Financial Data and Key Metrics Changes - The company reported a five-year revenue CAGR of 23%, slightly below the targeted 25% [24] - Subscription revenue CAGR over five years is 21%, with revenue growth from under $500 million in 2021 to nearly $1 billion today [27][28] - Adjusted operating income (AOI) is projected to be $512 million over five years, indicating significant reinvestment potential [25] - The profit per pet margin is expected to reach around $12, up from $6 at the lowest point, while maintaining a 71% loss ratio [62] Business Line Data and Key Metrics Changes - The subscription business has shown resilience with a 54% year-over-year growth in subscription adjusted operating margin in 2024 [29] - The veterinary invoices paid have reached over $3.5 billion, with a significant increase in claims processed daily, now averaging 1.7 million [33][36] Market Data and Key Metrics Changes - The veterinary services price index has increased by 65%, significantly outpacing the overall Consumer Price Index (CPI) of 36% [39] - The addressable market for pet insurance in North America is estimated at 45 million pets, with only 7 million currently insured, indicating substantial growth potential [45][46] Company Strategy and Development Direction - The company plans to focus on three strategic pillars: product, channels, and geography, with an emphasis on enhancing the core product and expanding market reach [74][82] - There is a strong commitment to innovation in the veterinary channel, which is considered the heartland of the business, to improve engagement and conversion rates [99][100] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the pressures in the veterinary industry due to rising costs but expressed confidence in the company's ability to adapt and innovate alongside veterinary partners [42][44] - The company is optimistic about future growth, particularly in international markets, with expectations that international business could surpass North American insurance business within the next five to ten years [83] Other Important Information - The company has protected over 3 million pets, highlighting its significant market presence and commitment to pet health [26] - The company is actively working on a food initiative, targeting a $60 billion market, which could enhance customer retention and overall revenue [78][79] Q&A Session Summary Question: What is the current retention rate and its impact on growth? - The retention rate was reported at 98.5% for 2024, with expectations for improvement in 2025, significantly contributing to net pet growth without additional acquisition costs [54] Question: How does the company plan to address the rising costs in veterinary services? - Management emphasized the importance of communicating the value of pet insurance to veterinarians and pet parents, ensuring that the cost of care does not deter pet owners from seeking necessary treatments [40][41] Question: What are the expectations for the international market? - The company anticipates that the international business will grow significantly, potentially becoming larger than the North American market within the next five to ten years [83]

Core Insights - Trupanion has launched its annual truFame contest to find the next faces of the company for 2026, celebrating the joy pets bring to their owners [1][2] - The contest allows Trupanion members to submit their pets' photos and stories, with winners featured in marketing campaigns throughout the year [2][3] Company Overview - Trupanion is a leader in medical insurance for pets in the United States, Canada, and parts of Europe, with over 1,000,000 pets currently enrolled [5] - The company has been operational for over two decades, focusing on providing pet owners with peace of mind through unlimited payouts for their pets' medical needs [5] - Trupanion utilizes a patented technology that allows for direct payment to veterinarians at the time of checkout, distinguishing it from other providers in North America [5] Contest Details - The submission period for the truFame contest runs from September 8 to September 19, 2025, with voting taking place from September 25 to October 6 [6] - Winning pets will be announced during the week of October 6 and will serve as the faces of Trupanion in 2026 [6]

Industry Overview - The Zacks Accident and Health Insurance industry is expected to benefit from increased underwriting exposure, with companies like Aflac, Trupanion, and Globe Life likely to be driven by prudent underwriting standards [1] - The industry has maintained profitability due to solid reserves, prudent claims management, stable loss trends, and fewer claims, although a softer performance is predicted for 2025 [2] - The global workers' compensation insurance market is projected to grow significantly between 2024 and 2032, driven by rising awareness of the benefits of coverage [3] Trends Impacting the Industry - Pricing pressure is anticipated to continue due to inflation, rising medical costs, and demographic changes, with healthcare spending expected to increase by 5.4% annually through 2028 [4] - Claims frequency is improving due to better safety measures and working conditions, which is expected to enhance the industry's performance [5] - The adoption of technology, including AI and data analytics, is accelerating, potentially reducing workers' compensation claim expenses by about 45% [6] Industry Performance - The Zacks Accident and Health Insurance industry currently holds a Zacks Industry Rank of 227, placing it in the bottom 7% of 251 Zacks industries, indicating weak near-term prospects [7][8] - The industry has underperformed compared to the Finance sector and the Zacks S&P 500 composite, with a year-to-date gain of 4.5% compared to 12.2% and 10.1% respectively [11] Current Valuation - The industry is trading at a trailing 12-month price-to-book (P/B) ratio of 1.82X, significantly lower than the Zacks S&P 500 composite's 8.42X and the sector's 4.26X [14] Company Highlights - **Aflac**: Offers voluntary supplemental health and life insurance products, with a focus on strategic growth investments and digital solutions. The consensus estimate for 2025 earnings indicates a decrease of 5.3%, but an increase of 7% is expected for 2026 [19][20] - **Trupanion**: Provides pet insurance in a large but underpenetrated market, with a consensus estimate for 2025 earnings indicating a 252.2% increase. The company has a Growth Score of A and has seen significant upward revisions in earnings estimates [23][24] - **Globe Life**: Offers individual life and supplemental health insurance, with positive revenue trends driven by premium growth. The consensus estimates for 2025 and 2026 earnings indicate increases of 15.8% and 5.4% respectively [27][29]

Trupanion (TRUP) FY Conference Summary Industry Overview - The pet insurance market is significantly underpenetrated in North America, with only about 4% of pets insured compared to 25% in the UK, indicating a long growth runway ahead [3][4] - Trupanion has been in the pet insurance business for 25 years, operating on a cost-plus model to provide high value for pet owners [4] Strategic Priorities - The company has shifted focus from gross pet adds to margin recovery due to unprecedented inflation in veterinary care costs, which has seen over 50% inflation in the last three to four years [5][6] - Trupanion is now back in growth mode, focusing on retention and acquisition while maintaining a strong value proposition for members [6] Financial Performance - In Q2, Trupanion reported an 11% increase in adjusted operating income guidance, with operating income growing at nearly 30% year-over-year [8][9] - The company has successfully managed operating costs while enhancing its pricing strategy, leading to improved margins [10] Inflation and Market Dynamics - Inflation in the veterinary industry is showing signs of deceleration, which is beneficial for retention and pricing consistency [11][12] - The company supports necessary price increases from veterinarians, as many pet parents are unable to afford care without insurance [14][15] Pet Acquisition and Retention Strategy - Incremental spending is being allocated across lead conversion and first-year retention, with a renewed focus on brand spending to enhance overall market presence [19][20] - The company is targeting early acquisition channels, such as breeders and shelters, to educate new pet owners about insurance [23][25] Digital and Web Conversion Efforts - Trupanion is actively refining its web conversion strategies to better engage with a changing audience, particularly Gen Z [27][28] - The company is seeing positive trends in web traffic and conversion rates, although there is still room for improvement [29] International Expansion - Trupanion launched its brand in Germany and Switzerland, with plans to expand into other European markets, leveraging partnerships with veterinary hospitals [38][40] - The company is cautious in its international strategy, focusing on controlled growth and adapting to local market conditions [41][45] Competitive Landscape - The competitive environment has seen some consolidation, with one company owning multiple brands, which may increase overall market awareness [49] - Trupanion maintains a unique selling proposition by being the only provider that can pay veterinarians directly at the time of service [51] Future Outlook - The company is optimistic about its growth trajectory, with expectations for increased pet counts and brand presence in the coming years [31][62] - Trupanion is exploring opportunities in the pet food market, aiming to launch a subscription-based food service that could enhance pet health and reduce insurance costs [58][59] Additional Insights - The company continues to underwrite plans for Pets Best but is gradually scaling down this low-margin business [55][57] - Trupanion is focused on building a durable compounding model with multiple growth levers, including retention, acquisition, and margin expansion [61][62]

Core Viewpoint - Trupanion reported quarterly earnings of $0.22 per share, significantly exceeding the Zacks Consensus Estimate of a loss of $0.03 per share, and showing improvement from a loss of $0.14 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +833.33%, with the company previously expected to post a loss of $0.04 per share but instead reporting a loss of $0.03, resulting in a +25% surprise [2] - Trupanion's revenues for the quarter ended June 2025 were $353.56 million, surpassing the Zacks Consensus Estimate by 1.99% and up from $314.8 million year-over-year [3] - The company has exceeded consensus revenue estimates four times over the last four quarters [3] Stock Performance and Outlook - Trupanion shares have increased by approximately 0.9% since the beginning of the year, while the S&P 500 has gained 7.9% [4] - The company's earnings outlook is crucial for investors, with current consensus EPS estimates for the upcoming quarter at -$0.02 on revenues of $354.42 million, and $0.04 on $1.4 billion in revenues for the current fiscal year [5][8] Industry Context - The Insurance - Accident and Health industry, to which Trupanion belongs, is currently ranked in the bottom 14% of over 250 Zacks industries, indicating potential challenges for stock performance [9]

Core Insights - Trupanion reported strong financial results for Q2 2025, with diluted EPS of $0.22, significantly exceeding the consensus estimate of negative $0.03, and revenue of $353.6 million, surpassing the $346.7 million estimate [1][5][6] - The company experienced a 12.3% year-over-year revenue growth, driven primarily by its subscription segment, which saw a 16.1% increase in revenue [2][5] - Despite the financial improvements, total pet enrollments decreased by 2% year-over-year, indicating ongoing challenges in customer acquisition [1][7] Financial Performance - Q2 2025 diluted EPS was $0.22 compared to negative $0.14 in Q2 2024, reflecting a significant improvement [2] - Revenue reached $353.6 million, up from $314.8 million in Q2 2024, marking a 12.3% increase [2] - Adjusted EBITDA more than doubled to $16.6 million from $7.4 million in Q2 2024, and free cash flow increased to $12.0 million from $4.0 million [2][6] - Subscription revenue was $242.2 million, a 16.1% increase from $208.6 million in Q2 2024 [2][5] Business Model and Strategy - Trupanion operates a subscription-based pet health insurance model, focusing on high customer retention and predictable revenue streams [3][10] - The company has emphasized expanding its subscription base and leveraging technology for real-time claim payments, enhancing customer satisfaction [4][11] - Management has prioritized margin expansion and operational efficiency, with a focus on profitable recurring members rather than just market share [11][12] Challenges and Trends - Total enrolled pets decreased by 2% year-over-year, with total enrolled pets at 1,660,455, indicating challenges in customer acquisition [1][7] - Customer acquisition costs rose to $276 per pet from $231 in Q2 2024, impacting overall growth [7][13] - The company reported a one-time $7.8 million gain from a preferred equity investment, which significantly boosted net income but masked underlying profit trends [7][14] Future Outlook - Management did not provide updated guidance for the next quarter but indicated a full-year 2025 revenue target between $1.39 billion to $1.425 billion, implying approximately 14% year-over-year growth [16] - Investors should monitor trends in total and net pet enrollments, operating margins, and the balance between pricing actions and retention rates [17]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $353.6 million, up 12% year over year [9] - Subscription revenue increased 16% year over year to $242.2 million, with adjusted operating income rising 45% to over $33 million [6][9] - Net income improved to $9.4 million or $0.22 per share, compared to a net loss of $5.9 million in the prior year [14] - Free cash flow was $12 million, up from $4 million last year, with total free cash flow over the last four quarters reaching $61.3 million [15] Business Line Data and Key Metrics Changes - Subscription pets increased 4% year over year to over 1,066,000 pets as of June 30 [9] - Adjusted operating income for the subscription business was $33.4 million, contributing 96% of total adjusted operating income for the quarter [11] - Other business segment revenue was $111.4 million, an increase of 5% year over year, but growth is expected to decelerate [12] Market Data and Key Metrics Changes - Average monthly retention for the trailing twelve months was 98.29%, slightly down from 98.34% in the previous year [10] - Retention on a trailing three-month basis was 98.4%, up from the second quarter last year [10] Company Strategy and Development Direction - The company is focused on refining its approach to ensure appropriate pricing for each pet, emphasizing quality over quantity in pet acquisition [32] - Long-term investments in technology are improving operational efficiencies and member experience, contributing to high retention rates [20] - The company is positioned for sustainable growth with a strong financial foundation and plans to deploy adjusted operating income for future investments [21] Management's Comments on Operating Environment and Future Outlook - Management noted a modest deceleration in veterinary care costs, allowing for improved operating assumptions for the second half of the year [19] - The company expects total revenue for 2025 to be in the range of $1.417 billion to $1.434 billion, with subscription revenue projected to grow approximately 15% year over year [16] - Management remains optimistic about the potential of the food initiative, which is still in early stages but has foundational intellectual property [28] Other Important Information - The company recorded a one-time gain of $7.8 million related to preferred stock exchange for intellectual property [14] - The balance sheet showed $319.6 million in cash and short-term investments, with a reduced debt balance of $116.4 million [15] Q&A Session Summary Question: Clarification on loss ratio and seasonal trends - Management acknowledged typical seasonal lifts in Q1 and Q2 but noted a mild deceleration in costs this quarter, which was encouraging [24][26] Question: Update on food initiative - Management indicated that the food initiative is in early stages but optimistic about its potential due to acquired intellectual property [27][28] Question: Concerns about stagnant gross adds despite increased spending - Management explained the focus on quality over quantity in pet acquisition, targeting pets with higher lifetime value [32][33] Question: Expectations for gross adds in the second half of the year - Management expects a modest pickup in gross adds in the second half of the year, aligning with their growth strategy [41][52] Question: Retention strategy and pricing adjustments - Management stated that pricing is set for the back half of the year, with expectations for softer increases moving forward [65][66]

[FORM 10-Q Cover Page](index=1&type=section&id=Form%2010-Q%20Cover%20Page) This is a Quarterly Report (Form 10-Q) for the period ended June 30, 2025, filed by TRUPANION, INC. - This is a Quarterly Report (Form 10-Q) for the period ended June 30, 2025, filed by TRUPANION, INC. (Commission File Number: 001-36537)[2](index=2&type=chunk) - The registrant's common stock trades under the symbol '**TRUP**' on The Nasdaq Stock Market LLC[3](index=3&type=chunk) - Trupanion, Inc. is classified as a '**Large accelerated filer**' and is not a shell company[5](index=5&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized listing of all major sections and financial statements included in the Form 10-Q report [Note About Forward-Looking Statements](index=4&type=section&id=Note%20About%20Forward-Looking%20Statements) This section cautions readers that the report contains forward-looking statements subject to risks and uncertainties, and the company undertakes no obligation to update them - The report contains forward-looking statements regarding future results, financial position, business strategy, and operational objectives, identified by words like 'believe,' 'may,' 'will,' 'anticipate,' and 'expect'[9](index=9&type=chunk) - These statements are subject to risks, uncertainties, and assumptions, including those discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[10](index=10&type=chunk) - The Company undertakes no obligation to publicly update any forward-looking statements, except as required by law[11](index=11&type=chunk) [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents Trupanion, Inc.'s unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2025, along with management's discussion and analysis of financial condition and results of operations, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited condensed consolidated financial statements, including statements of operations, comprehensive income (loss), balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, investments, debt, stock-based compensation, and segment performance [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement presents the company's revenues, costs, and net income (loss) for the reported periods | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $353,557 | $314,800 | $695,532 | $620,921 | | Total cost of revenue | $298,730 | $274,531 | $589,602 | $544,425 | | Operating income (loss) | $2,314 | $(5,471) | $841 | $(11,608) | | Net income (loss) | $9,413 | $(5,862) | $7,930 | $(12,714) | | Basic EPS | $0.22 | $(0.14) | $0.19 | $(0.30) | | Diluted EPS | $0.22 | $(0.14) | $0.18 | $(0.30) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement details net income (loss) and other comprehensive income (loss) components | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $9,413 | $(5,862) | $7,930 | $(12,714) | | Other comprehensive income (loss), net of taxes | $3,372 | $(190) | $5,269 | $(2,174) | | Comprehensive income (loss) | $12,785 | $(6,052) | $13,199 | $(14,888) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity at period end | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets | $847,789 | $806,853 | | Total liabilities | $492,335 | $483,585 | | Total stockholders' equity | $355,454 | $323,268 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, including net income and stock-based compensation - Total stockholders' equity increased from **$323,268 thousand** at January 1, 2025, to **$355,454 thousand** at June 30, 2025, driven by stock-based compensation expense (**$19,344 thousand**), other comprehensive income (**$5,269 thousand**), and net income (**$7,930 thousand**)[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash flows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $30,989 | $9,290 | | Net cash used in investing activities | $(51,440) | $(30,454) | | Net cash used in financing activities | $(16,346) | $(1,244) | | Net change in cash, cash equivalents, and restricted cash | $(35,059) | $(22,871) | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, estimates, and financial statement line items [Note 1. Nature of Operations and Significant Accounting Policies](index=11&type=section&id=Note%201.%20Nature%20of%20Operations%20and%20Significant%20Accounting%20Policies) This note describes Trupanion's business, recent IP acquisition, and evaluation of new accounting pronouncements - Trupanion, Inc. provides medical insurance for cats and dogs in the US, Canada, and certain countries in Continental Europe, utilizing a data-driven, vertically-integrated approach to offer high-value, uniquely priced products[30](index=30&type=chunk) - The company acquired intellectual property from Baystride, Inc. for **$14.9 million**, recorded as a patent, resulting in a **$7.8 million** gain from the nonmonetary exchange of preferred stock[33](index=33&type=chunk)[47](index=47&type=chunk) - The FASB issued ASU 2023-09 (effective after Dec 15, 2024) and ASU 2024-03 (effective after Dec 15, 2026), which the company is currently evaluating for impact on its financial statements[36](index=36&type=chunk)[37](index=37&type=chunk) [Note 2. Net Income (Loss) per Share](index=12&type=section&id=Note%202.%20Net%20Income%20(Loss)%20per%20Share) This note details basic and diluted earnings per share calculation, including dilutive securities treatment | EPS Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Basic | $0.22 | $(0.14) | $0.19 | $(0.30) | | Diluted | $0.22 | $(0.14) | $0.18 | $(0.30) | - Potentially dilutive equity securities (stock options and restricted stock units) were not included in diluted earnings per share calculation in periods of net loss as they would have had an antidilutive effect[39](index=39&type=chunk) [Note 3. Investments](index=12&type=section&id=Note%203.%20Investments) This note breaks down the investment portfolio and discusses unrealized losses on available-for-sale securities | Investment Type (in thousands) | Fair Value (June 30, 2025) | Fair Value (December 31, 2024) | | :----------------------------- | :------------------------- | :----------------------------- | | Long-term held-to-maturity | $167 | $372 | | Short-term available-for-sale | $178,432 | $134,466 | | Short-term held-to-maturity | $18,414 | $12,638 | - Unrealized losses on available-for-sale investments are primarily due to interest rate changes, and the Company does not anticipate material credit losses or intend to sell these securities prior to cost basis recovery[43](index=43&type=chunk) [Note 4. Other Investments](index=15&type=section&id=Note%204.%20Other%20Investments) This note describes the nonmonetary exchange of preferred stock for intellectual property and a revolving line of credit - The Company completed a nonmonetary exchange during Q2 2025, transferring its **$14.8 million** fair value preferred stock investment in Baystride, Inc. for **$14.9 million** of intellectual property (a patent), resulting in a **$7.8 million** realized gain[46](index=46&type=chunk)[47](index=47&type=chunk) - A **$7.0 million** revolving line of credit extended to Baystride had an outstanding balance of **$0.4 million** as of June 30, 2025, down from **$1.6 million** at December 31, 2024, and was extinguished in July 2025[48](index=48&type=chunk) [Note 5. Fair Value](index=16&type=section&id=Note%205.%20Fair%20Value) This note presents fair value measurements of financial assets, categorized by valuation input levels | Asset Type (in thousands) | Fair Value (June 30, 2025) | Fair Value (December 31, 2024) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 3 (June 30, 2025) | | :------------------------ | :------------------------- | :----------------------------- | :---------------------- | :---------------------- | :---------------------- | | Money market funds | $57,309 | $91,534 | $57,309 | $— | $— | | Fixed maturities | $178,432 | $134,466 | $— | $178,432 | $— | | Preferred stock investment | $— | $7,916 | $— | $— | $— | | Total | $235,741 | $233,916 | $57,309 | $178,432 | $— | - The preferred stock investment, previously a Level 3 measurement, was exchanged for intellectual property during Q2 2025, resulting in a zero balance at period end[52](index=52&type=chunk)[54](index=54&type=chunk) [Note 6. Commitments and Contingencies](index=17&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note addresses legal proceedings and other commitments, anticipating no material individual or aggregate impact - The Company is subject to various legal proceedings in the ordinary course of business but does not believe any current matters are material individually or in the aggregate[57](index=57&type=chunk) [Note 7. Reserve for Veterinary Invoices](index=17&type=section&id=Note%207.%20Reserve%20for%20Veterinary%20Invoices) This note explains the actuarial estimation for unpaid claims and details development patterns for business segments - The reserve for veterinary invoices is an actuarial estimate for unpaid claims and related processing costs, continually refined based on claims development patterns[58](index=58&type=chunk) | Segment | Reserve at Beginning of Year (2025) | Total Veterinary Invoice Expense (2025) | Total Paid (2025) | Reserve at End of Period (2025) | | :------ | :---------------------------------- | :-------------------------------------- | :---------------- | :------------------------------ | | Subscription Business | $23,084 | $341,055 | $336,608 | $25,907 | | Other Business | $28,551 | $161,975 | $163,910 | $26,616 | - The subscription business experienced **$2.1 million** in unfavorable development on veterinary invoice reserves for the six months ended June 30, 2025, primarily due to slower claims reporting and higher frequency than expected[60](index=60&type=chunk) - The other business segment experienced **$5.5 million** in favorable development on veterinary invoice reserves for the six months ended June 30, 2025, driven by faster claims reporting and lower frequency/severity than anticipated[61](index=61&type=chunk) [Note 8. Debt](index=18&type=section&id=Note%208.%20Debt) This note outlines the Credit Facility, including term loans, recent principal repayments, and interest rates - The Company has a **$150.0 million** Credit Facility, including **$60.0 million** Initial Term Loan, **$75.0 million** Delayed Draw Term Loans, and **$15.0 million** Revolving Loans[64](index=64&type=chunk)[65](index=65&type=chunk) - In June 2025, the Company made a **$14.9 million** principal repayment on the Initial Term Loan, in addition to the 0.25% quarterly mandatory repayment[67](index=67&type=chunk) - The Credit Facility bears interest at approximately **9.45%** as of June 30, 2025, and is secured by substantially all Company assets[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 9. Stock-Based Compensation](index=20&type=section&id=Note%209.%20Stock-Based%20Compensation) This note breaks down stock-based compensation expense and details outstanding stock options and restricted stock units | Expense Category (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------ | :------------------------------- | :------------------------------- | | Veterinary invoice expense | $774 | $1,544 | | Other cost of revenue | $605 | $1,094 | | Technology and development | $1,470 | $2,621 | | General and administrative | $5,047 | $9,575 | | New pet acquisition expense | $1,560 | $4,452 | | Total expensed stock-based compensation | $9,456 | $19,286 | - As of June 30, 2025, **237,699** stock options were outstanding and exercisable with a weighted average remaining contractual life of **1.4 years**; no new stock options have been granted since 2017[72](index=72&type=chunk)[73](index=73&type=chunk) - Unvested restricted stock units totaled **1,393,567** shares as of June 30, 2025, with **$55.3 million** in related compensation expense expected to be recognized over approximately **2.0 years**[74](index=74&type=chunk) [Note 10. Stockholders' Equity](index=21&type=section&id=Note%2010.%20Stockholders'%20Equity) This note specifies common shares outstanding and the company's policy on cash dividends and share repurchases - As of June 30, 2025, the Company had **42,987,772** shares of common stock outstanding and no preferred stock outstanding[75](index=75&type=chunk) - The Company does not intend to declare or pay cash dividends in the foreseeable future and made no share repurchases under its program during the six months ended June 30, 2025[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 11. Accumulated Comprehensive Income (Loss)](index=21&type=section&id=Note%2011.%20Accumulated%20Comprehensive%20Income%20(Loss)) This note details components of accumulated comprehensive income (loss), including foreign currency translation | Component (in thousands) | Balance as of April 1, 2025 | Other Comprehensive Income (Loss) | Balance as of June 30, 2025 | | :----------------------- | :-------------------------- | :-------------------------------- | :-------------------------- | | Foreign Currency Translation | $(1,761) | $3,202 | $1,441 | | Net Unrealized Gain (Loss) on Available-for-Sale Securities | $1,046 | $170 | $1,216 | | Total | $(715) | $3,372 | $2,657 | - A **$0.9 million** previously unrealized gain was reclassified from Accumulated other comprehensive income (loss) to Other (income), net during the six months ended June 30, 2025, due to a nonmonetary exchange[77](index=77&type=chunk) [Note 12. Segments](index=22&type=section&id=Note%2012.%20Segments) This note describes Trupanion's subscription and other business segments, along with geographic revenue breakdown - Trupanion operates two segments: subscription business (direct-to-consumer pet medical insurance, higher margin) and other business (underwriting for third parties, lower margin, not core strategy)[80](index=80&type=chunk)[89](index=89&type=chunk) | Segment Performance (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Subscription business revenue | $242,156 | $208,618 | $475,220 | $409,752 | | Subscription business operating income (loss) | $4,523 | $(3,420) | $5,590 | $(7,939) | | Other business revenue | $111,401 | $106,182 | $220,312 | $211,169 | | Other business operating loss | $(2,209) | $(2,004) | $(4,444) | $(3,519) | | Geographic Region | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | United States | $293,979 | $263,220 | $579,803 | $519,193 | | Canada and other | $59,578 | $51,580 | $115,729 | $101,728 | | Total revenue | $353,557 | $314,800 | $695,532 | $620,921 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Trupanion's financial performance, including an overview of its business segments, key operating metrics, non-GAAP financial measures, detailed analysis of operating results, factors affecting performance, and a discussion of liquidity and capital resources [Overview](index=24&type=section&id=Overview) This section provides a high-level description of Trupanion's business model, operating segments, and customer acquisition channels - Trupanion provides medical insurance for cats and dogs in the US, Canada, and parts of Continental Europe, using a data-driven, vertically-integrated approach[86](index=86&type=chunk) - The company operates two segments: subscription business (direct-to-consumer, target margin focus) and other business (underwriting for third parties, lower margin, not core strategy)[87](index=87&type=chunk)[89](index=89&type=chunk) - Veterinary hospitals are the largest referral source for the subscription business, with 'Territory Partners' cultivating direct relationships[88](index=88&type=chunk) [Key Operating Metrics](index=25&type=section&id=Key%20Operating%20Metrics) This section presents crucial operational performance indicators, including pet enrollment, revenue per pet, and retention | Metric | June 30, 2025 | June 30, 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Total pets enrolled (at period end) | 1,660,455 | 1,699,643 | (2)% | | Total subscription pets enrolled (at period end) | 1,066,354 | 1,020,934 | 4% | | Monthly average revenue per pet | $79.93 (Q2) | $71.72 (Q2) | 11% | | Average pet acquisition cost (PAC) | $276 (Q2) | $231 (Q2) | 19% | | Average monthly retention | 98.29% | 98.34% | (0.05)% | - Total pets enrolled decreased by **2% YoY**, while total subscription pets enrolled increased by **4% YoY**, indicating a shift towards the core subscription business[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - Monthly average revenue per pet for the subscription business increased by **11% YoY**, reflecting improved unit economics[91](index=91&type=chunk)[94](index=94&type=chunk) [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures used to assess operating performance - Non-GAAP financial measures are used to evaluate operating performance by excluding non-cash or non-recurring expenses like stock-based compensation, non-recurring transactions, restructuring, and pre-revenue development expenses[98](index=98&type=chunk)[99](index=99&type=chunk) | Non-GAAP Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % of Subscription Revenue (2025) | % of Subscription Revenue (2024) | | :----------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Subscription cost of paying veterinary invoices | $339,533 | $306,130 | 71.4% | 74.7% | | Subscription variable expenses | $43,223 | $39,222 | 9.1% | 9.6% | | Fixed expenses | $42,531 | $33,036 | 6.1% (of total revenue) | 5.3% (of total revenue) | | Subscription acquisition cost | $35,892 | $30,771 | 7.6% | 7.5% | - Net acquisition cost, a non-GAAP measure, excludes stock-based compensation, other business segment expense, and pet acquisition expense for commission-based policies, offset by sign-up fee revenue, to provide a more comparable metric across periods[103](index=103&type=chunk) | Net Acquisition Cost (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | | New pet acquisition expense | $40,359 | $34,717 | | Net of sign-up fee revenue | $(2,101) | $(2,055) | | Excluding stock-based compensation expense | $(4,390) | $(3,923) | | Excluding other business pet acquisition expense | $(77) | $(23) | | Excluding pet acquisition expense for commission-based policies | $(1,524) | $(1,586) | | **Net acquisition cost** | **$32,267** | **$27,130** | [Components of Operating Results](index=31&type=section&id=Components%20of%20Operating%20Results) This section explains the various components contributing to the company's operating results by segment [General](index=31&type=section&id=General) This subsection outlines the strategic focus and offerings of the subscription business and the nature of the other business segment - The Company's subscription business focuses on achieving a target margin before pet acquisition expense, while the other business segment has a lower margin profile and is not part of the core strategy[105](index=105&type=chunk)[106](index=106&type=chunk) - The subscription business includes 'Powered by Trupanion' offerings, Furkin and PHI Direct in Canada, and Trupanion branded products in Germany and Switzerland, with an intent to assume full insurance risk for European products[105](index=105&type=chunk) - The other business segment's largest revenue source is from underwriting policies for Pets Best, alongside programs for the U.S. Department of Veterans Affairs and employer-sponsored programs[106](index=106&type=chunk) [Revenue](index=32&type=section&id=Revenue) This subsection describes the primary sources and recognition methods for revenue within both business segments - Subscription business revenue is primarily from subscription payments recognized pro rata over the policy term, with a small amount from one-time sign-up fees and commissions in European markets[107](index=107&type=chunk) - Other business segment revenue is primarily from writing policies for third parties without direct consumer marketing, often with different margin profiles[108](index=108&type=chunk) [Cost of Revenue](index=32&type=section&id=Cost%20of%20Revenue) This subsection details the components of cost of revenue, including veterinary invoice expense and other direct costs - Veterinary invoice expense includes costs to review, pay, and administer invoices, plus accruals for incurred but unpaid invoices and internal processing costs[109](index=109&type=chunk) - Other cost of revenue for the subscription business includes member service expenses, Territory Partner fees, payment processing, and premium taxes; for the other business, it includes commissions to general agents, program administration, and premium taxes[110](index=110&type=chunk) [Operating Expenses](index=32&type=section&id=Operating%20Expenses) This subsection categorizes and explains the company's operating expenses, such as technology, G&A, and pet acquisition - Operating expenses are categorized into technology and development, general and administrative, new pet acquisition, and depreciation and amortization, with personnel costs being the largest component for most categories[111](index=111&type=chunk) - Technology and development expenses cover IT staff, infrastructure, and new product/geography development. General and administrative expenses include personnel for finance, actuarial, HR, legal, and management, plus facilities and professional services. New pet acquisition expenses cover educating consumers/veterinarians, lead generation, conversion, and advertising[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [Gain (loss) from investment in joint venture](index=33&type=section&id=Gain%20(loss)%20from%20investment%20in%20joint%20venture) This subsection explains the restructuring of the Australian joint venture to a brand license arrangement - The Company's relationship with its Australian joint venture was restructured from an equity method investment to a brand license and services arrangement in March 2025[116](index=116&type=chunk) [Stock-based compensation](index=33&type=section&id=Stock-based%20compensation) This subsection clarifies that stock-based compensation expense is allocated across various cost and expense lines - Stock-based compensation expense, included across various cost and expense lines, varies based on corporate performance and the timing/vesting of annual performance grants under the equity incentive plan[117](index=117&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) [Factors Affecting Our Performance](index=33&type=section&id=Factors%20Affecting%20Our%20Performance) This section identifies key internal and external factors influencing the company's financial and operational performance - Key performance factors include average monthly retention (influenced by value, member experience, claims process, veterinary inflation, pricing adjustments, and new pet enrollment rates), investment in pet acquisition (cost, channels, effectiveness), and timing of price adjustments (cost-plus model, regulatory approval, timing mismatches)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Other factors include the timing of new initiatives (member experience, plan modifications, technology, direct pay software), mix of sales (geography, pet age/species/breed impacting revenue per pet and foreign exchange exposure), and the other business segment's lower margin, non-core strategy, and potential for contract termination[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of Trupanion's financial results for the three and six months ended June 30, 2025, versus 2024, highlighting changes in revenue, cost of revenue, operating expenses, and other income/expense [Revenue](index=37&type=section&id=Revenue_Results_of_Operations) This subsection analyzes changes in revenue for both subscription and other business segments | Revenue (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :--------------------- | :----------- | :----------- | :------------- | :----------- | :----------- | :------------- | | Subscription business | $242,156 | $208,618 | 16% | $475,220 | $409,752 | 16% | | Other business | $111,401 | $106,182 | 5% | $220,312 | $211,169 | 4% | | Total revenue | $353,557 | $314,800 | 12% | $695,532 | $620,921 | 12% | - Subscription business revenue increased by **16%** for both the three and six months ended June 30, 2025, primarily due to an **11%** increase in monthly average revenue per pet and growth in subscription pet months[127](index=127&type=chunk)[128](index=128&type=chunk) - Other business revenue increased by **5% (QoQ)** and **4% (YoY)**, driven by a **20% (QoQ)** and **19% (YoY)** increase in monthly average revenue per pet, partially offset by a decrease in pet months due to the expected run-off of Pets Best policies[127](index=127&type=chunk)[128](index=128&type=chunk) [Cost of Revenue](index=38&type=section&id=Cost%20of%20Revenue_Results_of_Operations) This subsection examines changes in cost of revenue for both segments, noting the impact of veterinary invoice expense | Cost of Revenue (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :----------------------------- | :----------- | :----------- | :------------- | :----------- | :----------- | :------------- | | Subscription business total | $195,488 | $175,740 | 11% | $385,333 | $347,871 | 11% | | Other business total | $103,242 | $98,791 | 5% | $204,269 | $196,554 | 4% | - Subscription business cost of revenue increased by **11%** for both periods, but decreased as a percentage of revenue from **84% to 81% (QoQ)** and **85% to 81% (YoY)**, indicating revenue growth outpaced cost growth[129](index=129&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Other business cost of revenue increased by **5% (QoQ)** and **4% (YoY)**, remaining constant at **93% of revenue**, driven by a **25% (QoQ)** and **18% (YoY)** increase in veterinary invoice expense per pet, partially offset by decreased pet months[130](index=130&type=chunk)[133](index=133&type=chunk) [Technology and Development Expenses](index=39&type=section&id=Technology%20and%20Development%20Expenses_Results_of_Operations) This subsection discusses drivers behind changes in technology and development expenses | Expense (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :--------------------- | :--------- | :--------- | :------------- | :--------- | :--------- | :------------- | | Technology and development | $8,586 | $8,190 | 5% | $16,658 | $15,150 | 10% | | % of total revenue | 2% | 3% | | 2% | 2% | | - The increase was primarily due to higher general compensation and employee-related expenses and reduced capitalized expenditures for internal software, partially offset by decreases in development and infrastructure expenses[134](index=134&type=chunk)[135](index=135&type=chunk) [General and Administrative Expenses](index=39&type=section&id=General%20and%20Administrative%20Expenses_Results_of_Operations) This subsection explains the increase in general and administrative expenses due to compensation and underwriting fees | Expense (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :--------------------- | :--------- | :--------- | :------------- | :--------- | :--------- | :------------- | | General and administrative | $20,122 | $15,253 | 32% | $40,014 | $29,926 | 34% |\ | % of total revenue | 6% | 5% | | 6% | 5% | | - The significant increase was driven by higher general compensation and employee-related expenses and increased underwriting fees related to the Canadian business[136](index=136&type=chunk)[137](index=137&type=chunk) [New Pet Acquisition Expense](index=40&type=section&id=New%20Pet%20Acquisition%20Expense_Results_of_Operations) This subsection analyzes the increase in new pet acquisition expense and average pet acquisition cost | Expense (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :--------------------- | :--------- | :--------- | :------------- | :--------- | :--------- | :------------- | | New pet acquisition expense | $19,843 | $17,874 | 11% | $40,359 | $34,717 | 16% | | % of total revenue | 6% | 6% | | 6% | 6% | | | Average pet acquisition cost (PAC) | $276 | $231 | 19% | $272 | $219 | 24% | - The increase in new pet acquisition expense and average PAC reflects increased marketing spend to acquire new pets in a disciplined manner, while maintaining a constant percentage of total revenue[138](index=138&type=chunk)[139](index=139&type=chunk) [Depreciation and Amortization](index=41&type=section&id=Depreciation%20and%20Amortization_Results_of_Operations) This subsection details the decrease in depreciation and amortization expenses due to fewer software projects | Expense (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :--------------------- | :--------- | :--------- | :------------- | :--------- | :--------- | :------------- | | Depreciation and amortization | $3,962 | $4,376 | (9)% | $7,753 | $8,161 | (5)% | | % of total revenue | 1% | 1% | | 1% | 1% | | - The decrease was primarily due to fewer internally developed software projects being placed in-service during the period[141](index=141&type=chunk)[142](index=142&type=chunk) [Total Other (Income) Expense, Net](index=41&type=section&id=Total%20Other%20(Income)%20Expense,%20Net_Results_of_Operations) This subsection explains the significant change in other income (expense), net, from a nonmonetary exchange | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :-------------------- | :----------- | :--------- | :------------- | :----------- | :--------- | :------------- | | Interest expense | $3,682 | $3,655 | 1% | $6,893 | $7,251 | (5)% | | Other (income), net | $(11,914) | $(3,220) | 270% | $(15,154) | $(6,063) | 150% | | Total other (income) expense, net | $(8,232) | $435 | (1,992)% | $(8,261) | $1,188 | (795)% | - The significant increase in other income was primarily due to a **$7.8 million** realized gain from the nonmonetary exchange of Baystride preferred stock for intellectual property[143](index=143&type=chunk)[144](index=144&type=chunk) [Stock-Based Compensation](index=41&type=section&id=Stock-Based%20Compensation_Results_of_Operations) This subsection highlights the increase in total stock-based compensation expense from equity grants | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change (QoQ) | YTD 2025 | YTD 2024 | % Change (YoY) | | :-------------------- | :--------- | :--------- | :------------- | :--------- | :--------- | :------------- | | Total stock-based compensation expense | $9,456 | $8,646 | 9% | $19,286 | $16,798 | 15% | - The increase in stock-based compensation expense reflects the timing and vesting of annual performance grants under the equity incentive plan[145](index=145&type=chunk)[146](index=146&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Trupanion's cash flows, primary liquidity sources, capital requirements, debt obligations, and regulatory capital requirements for its insurance entities, highlighting an increase in operating cash flow and strategic capital deployment [Operating Cash Flows](index=42&type=section&id=Operating%20Cash%20Flows) This subsection analyzes the substantial increase in net cash provided by operating activities | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | | Net cash provided by operating activities | $30,989 | $9,290 | 233.6% | - The significant increase in operating cash flow was driven by improved operating results, higher revenue, and better Subscription Business margins, along with timing differences in working capital[151](index=151&type=chunk) [Investing Cash Flows](index=42&type=section&id=Investing%20Cash%20Flows) This subsection details the increase in net cash used in investing activities due to higher investment security purchases | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net cash used in investing activities | $(51,440) | $(30,454) | | Purchases of investment securities | $(142,000) | $(81,249) | | Sales and maturities of investment securities | $94,264 | $55,678 | | Capital expenditures (property, equipment, internal-use software) | $(4,904) | $(5,945) | - Net cash used in investing activities increased due to higher purchases of investment securities, partially offset by sales and maturities, and a decrease in capital expenditures for internal-use software[152](index=152&type=chunk) [Financing Cash Flows](index=42&type=section&id=Financing%20Cash%20Flows) This subsection explains the increase in net cash used in financing activities, driven by a significant debt repayment | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net cash used in financing activities | $(16,346) | $(1,244) | | Repayment of debt financing | $(15,525) | $(675) | - The increase in cash used in financing activities was primarily due to a significant **$15.5 million** repayment on the Credit Facility in 2025[153](index=153&type=chunk) [Long-Term Debt](index=42&type=section&id=Long-Term%20Debt) This subsection provides an overview of outstanding term loans and details recent principal repayments - As of June 30, 2025, the Company had **$116.4 million** in outstanding term loans under its **$150.0 million** Credit Facility, secured by substantially all assets[154](index=154&type=chunk) - A **$14.9 million** principal repayment was made on the Initial Term Loan in June 2025[154](index=154&type=chunk) [Regulation](index=43&type=section&id=Regulation) This subsection discusses regulatory capital requirements for insurance entities and details extraordinary dividends - Trupanion's insurance entities held **$266.3 million** in cash, cash equivalents, and short-term investments as of June 30, 2025, subject to capital and dividend regulations by various jurisdictions[149](index=149&type=chunk)[155](index=155&type=chunk) - APIC distributed an extraordinary dividend of **$26.0 million** to Trupanion, Inc. in May 2025, while WICL Segregated Account AX distributed **$15.6 million** and **$7.0 million** in March and July 2025, respectively[156](index=156&type=chunk)[158](index=158&type=chunk) - The Company established new insurance subsidiaries, ZPIC (US) and GPIC (Canada), in 2021 and 2022, respectively, to provide flexibility in underwriting policies, with GPIC beginning to underwrite business in 2025[157](index=157&type=chunk) [Contractual Obligations](index=44&type=section&id=Contractual%20Obligations) This subsection identifies primary long-term contractual obligations, including debt and vendor service agreements - The Company's long-term contractual obligations primarily consist of debt obligations under its **$150.0 million** Credit Facility and non-cancellable vendor service agreements[162](index=162&type=chunk) [Critical Accounting Policies and Significant Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) This section confirms no material changes to critical accounting policies or estimates since the last annual report - There have been no material changes to the Company's critical accounting policies or estimates as compared to those described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Management states there have been no material changes to the Company's quantitative or qualitative disclosures about market risk during the first six months ended June 30, 2025, referring to the 2024 Form 10-K for further discussion - No material changes to market risk disclosures were reported for the first six months ended June 30, 2025[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that Trupanion's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=45&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection states the CEO and CFO concluded disclosure controls and procedures were effective - As of June 30, 2025, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective[168](index=168&type=chunk) [Changes in Internal Control](index=45&type=section&id=Changes%20in%20Internal%20Control) This subsection reports no material changes in internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[169](index=169&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=45&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) This subsection acknowledges inherent limitations of controls and procedures, providing only reasonable assurance - Management acknowledges that controls and procedures provide only reasonable assurance due to inherent limitations and resource constraints, requiring judgment in evaluating benefits versus costs[170](index=170&type=chunk) [PART II - OTHER INFORMATION](index=46&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers non-financial information, including legal proceedings, risk factors, unregistered sales of equity securities, defaults on senior securities, mine safety disclosures, other information (Rule 10b5-1 plans), and a list of exhibits [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The Company is subject to ordinary course litigation but does not believe any current matters are individually or aggregately material - The Company is subject to litigation in the ordinary course of business, but no material matters are currently identified[172](index=172&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously identified in the Company's Annual Report on Form 10-K - No material changes to risk factors were identified compared to the Annual Report on Form 10-K[173](index=173&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended June 30, 2025, Trupanion issued 3,571 shares of common stock to a strategic distributor as partial consideration for sales, relying on Section 4(a)(2) of the Securities Act for exemption from registration - Trupanion issued **3,571** shares of common stock to a strategic distributor in Q2 2025 for product sales, relying on Section 4(a)(2) exemption from registration[174](index=174&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[175](index=175&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable[176](index=176&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This section details Rule 10b5-1 trading plans adopted or terminated by company officers during the quarter, including plans by the CFO and CEO - CFO Fawwad Qureshi adopted a Rule 10b5-1 plan on May 19, 2025, to sell up to **49,561** shares by August 31, 2026[177](index=177&type=chunk) - CEO Margi Tooth terminated a previous Rule 10b5-1 plan on June 5, 2025, and adopted a new one on June 6, 2025, to sell up to **9,253** shares and exercise/sell up to **28,000** options by December 31, 2025[178](index=178&type=chunk)[179](index=179&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications, XBRL documents, and corporate governance documents incorporated by reference - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various XBRL taxonomy documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[181](index=181&type=chunk) [Signatures](index=48&type=section&id=Signatures) This section confirms the official signing of the Quarterly Report on Form 10-Q by the CEO and CFO - The Quarterly Report on Form 10-Q was signed by Margi Tooth (Chief Executive Officer) and Fawwad Qureshi (Chief Financial Officer) on August 7, 2025[187](index=187&type=chunk)

Financial Performance - Total subscription revenue has grown significantly from $3.1 million in 2010 to $242.2 million in Q2 2025[3] - Free cash flow increased from $3.975 million in Q2 2024 to $12.047 million in Q2 2025[15] - The company estimates an internal rate of return (IRR) of 30% per average subscription pet[12] Subscription Metrics - Total subscription pets enrolled reached 1,066,354 in Q2 2025[10] - Gross new pets enrolled in Q2 2025 were 62,740, with 53,186 from Core Trupanion[10] - Quarterly average revenue per new pet is $73.77[12] Outlook for 2025 - The company projects revenue between $359 million and $365 million for Q3 2025 and between $1.417 billion and $1.434 billion for the full year[17] - Subscription revenue is expected to be between $251 million and $254 million for Q3 2025 and between $983 million and $992 million for the full year[17] - Adjusted operating income is projected to be between $37 million and $40 million for Q3 2025 and between $141 million and $151 million for the full year[17]

Core Insights - Trupanion, Inc. reported strong financial results for Q2 2025, highlighting consistent revenue growth, margin expansion, and improved retention rates, which positions the company well for future investments in the pet insurance market [2][10]. Financial Highlights - Total revenue for Q2 2025 was $353.6 million, a 12% increase compared to Q2 2024 [10]. - Subscription business revenue reached $242.2 million, marking a 16% increase year-over-year [10]. - Net income for Q2 2025 was $9.4 million, or $0.22 per share, compared to a net loss of $(5.9) million, or $(0.14) per share, in Q2 2024 [10]. - Adjusted EBITDA for Q2 2025 was $16.6 million, up from $7.4 million in Q2 2024 [10]. - Operating cash flow was $15.0 million, with free cash flow of $12.0 million in Q2 2025, compared to $6.9 million and $4.0 million, respectively, in Q2 2024 [10]. Enrollment Metrics - Total enrolled pets as of June 30, 2025, was 1,660,455, a decrease of 2% from the previous year [10]. - Subscription enrolled pets increased by 4% to 1,066,354 [10]. - Monthly average revenue per pet rose to $78.73 from $70.76 year-over-year [22]. Cost and Expense Analysis - Total cost of revenue for Q2 2025 was $298.7 million, compared to $274.5 million in Q2 2024 [10]. - Subscription cost of paying veterinary invoices was 71.1% of subscription revenue, down from 74.1% in Q2 2024 [26]. - Average pet acquisition cost increased to $272 from $219 year-over-year [22]. Cash and Investment Position - As of June 30, 2025, the company held $319.6 million in cash and short-term investments, with an additional $15 million available under its credit facility [10]. - The company reported a net cash provided by operating activities of $30.99 million for the first half of 2025, compared to $9.29 million in the first half of 2024 [20].