86		57,907
Granted		—	—		—
Exercised		(626,554)	9.54		35,696
Forfeited		(12,134)	17.41		—
Outstanding as of December 31, 2020		1,459,290	9.93		160,200
	Number of Options						Number of Options	Weighted Average Exercise Price per Share	Aggregate Intrinsic Value (in thousands)
Outstanding as of January 1, 2021
Granted	Granted	—	—		—
Exercised	Exercised	(647,164)	5.59		58,200
Forfeited	Forfeited	(4,921)	13.66		—
Outstanding as of December 31, 2021	Outstanding as of December 31, 2021	807,205	13.39		95,765
Granted
Exercised
Forfeited
Outstanding as of December 31, 2022
Granted
Exercised
Forfeited
Outstanding as of December 31, 2023

Exercisable at December 31, 2021		807,205	$	13.39	$	95,765
Exercisable at December 31, 2023
Exercisable at December 31, 2023
Exercisable at December 31, 2023


		Weighted Average Grant Date Fair Value per Share		Fair Value of Options Vested (in thousands)
				Fair Value of Options Vested (in thousands)
				Fair Value of Options Vested (in thousands)
				Fair Value of Options Vested (in thousands)
Year:	Year:
2019		$	—	$	1,591
2020		$	—	$	1,105
2021	2021	$	—	$	313
2021
2021
2022
2023


	Number of Shares	Weighted Average Grant Date Fair Value per Share
Unvested shares as of January 1, 2019	451,160	$	22.16
Granted	459,523	30.03
Vested	(276,184)	18.20
Forfeited	(52,556)	29.85
Unvested shares as of December 31, 2019	581,943	29.56
Granted	535,184	37.60
Vested	(266,640)	29.77
Forfeited	(67,732)	31.51
Unvested shares as of December 31, 2020	782,755	34.81
Granted	787,730	101.32
Vested	(426,725)	40.10
Forfeited	(56,133)	72.93
Unvested shares as of December 31, 2021	1,087,627	$	78.94


Year ending December 31:
2022	$	1,173
2023	669
2024	163
2025	168
2026	100
Thereafter	—
Total rental payments	$	2,273


	Number of Shares	Weighted Average Grant Date Fair Value per Share
Unvested shares as of January 1, 2021	782,755	$	34.81
Granted	787,730	101.32
Vested	(426,725)	40.10
Forfeited	(56,133)	72.93
Unvested shares as of December 31, 2021	1,087,627	78.94
Granted	623,401	84.11
Vested	(516,077)	72.81
Forfeited	(82,399)	81.91
Unvested shares as of December 31, 2022	1,112,552	84.46
Granted	366,870	26.77
Vested	(669,413)	72.52
Forfeited	(95,627)	79.60
Unvested shares as of December 31, 2023	714,382	$	66.64


	Foreign Currency Translation		Net Unrealized Gain (Loss) on Available-for-Sale Securities		Total
Balance as of January 1, 2021	$	2,120	$	951	$	3,071
Other comprehensive income (loss)	(496)		502		6
Balance as of December 31, 2021	$	1,624	$	1,453	$	3,077
Other comprehensive income (loss)	(4,412)		(4,966)		(9,378)
Balance as of December 31, 2022	$	(2,788)	$	(3,513)	$	(6,301)
Other comprehensive income (loss)	2,712		3,992		6,704
Balance as of December 31, 2023	$	(76)	$	479	$	403


+			Indicates a management contract or compensatory plan or arrangement.
†			Registrant has omitted portions of the referenced exhibit pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Exchange Act. The omitted portions of this exhibit have been filed separately with the SEC.
*			This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.