TRUPANION, INC.

Previous wording

Our other business segment generates revenue from other product offerings, primarily by underwriting policies on behalf of third parties with whom we generally have a business-to-business relationship. This business segment has, and targets, a significantly lower margin profile than our subscription business segment and is not part of our core business strategy. The largest source of revenue within this segment is from our long-standing contractual relationship as an underwriter for Pets Best, a third-party insurance provider we have worked with since 2015. We expect that enrollment from Pets Best will continue to decline as it engages other third-party underwriters. Additional products in this segment include the U.S. Department of Veterans Affairs program and employer-sponsored programs, primarily for companies with animal health related operations.

Current wording

Our other business segment generates revenue from other product offerings, primarily by underwriting policies on behalf of third parties with whom we generally have a business-to-business relationship. This business segment has, and targets, a significantly lower margin profile than our subscription business segment and is not part of our core business strategy. The largest source of revenue within this segment is from our long-standing contractual relationship as an underwriter for Pets Best, a third-party insurance provider we have worked with since 2015. We and Pets Best have agreed to end our relationship after the third quarter of 2028. We expect that enrollment from Pets Best will continue to decline as it rolls off business and engages other third-party underwriters. Additional products in this segment include the U.S. Department of Veterans Affairs program and employer-sponsored programs, primarily for companies with animal health related operations.

Previous wording

The following table sets forth total enrolled pets in our subscription and our other business segment and key operating metrics for our subscription business for each of the last eight fiscal quarters.

Current wording

The following table sets forth total enrolled pets in our subscription and our other business segment and key operating metrics for our subscription business for year-to-date values as well as each of the last eight fiscal quarters.

Previous wording

The following table presents the reconciliation of our non-GAAP financial measures from corresponding GAAP measures for each of the last eight fiscal quarters (in thousands):

Current wording

The following table presents the reconciliation of our non-GAAP financial measures from corresponding GAAP measures for year-to-date values as well as each of the last eight fiscal quarters (in thousands):

Previous wording

The following table reconciles GAAP new pet acquisition expense to non-GAAP net acquisition cost (in thousands) for each of the last eight fiscal quarters:

Current wording

The following table reconciles GAAP new pet acquisition expense to non-GAAP net acquisition cost for year-to-date values as well as each of the last eight fiscal quarters (in thousands):

Previous wording

Comparison of the Three Months Ended March 31, 2026 and 2025

Current wording

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. Total revenue increased by $42.1 million, or 12%, to $384.0 million for the three months ended March 31, 2026. Revenue from our subscription business segment increased by $36.4 million, or 16%, to $269.5 million for the three months ended March 31, 2026. This increase was primarily due to an 11% increase in monthly average revenue per pet and an increase in subscription pet months (the sum of pets enrolled for each month during a period) for policies underwritten by Trupanion. Our subscription pets enrolled increased by 52,938 pets, or 5%, to 1,105,783 for the three months ended at March 31, 2026, which was consistent with the growth rate of pets enrolled in the prior year period. Revenue from our other business segment increased by $5.7 million, or 5%, to $114.6 million for the three months ended March 31, 2026. This increase was primarily driven by a 22% increase in monthly average revenue per pet in this segment, partially offset by a decrease in pet months primarily reflecting the expected run-off of pets we historically insured for Pets Best.

Current wording

Three months ended June 30, 2026 compared to three months ended June 30, 2025. Total revenue increased by $39.4 million, or 11%, to $392.9 million for the three months ended June 30, 2026. Revenue from our subscription business segment increased by $34.5 million, or 14%, to $276.7 million for the three months ended June 30, 2026. This increase was primarily due to a 9% increase in monthly average revenue per pet and an increase in subscription pet months (the sum of pets enrolled for each month during a period) for policies underwritten by Trupanion. Our subscription pets enrolled increased by 58,194 pets, or 5%, to 1,124,548 for the three months ended June 30, 2026, which represented a 1% increase in growth rate of pets enrolled compared to the prior year period's growth rate of 4%. Revenue from our other business segment increased by $4.8 million, or 4%, to $116.2 million for the three months ended June 30, 2026. This increase was primarily driven by a 22% increase in monthly average revenue per pet in this segment, partially offset by a decrease in pet months primarily reflecting the expected run-off of pets we historically insured for Pets Best.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. Total cost of revenue for our subscription business segment increased by $26.6 million, or 14%, to $216.5 million, for the three months ended March 31, 2026. This increase was driven by a $23.2 million, or 14%, increase in veterinary invoice expense and a $3.4 million, or 16%, increase in other cost of revenue. The 14% increase in veterinary invoice expense was driven by a 9% increase in veterinary invoice expense per pet and an increase in total subscription pet months for policies underwritten by Trupanion. The 16% increase in other cost of revenue was primarily due to general increases in costs attributable to growth in our membership and subscription revenue. Subscription business total cost of revenue decreased from 81% to 80% of revenue year-over-year primarily due to growth in subscription revenue outpacing growth in subscription veterinary invoice expense.

Current wording

Six months ended June 30, 2026 compared to six months ended June 30, 2025. Total cost of revenue for our subscription business segment increased by $51.4 million, or 13%, to $436.7 million, for the six months ended June 30, 2026. This increase was driven by a $45.2 million, or 13%, increase in veterinary invoice expense and a $6.2 million, or 14%, increase in other cost of revenue. The 13% increase in veterinary invoice expense was driven by a 9% increase in veterinary invoice expense per pet and an increase in total subscription pet months for policies underwritten by Trupanion. The 14% increase in other cost of revenue was primarily due to general increases in costs attributable to growth in our membership and subscription revenue. Subscription business total cost of revenue decreased from 81% to 80% of revenue year-over-year primarily due to growth in subscription revenue outpacing growth in subscription veterinary invoice expense.

Previous wording

Total cost of revenue for our other business segment increased by $5.1 million, or 5%, to $106.1 million for the three months ended March 31, 2026. This increase was primarily driven by a $10.8 million, or 14%, increase in veterinary invoice expense, partially offset by a $5.7 million, or 26% decrease in other cost of revenue. The 14% increase in veterinary invoice expense was primarily driven by a 31% increase in veterinary invoice expense per pet, partially offset by a decrease in pet months in this segment primarily reflecting the expected run-off of pets we historically insured for Pets Best. Within our other business segment, fluctuations in other cost of revenue are largely driven by trends in revenue and veterinary invoice expense. Total cost of revenue for the other business segment remained materially consistent at 93% of segment revenue year-over-year.

Current wording

Total cost of revenue for our other business segment increased by $9.4 million, or 5%, to $213.7 million for the six months ended June 30, 2026. This increase was primarily driven by a $12.7 million, or 8%, increase in veterinary invoice expense and partially offset by a $3.3 million, or 8%, decrease in other cost of revenue. The 8% increase in veterinary invoice expense was primarily driven by a 25% increase in veterinary invoice expense per pet, partially offset by a decrease in pet months in this segment primarily reflecting the expected run-off of pets we historically insured for Pets Best. Within our other business segment, fluctuations in other cost of revenue are largely driven by trends in revenue and veterinary invoice expense and remained materially consistent at 93% of segment revenue year-over-year.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. Technology and development expenses increased by $3.2 million, or 40%, to $11.3 million for the three months ended March 31, 2026. This increase was primarily due to a $1.7 million increase in general compensation and other employee-related expenses, a $0.8 million reduction in capitalized expenditures related to internally developed software projects, and a $0.6 million increase in new product exploration and development expenses. Technology and development expenses increased from 2% to 3% of total revenue year-over-year.

Current wording

Three months ended June 30, 2026 compared to three months ended June 30, 2025. Technology and development expenses increased by $4.2 million, or 49%, to $12.8 million for the three months ended June 30, 2026. This increase was primarily due to a $1.4 million increase in stock-based compensation expenses primarily driven by a one-time award modification, a $0.9 million increase in new product exploration and development expense, a $0.8 million increase in general compensation and other employee-related expenses, a $0.6 million reduction in capitalized expenditures related to internally developed software projects, and a $0.5 million increase in IT infrastructure-related expenses. Technology and development expenses increased from 2% to 3% of total revenue year-over-year.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. General and administrative expenses decreased by $0.8 million, or 4%, to $19.1 million for the three months ended March 31, 2026. This decrease was driven by decreases of $1.1 million in professional services and $2.4 million in underwriting fees related to our Canadian business, partially offset by an increase of $1.4 million in general compensation and other employee-related expenses and a $1.3 million increase in other miscellaneous expenses. General and administrative expenses decreased from 6% to 5% of total revenue year-over-year.

Current wording

Six months ended June 30, 2026 compared to six months ended June 30, 2025. General and administrative expenses decreased by $1.4 million, or 3%, to $38.6 million for the six months ended June 30, 2026. This decrease was driven by decreases of $4.8 million in underwriting fees related to our Canadian business and $1.0 million in professional services, partially offset by increases of $1.9 million in foreign consumption taxes, $1.4 million in other miscellaneous expenses and $1.1 million in general compensation and other employee-related expenses. General and administrative expenses decreased from 6% to 5% of total revenue year-over-year.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. New pet acquisition expenses increased by $2.1 million, or 10%, to $22.6 million for the three months ended March 31, 2026. This increase was primarily driven by increased marketing spend as we have begun deploying more capital to acquire new pets in a disciplined manner. New pet acquisition expense as a percentage of revenue remained constant at 6%.

Current wording

Three months ended June 30, 2026 compared to three months ended June 30, 2025. New pet acquisition expenses increased by $3.0 million, or 15%, to $22.8 million for the three months ended June 30, 2026. This increase was primarily driven by increased marketing spend as we have begun deploying more capital to acquire new pets in a disciplined manner. New pet acquisition expense as a percentage of revenue remained constant at 6%.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. Depreciation and amortization expense decreased by $0.1 million, or 2%, to $3.7 million for the three months ended March 31, 2026, and remained consistent at 1% of total revenue year-over-year.

Current wording

Three months ended June 30, 2026 compared to three months ended June 30, 2025. Depreciation and amortization expense decreased by $0.3 million, or 7%, to $3.7 million for the three months ended June 30, 2026, primarily driven by fewer internally developed software projects placed in-service during the period.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. Total other (income), net increased by $1.2 million from income of less than $0.1 million to income of $1.2 million for the three months ended March 31, 2026, primarily due to a $1.3 million decrease in interest expense partially offset by lower investment income.

Current wording

Three months ended June 30, 2026 compared to three months ended June 30, 2025. Total other (income), net decreased by $7.2 million from income of $8.2 million to income of $1.0 million for the three months ended June 30, 2026, primarily due to a $7.8 million realized gain recognized on the nonmonetary exchange of our Baystride preferred stock investment for intellectual property during 2025 and an increase in foreign currency losses of $0.9 million. These decreases in income were partially offset by a decrease in interest expense of $1.9 million.

Previous wording

Three months ended March 31, 2026 compared to three months ended March 31, 2025. Income tax expense increased by $1.1 million from a expense of less than $0.1 million to expense of $1.1 million for the three months ended March 31, 2026, primarily due to the transfer of our Canadian insurance business to GPIC, resulting in an increase in taxable income in Canada.

Current wording

Three months ended June 30, 2026 compared to three months ended June 30, 2025. Income tax expense decreased $0.6 million from $1.1 million to $0.5 million for the three months ended June 30, 2026, primarily due to the initial transfer of our Canadian insurance business to GPIC in the prior year quarter, which resulted in a true-up to the annual effective tax rate for the three months ended June 30, 2025.

Previous wording

As of March 31, 2026, we had $383.7 million in cash, cash equivalents and short-term investments, of which $324.4 million was held by our insurance entities. Outside of insurance entities, we held $59.3 million in cash, cash equivalents and short-term investments with an additional $5.0 million available under our PNC Facility.

Current wording

As of June 30, 2026, we had $398.5 million in cash, cash equivalents and short-term investments, of which $344.1 million was held by our insurance entities. Outside of insurance entities, we held $54.4 million in cash, cash equivalents and short-term investments with an additional $3.5 million available under our PNC Facility.

Previous wording

Net cash provided by operating activities was $14.6 million for the three months ended March 31, 2026, compared to $16.0 million for the three months ended March 31, 2025. This decrease was primarily driven by timing differences in working capital activities partially offset by improved operating results largely driven by higher revenue and improved subscription business margins. Changes in accounts receivable and deferred revenue were primarily related to annual policies with annual payment terms within our other business segment. Changes in our reserve for veterinary invoices are driven by multiple factors, including ongoing analysis of claims frequency and severity. Additionally, changes in our accounts payable, accrued liabilities, and other liabilities are primarily due to differences in timing of payments.

Current wording

Net cash provided by operating activities was $35.6 million for the six months ended June 30, 2026, compared to $31.0 million for the six months ended June 30, 2025. This increase was primarily driven by improved operating results largely driven by higher revenue and improved subscription business margins, partially offset by timing differences in working capital activities. Changes in accounts receivable and deferred revenue were primarily related to annual policies with annual payment terms within our other business segment. Changes in our reserve for veterinary invoices are driven by multiple factors, including ongoing analysis of claims frequency and severity. Additionally, changes in our accounts payable, accrued liabilities, and other liabilities are primarily due to differences in timing of payments.

Previous wording

Net cash provided by investing activities was $0.1 million for the three months ended March 31, 2026, primarily consisting of $48.9 million in sales and maturities of investment securities, partially offset by purchases of investment securities of $47.9 million as well as $0.8 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements. Net cash used in investing activities was $9.0 million for the three months ended March 31, 2025, primarily consisting of purchases of investment securities of $40.9 million as well as $1.9 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements, partially offset by $33.2 million in sales and maturities of investment securities.

Current wording

Net cash used by investing activities was $22.4 million for the six months ended June 30, 2026, primarily consisting of purchases of investment securities of $120.0 million as well as $2.7 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements, partially offset by $100.2 million in sales and maturities of investment securities. Net cash used in investing activities was $51.4 million for the six months ended June 30, 2025, primarily consisting of purchases of investment securities of $142.0 million as well as $4.9 million of capital expenditures primarily related to the development of internal-use software focused on member experience, claims processing and internal policy management improvements, partially offset by $94.3 million in sales and maturities of investment securities.

Previous wording

Net cash used in financing activities was $2.7 million for the three months ended March 31, 2026, primarily consisting of $2.5 million in repayments on the PNC Facility. Net cash used in financing activities was $0.5 million for the three months ended March 31, 2025, primarily consisting of $0.3 million in repayments on the Prior Credit Facility, as well as $0.9 million in shares withheld to satisfy tax withholding, partially offset by $1.0 million in proceeds from exercise of stock options.

Current wording

Net cash used in financing activities was $5.3 million for the six months ended June 30, 2026, primarily consisting of $5.0 million in repayments on the PNC Facility. Net cash used in financing activities was $16.3 million for the six months ended June 30, 2025, primarily consisting of $15.5 million in repayments on the Prior Credit Facility, as well as $1.7 million in shares withheld to satisfy tax withholding, partially offset by $1.3 million in proceeds from exercise of stock options.

Previous wording

Loans under the PNC Facility bear interest at a reference rate plus an applicable margin, which will generally be the SOFR reference rate plus 2.75% per annum. The Company makes quarterly principal payments of $2.5 million on the term loan facility. The Company may voluntarily prepay loans or reduce revolving commitments under the PNC Facility at any time without premium or penalty.

Current wording

Loans under the PNC Facility bear interest at a reference rate plus an applicable margin, which will generally be the SOFR reference rate plus 2.75% per annum. We make quarterly principal payments of $2.5 million on the term loan facility. We may voluntarily prepay loans or reduce revolving commitments under the PNC Facility at any time without premium or penalty.

Previous wording

As of March 31, 2026, our insurance entities collectively held $94.2 million in cash and cash equivalents, to be used for operating expenses of our insurance entities, $230.2 million in short-term investments and $300.7 million in other current assets. The majority of the assets in our insurance entities are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate.

Current wording

As of June 30, 2026, our insurance entities collectively held $94.9 million in cash and cash equivalents, to be used for operating expenses of our insurance entities, $249.2 million in short-term investments and $298.0 million in other current assets. The majority of the assets in our insurance entities are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate.

Previous wording

APIC, our wholly-owned insurance subsidiary domiciled in New York, underwrites all of our policies in the U.S. As our business in the U.S. grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements will also increase, though risk-based capital requirements also take our overall rate of growth into consideration. Recently, our other business segment growth has slowed, and we currently expect that to continue, which would reduce capital requirements. In February 2026, APIC distributed an extraordinary dividend of $14.9 million to Trupanion, Inc. APIC's primary regulator is the New York Department of Financial Services ("NY DFS").

Current wording

APIC, our wholly-owned insurance subsidiary domiciled in New York, underwrites all of our policies in the U.S. As our business in the U.S. grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements will also increase, though risk-based capital requirements also take our overall rate of growth into consideration. Recently, our other business segment growth has slowed, and we currently expect that to continue, which would reduce capital requirements. In February 2026 and August 2026, APIC distributed extraordinary dividends of $14.9 million and $10.0 million to Trupanion, Inc., respectively. APIC's primary regulator is the New York Department of Financial Services ("NY DFS").

Previous wording

GPIC, our wholly-owned insurance subsidiary domiciled in Canada underwrites the majority of our policies in Canada. We are continuing to transition the remaining portion of our insurance activity in Canada to GPIC from a fronting arrangement with Accelerant Insurance Company of Canada (formerly Omega General Insurance Company) ("Accelerant"). Pursuant to the Canadian Office of the Superintendent of Financial Institutions ("OSFI") regulations, we have contributed CAD $29.5 million to GPIC as of March 31, 2026, as the required statutory capital for this subsidiary. The capital we maintain at GPIC is, and for the foreseeable future may continue to be, more than the amount that we historically held subject to our fronting arrangement with Accelerant.

Current wording

GPIC, our wholly-owned insurance subsidiary domiciled in Canada, underwrites the majority of our policies in Canada. We are continuing to transition the remaining portion of our insurance activity in Canada to GPIC from a fronting arrangement with Accelerant Insurance Company of Canada (formerly Omega General Insurance Company) ("Accelerant"). Pursuant to the Canadian Office of the Superintendent of Financial Institutions ("OSFI") regulations, we have contributed CAD $38.9 million to GPIC as of June 30, 2026, as the required statutory capital for this subsidiary. The capital we maintain at GPIC is, and for the foreseeable future may continue to be, more than the amount that we historically held subject to our fronting arrangement with Accelerant.

Previous wording

Under the terms of our agreements with Accelerant, we retain any financial risk associated with our Canadian business. Accelerant's Canadian insurance operations are supervised and regulated by Canadian federal, provincial and territorial governments and Accelerant is a fully licensed insurer in all of the Canadian provinces and territories in which we do business. As we transition more of the business to GPIC, the amount we are required to fund in the Canadian trust account will be reduced (as discussed below).

Current wording

Under the terms of our agreements with Accelerant, we retain any financial risk associated with our Canadian business. Accelerant's Canadian insurance operations are supervised and regulated by Canadian federal, provincial and territorial governments and Accelerant is a fully licensed insurer in all of the Canadian provinces and territories in which we do business.

Previous wording

WICL is domiciled in Bermuda and regulated by the Bermuda Monetary Authority ("BMA"). WICL Segregated Account AX was established by WICL, with Trupanion, Inc. as the shareholder, to enter into a reinsurance agreement with Accelerant for our business activity in Canada. All of the assets and liabilities of WICL Segregated Account AX are legally segregated from other assets and liabilities within WICL, and all shares of the segregated account are owned by Trupanion, Inc. Trupanion, Inc. received dividends of $3.3 million from WICL Segregated Account AX in February 2026, as permitted under our agreements with WICL. As required by OSFI regulations related to our reinsurance agreement with Accelerant, we are required to maintain a Canadian Reinsurance Trust account with the greater of CAD $2.0 million or 120% of unearned Canadian premium plus 20% of outstanding Canadian claims, including all incurred but not reported claims. As of March 31, 2026, the account held CAD $2.9 million which we expect will continue to decrease as we rollover our Canadian book of business to GPIC.

Current wording

WICL is domiciled in Bermuda and regulated by the Bermuda Monetary Authority ("BMA"). WICL Segregated Account AX was established by WICL, with Trupanion, Inc. as the shareholder, to enter into a reinsurance agreement with Accelerant for our business activity in Canada. All of the assets and liabilities of WICL Segregated Account AX are legally segregated from other assets and liabilities within WICL, and all shares of the segregated account are owned by Trupanion, Inc. Trupanion, Inc. received dividends of $3.3 million and $5.0 million from WICL Segregated Account AX in February and May 2026, respectively, as permitted under our agreements with WICL. As required by OSFI regulations related to our reinsurance agreement with Accelerant, we are required to maintain a Canadian Reinsurance Trust account with the greater of CAD $2.0 million or 120% of unearned Canadian premium plus 20% of outstanding Canadian claims, including all incurred but not reported claims. As of June 30, 2026, the account held CAD $2.0 million.

Previous wording

We enter into long-term contractual obligations and commitments in the normal course of business, consisting primarily of debt obligations and non-cancellable vendor service agreements. In November 2025, we entered into the PNC Agreement, which provides up to $120.0 million of credit, including $100.0 million term loan and $20.0 million revolving loan facility. We used the proceeds under the PNC Agreement to repay all amounts due and outstanding under our Prior Credit Facility. The PNC Agreement will require us to repay the underlying obligations over a three-year term at SOFR plus a margin. Refer to Note 7, Debt, included in Item 1 of Part I of this report, for further details regarding the credit agreement, including interest and future principal repayments.

Current wording

We enter into long-term contractual obligations and commitments in the normal course of business, consisting primarily of debt obligations and non-cancellable vendor service agreements. In November 2025, we entered into the PNC Agreement, which provides up to $120.0 million of credit, including a $100.0 million term loan and a $20.0 million revolving loan facility. We used the proceeds under the PNC Agreement to repay all amounts due and outstanding under our Prior Credit Facility. The PNC Agreement will require us to repay the underlying obligations over a three-year term at SOFR plus a margin. Refer to Note 8, Debt, included in Item 1 of Part I of this report, for further details regarding the credit agreement, including interest and future principal repayments.