DEF 14A of Trupanion, Inc., Apr 26, 2024

DEF 14A of Trupanion, Inc.

Filed Apr 26, 2024 · FY20230001371285-24-000112

Open on EDGAR

  1. Proposal No. 1: Election of Directors

    Proposal No. 1: Election of Directors As of the date of this Proxy Statement, our Board of Directors consists of ten directors, and following the Annual Meeting the size of our Board of Directors will be automatically reduced to eight directors. Our nominating and corporate governance committee has nominated Darryl Rawlings, Max Brodén, Jacqueline "Jackie" Davidson, Paulette Dodson, Richard Enthoven, Murray Low, Elizabeth "Betsy" McLaughlin, and Howard Rubin for election as directors at the 2024 Annual Meeting, and at the recommendation of our nominating and corporate governance committee, our Board of Directors proposes that Mr. Rawlings, Mr. Brodén, Ms. Davidson, Ms. Dodson, Mr. Enthoven, Dr. Low, Ms. McLaughlin, and Mr. Rubin, each be elected as a director for a one-year term expiring at the 2025 annual meeting and until their successor is duly elected and qualified or until their earlier resignation or removal. Daniel “Dan” Levitan and Zay Satchu, each an incumbent director, have notified us that they are resigning upon completion of the Annual Meeting and will not be standing for election. Mr. Levitan has served on our Board of Directors since 2007 and has played a pivotal role on our Board of Directors since that time. Dan was a key influencer in Trupanion’s decision to enter the US, and his impact will be felt long after his departure this year. During his tenure he helped us navigate our initial public offering in 2014, has served on several committees of the Board of Directors and provided a wealth of insight and counsel both to fellow board members and to management throughout the course of his tenure. We thank him for his contributions and also thank Dr. Satchu for her time, support and service on our board for the past three years. Our nominating and corporate governance committee regularly considers and will continue to assess Board size, tenure and refreshment, and whether our Board of Directors has the right mix of skills, qualifications and experiences. With the appointment of four new board members during 2023 and the departure of two current directors, we believe our Board size of eight is appropriate at this time. Under our Bylaws, each director is elected by a plurality of the votes cast at the Annual Meeting. This means that the eight individuals nominated for election to the Board of Directors at the Annual Meeting receiving the highest number of “FOR” votes will be elected. You may either vote “FOR” any or all of the nominees or you may “WITHHOLD” your vote with respect to any or all nominees. Shares represented by proxies will be voted “FOR” the election of each of the nominees, unless the proxy is marked to withhold authority to so vote. You may not cumulate votes in the election of directors. If any nominee for any reason is unable to serve, the proxies may be voted for such substitute nominees as the proxy holders, who are officers of our Company, might determine. Each nominee has consented to being named in this proxy statement and to serve if elected. Proxies may not be voted for more than eight directors.

  2. Proposal No. 1: Election of Directors

    | OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF EACH OF THE NOMINATED DIRECTORS. |

  3. Our Board of Directors

    Our Board of Directors

  4. Non-Employee Director Compensation

    Non-Employee Director Compensation

  5. Non-Employee Director Compensation Program

    Non-Employee Director Compensation Program We maintain a non-employee director compensation program. For calendar year 2023, each of our non-employee directors received an annual retainer in the amount of $150,000. In addition, any non-employee directors serving as the lead independent director or as the chairs of each of the Board of Directors, audit committee, compensation committee and nominating and corporate governance committee received an additional annual retainer in the amount of $50,000. Annual amounts are pro-rated for any person whose service commences after the applicable amounts are paid. Under our non-employee director compensation program, a director receives their retainer in the form of (i) restricted stock units (RSUs) or non-qualified stock options, as our Board of Directors determines each year and/or (ii) cash, subject to certain limitations. Prior to April 2023, directors could elect to receive 50% of their retainer in cash and 50% in equity. The number of shares of common stock underlying RSUs was based on our then-most recent determination of the intrinsic value of a share of common stock. In April 2023, we amended our non-employee director compensation program such that a director may elect to receive (i) 50% of their retainer in cash and 50% in equity or (ii) 100% in cash if the director holds at least the minimum amount of equity required under our stock ownership guidelines (without regard to the five-year transition relief), unless otherwise approved by the compensation committee. If equity is in the form of RSUs, the number of underlying shares of common stock is determined by dividing the applicable dollar amount by the value of a share of common stock as reported by the NASDAQ stock market as of the first day of the applicable open trading window in which the grant is made. If equity is in the form of non-qualified stock options, the number of underlying shares of common stock is determined by dividing the applicable dollar amount by the value of each option calculated using the Black-Scholes valuation method as of the first day of the open trading window in which the grant will be made. For calendar year 2023, our Board of Directors determined that the equity portion of non-employee director retainers would be in the form of RSUs. Jackie Davidson, Murray Low, and Howard Rubin each elected to receive 50% of their retainer in cash and 50% in the form of RSUs. In addition, Michael Doak, who resigned from our Board of Directors in June 2023, elected to receive 50% of his retainer in cash and 50% in the form of RSUs. Dan Levitan and Zay Satchu received their retainers in RSUs only. Because each of these directors was serving on our Board of Directors prior to April 2023, the number of RSUs granted to them was determined by dividing the applicable dollar amount by our then-most current calculation of intrinsic value of a share of our common stock. Max Brodén, Paulette Dodson, Richard Enthoven, and Betsy McLaughlin each joined our Board of Directors following the amendment of our non-employee director compensation program in April 2023. Mr. Enthoven elected to receive 50% of his retainer in cash and 50% in the form of RSUs and Mr. Brodén and Mses. Dodson and McLaughlin received their retainers in RSUs only. The number of RSUs granted to them was determined by dividing the applicable dollar amount by the value of a share of common stock as reported by the NASDAQ stock market as of the first day of the applicable open trading window for which the grant was made. Equity awards under our non-employee director compensation program are typically granted in the first open trading window of the calendar year and vest in four quarterly installments on March 31st, June 30th, September 30th, and December 31st, subject to the continued service of the non-employee director through the vesting date. Similarly, any cash amounts are paid in the same quarterly installments, subject to the continued service of the non-employee director on each date. Annual awards that are unvested terminate at the time a non-employee director's service ends, and no cash compensation will be paid following the effective date of a director’s resignation or other termination from our Board of Directors.

  6. 2023 Non-Employee Director Compensation Table

    2023 Non-Employee Director Compensation Table The following table presents the total compensation for each person who served as a non-employee member of our Board of Directors during the year ended December 31, 2023. Other than as set forth in the table, during the year ended December 31, 2023, we did not pay any fees to, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our Board of Directors, with the exception of reimbursement of travel expenses as described above. Mr. Rawlings, our Chief Executive Officer, received no compensation for his service as a director during the year ended December 31, 2023. The compensation provided to Mr. Rawlings is discussed in the section entitled “Executive Compensation”.

  7. 2023 Non-Employee Director Compensation Table

    | Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | All Other Compensation | Total | | Max Brodén | $— | $65,038 | $— | $65,038 | | Jackie Davidson | $100,000 | $55,878 | $— | $155,878 | | Michael Doak (3) | $37,500 | $41,923 | $— | $79,423 | | Paulette Dodson | $— | $93,161 | $— | $93,161 | | Richard Enthoven | $11,096 | $11,010 | $— | $22,106 | | Dan Levitan (4) | $— | $83,902 | $— | $83,902 | | Murray Low (5) | $100,000 | $55,878 | $— | $155,878 | | Betsy McLaughlin (6) | $— | $93,161 | $9,000 | $102,161 | | Howard Rubin | $100,000 | $55,878 | $— | $155,878 | | Zay Satchu (7) | $— | $83,902 | $— | $83,902 |

  8. 2023 Non-Employee Director Compensation Table

    (1)Reflects applicable cash elections and prorations, as described above in "--Non-Employee Director Compensation Program." (2)Reflects RSUs granted in 2023, net of cash elections and prorations, as described above in"--Non-Employee Director Compensation Program." The amounts in this column represent the aggregate grant date fair value of the RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our directors. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of the assumptions we apply in calculating these amounts. (3)Mr. Doak resigned as a member of our Board of Directors effective as of June 7, 2023. Mr. Doak had elected to receive 50% of his retainer in cash and 50% in the form of RSUs. The amount in the column entitled "Stock Awards" represents the aggregate grant date fair value of all RSUs, even though the unvested portion of his RSUs terminated upon his resignation. (4)Dan Levitan has notified us that he is resigning upon completion of the Annual Meeting and will not be standing for election. (5)As of December 31, 2023, Dr. Low held options to purchase 37,592 shares of common stock under certain option awards granted pursuant to our 2014 Equity Incentive Plan. (6)In 2023, Ms. McLaughlin provided executive consulting services prior to joining the Board of Directors. (7)Zay Satchu has notified us that she is resigning upon completion of the Annual Meeting and will not be standing for election.

  9. Considerations in Evaluating Director Nominees

    Considerations in Evaluating Director Nominees Our nominating and corporate governance committee is responsible for identifying, evaluating and recommending nominees to our Board of Directors. A variety of methods are used to identify and evaluate director nominees, with the goal of maintaining and further developing a diverse, experienced and highly qualified Board of Directors. Candidates may come to our attention through current members of our Board of Directors, professional search firms, stockholders or other persons. Our nominating and corporate governance committee will recommend to our Board of Directors for selection all nominees to be proposed by our Board of Directors for election by the stockholders, including approval or recommendation of a slate of director nominees to be proposed by our Board of Directors for election at each annual meeting of stockholders, and will recommend all director nominees to be appointed by our Board of Directors to fill interim director vacancies. Our Board of Directors encourages selection of directors who will contribute to our overall corporate mission. The nominating and corporate governance committee may from time to time review and recommend to our Board of Directors the desired qualifications, expertise and characteristics of directors, including such factors as business experience, diversity and professional experience in management, animal health, technology, finance, marketing, financial reporting and other areas that are expected to contribute to an effective Board of Directors. In evaluating potential candidates for our Board of Directors, the nominating and corporate governance committee considers these factors, among others, in the light of the specific needs of our Board of Directors at that time. We value diversity on a company-wide basis but have not adopted a specific policy regarding board diversity. In addition, under our Corporate Governance Guidelines, a director is expected to spend the time and effort necessary to properly discharge such director’s responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board of Directors and committees on which such director sits and to review materials distributed to the director. Thus, the number of other public company boards and other boards (or comparable governing bodies) on which a prospective nominee is a member, as well as their other professional responsibilities, will be considered. Under our Corporate Governance Guidelines, there are no limits on the number of terms that may be served by a director. However, in connection with evaluating recommendations for nomination for reelection, the nominating and corporate governance committee considers director tenure.

  10. 1.1 CD&A Sections

    | Key Sections | Core Topics | | Part 1. Organization of this CD&A | 1.1 CD&A Sections | | Part 2. Executive Summary | 2.1 Named Executive Officers 2.2 Business Overview and Performance 2.3 Compensation Highlights - Compensation Philosophy - Consideration of "Say-on-Pay" Vote - Compensation Programs - Compensation Mix - Alignment with Stockholders | | Part 3. Our Culture | 3.1 Who We Are | | Part 4. Governance of Executive Compensation | 4.1 Role of the compensation committee 4.2 Role of Management 4.3 Role of Consultant 4.4 Peer Group | | Part 5. Components of Executive Compensation | 5.1 Key Elements of Compensation 5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for 2023 Performance Year ‐ Base Salary ‐ Short-Term Incentive Awards ‐ Long-Term Incentive Awards ◦ Equity Allocations for the 2023 Performance Year - Other Compensation and General Benefits | | Part 6. Other Compensation Policies and Practices | 6.1 Employment Agreements 6.2 Severance and Change-in-Control Protection 6.3 Share Ownership 6.4 Risk Assessment 6.5 Clawbacks 6.6 Pledging & Hedging 6.7 Discussion on Key Performance Metrics |

  11. 2.3 Compensation Highlights

    2.3 Compensation Highlights Compensation Philosophy The primary objective of Trupanion’s compensation program is to align team member incentives with long-term stockholder interests. To accomplish this, we: •Strive to compensate team members based on value contributed; •Share increases in Company value among stockholders, leadership and employees; •Work to link equity award grants to growth in our calculated intrinsic value per share; •Link performance metrics and goals to the Company’s business strategy; •Recognize team and individual contributions through pay-for-performance incentive awards; •Encourage equity ownership by emphasizing equity in the overall executive compensation mix, facilitating equity ownership by all employees, and requiring equity ownership by executives and directors or their affiliates; •Provide a pay package that will attract, reward, focus, and retain critical talent; •Ensure that our incentive plans do not encourage undue risk-taking nor behavior that is contrary to the intent of our incentive plans by using two categories of incentive awards: (i) recognition for past performance, with quarterly vesting over a two-year period and (ii) encourage long-term planning with longer term awards, vesting over a four-year period; and •Communicate openly with employees about how their compensation mix is structured, the rationale behind this structure, and the decisions around their individual pay. Consideration of "Say-on-Pay" Vote We held a non-binding advisory "say-on-pay" vote at our 2023 Annual Meeting of Stockholders. Approximately 94.4% of the shares that voted for or against the 2023 say-on-pay proposal (excluding abstentions and broker non-votes) were cast in favor of our say-on-pay proposal. Our compensation committee considered the result of this advisory vote to be an endorsement of our compensation program, policies, practices, and philosophy for our named executive officers. Our compensation committee will continue to consider the outcome of our say-on-pay votes and our stockholder views when making compensation decisions for our named executive officers, including the outcome of Proposal 4 (advisory and non-binding vote to approve the compensation provided to the Company's named executive officers for 2023) at the 2024 Annual Meeting of Stockholders, as we currently hold say-on-pay votes annually. Compensation Programs To support our philosophy, the compensation committee strives to deliver total compensation that is commensurate primarily with overall Company performance and to be reasonable compared to the market and among executives internally. We may consider in the future a review of our existing compensation philosophy to ensure it adequately supports business performance. To encourage a long-term focus, the compensation committee emphasizes long-term equity compensation over salaries and bonuses for executives, as illustrated below. Throughout the remainder of this CD&A, we discuss both 2023 performance year compensation, as well as 2023 calendar year compensation found in the Summary Compensation Table to give a full view of our 2023 compensation practices for our named executive officers. The progress we made against our objectives is outlined above in the section of this CD&A titled “2.2 Business Overview and Performance” and in more detail in the section of this CD&A titled "5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for the 2023 Performance Year." Compensation Mix The mix of our executive pay structure emphasizes incentive-driven, performance-based pay (pursuant to our short-term and long-term incentive awards) over fixed salary, equity over cash, and long-term awards over short-term awards. This pay structure is designed to motivate our executives to achieve our long-term goals and deliver sustained increases in stockholder value without undue risk-taking. We evaluate compensation on a "performance year," rather than a "calendar year" basis. This means, for 2023 for example, we analyzed our total direct compensation mix by adding together the actual salary earned in 2023, plus bonuses earned for 2023 performance, but paid in 2024, plus any long-term incentive award earned for 2023 performance, whether granted in 2023 or 2024. We currently do not target a specific compensation mix; rather, we monitor executive compensation mix to ensure that our compensation mix objectives of emphasizing long-term performance-based compensation, are being met. The following pay mix charts reflect the mix of 2023 performance year compensation for our CEO and our other named executive officers: (1)This chart reflects the cash amount of short-term incentive awards payable to our named executive officers for performance year 2023. In lieu of taking their short-term incentive awards in cash, team members may convert all or a portion of their short-term incentive award into Company equity, in the form of RSUs, with a 20% premium to cash on value and subject to a two year lock-up. (2)Long-Term Incentive Awards for performance year 2023 were issued in August 2023 and February 2024. Alignment with Stockholders The Company’s Board of Directors and its compensation committee are committed to strong corporate governance and to a pay-for-performance philosophy tied to stockholder interests. The compensation committee meets quarterly to discuss compensation practices and to monitor the total compensation opportunities for the executive team. In February 2024, the compensation committee determined that performance-based equity grants that are granted in the future (including with respect to February 2024 grants described below) to eligible team members for prior year performance will vest quarterly over a two-year period. Historically, these grants would vest over a four-year period. The committee made this decision, in part, to more closely align the vesting period to the period of performance such that team members are rewarded for prior performance closer in time to the performance meriting the award. New hire grants and promotion grants will continue to vest over a four-year vesting schedule. The table below summarizes the key elements of our programs relative to our pay-for-performance philosophy.

  12. 2.3 Compensation Highlights

    | Compensation Committee’s Factors Supporting Strong Corporate Governance: | | ▪ Do not enter into individual employment agreements that provide a defined period of employment unless required by law | | ▪ Maintain a reasonable severance and change in control policy | | ▪ Hold executive sessions at least once a quarter | | ▪ Evaluate our incentive program each year to ensure that it does not encourage excessive risk-taking | | ▪ Maintain a compensation committee comprised of only independent board members | | ▪ Oversee and administer all executive compensation and equity programs | | ▪ Maintain a clawback policy to recover incentive compensation in the case of a restatement or actions causing reputational damage | | ▪ Frequently conduct stockholder outreach to capture views on a variety of practices, including on executive compensation | | ▪ Engage an independent executive pay consultant who reports solely to the compensation committee | | ▪ Permit tax gross-ups only in limited circumstances | | ▪ Prohibit executive and director hedging activities | | ▪ Do not provide any perquisites to our executives |

  13. 4.3 Role of Consultant

    4.3 Role of Consultant In 2023, the compensation committee again engaged Meridian Compensation Partners, LLC (Meridian) as its independent compensation consultant. During the year, Meridian advised the compensation committee on various executive pay issues. Meridian reports directly to the compensation committee. Pursuant to SEC rules, the compensation committee has assessed the independence of Meridian and concluded Meridian is independent and does not have any conflict of interest with the Company, its directors or its executive officers.

  14. 4.4 Peer Group

    4.4 Peer Group The compensation committee's practice has been to identify a comparator group of companies to assist in evaluating the competitiveness of its compensation levels, policies, programs, and dilution. In addition, the compensation committee consults survey data from time to time for a broad evaluation of the market pay levels for executive positions. Market data does not determine or dictate pay levels. We use this information primarily as a reference point for evaluating our executive compensation levels relative to our performance and the long-term sustainability of any compensation structures. Because the Company has few direct public competitors in the pet insurance industry, the compensation committee screens for companies that share certain business characteristics with Trupanion. The committee will change the criteria to determine the appropriate peer group from time to time as the company's size and other characteristics change. For its analysis of 2023 compensation, the committee considered factors including: •Traded on major U.S. securities exchanges •U.S. based •Categorized in one of the following industries: ◦Animal Health ◦Diversified Consumer Services ◦Life and Health Insurance ◦Internet Service and Infrastructure ◦Healthcare Providers and Services •Revenue under $2.5 billion •3-year compound annual revenue growth of mid-teens or higher •Certain business model characteristics, including: ◦Recurring revenue model (subscription-based company); ◦Business-to-consumer focus; and ◦Strategically-relevant companies with a pet focus. Based on these criteria the compensation committee identified ten primary peer companies and four reference peer companies for informing compensation decisions. The compensation committee considered information gathered from the peer groups below and the broader market when evaluating the Company's compensation programs. These companies included:

  15. 4.4 Peer Group

    | Primary Peer Group Used | | Reference Peer Group | | | Company | Industry | Company | Industry | | Alarm.com Holding, Inc. | Consumer Software Services | Central Garden & Pet Company | Animal Health | | ANGI Inc. | Consumer Services | Chewy, Inc. | Online Retail for Animal Products | | Freshpet, Inc. | Animal Health | IDEXX Laboratories, Inc. | Animal Health Care Equipment | | Frontdoor, Inc. | Consumer Services | Zillow Group, Inc. | Consumer Real Estate Services | | HealthEquity, Inc. | Healthcare Services | | | | Lemonade, Inc. | Property and Casualty Insurance | | | | Medifast, Inc. | Consumer Health Products | | | | PetIQ, Inc. | Health Care Provider and Services | | | | Petmed Express, Inc. | Animal Health | | | | Teladoc Health | Health Care Services | | |

  16. 5.1 Key Elements of Compensation

    | Element | Form | Description | Purpose | | Base Salary | Cash | Fixed cash compensation determined by value of contribution and desired pay mix of each position, and informed by market data. Our compensation committee adjusts base salary from time to time. | Provide baseline level of fixed compensation. | | Short-Term Incentive Awards | Cash or equity | Variable compensation based on achievement of strategic and/or financial corporate and individual monthly performance goals. In 2023, awards were scored monthly and paid in the first quarter of 2024, subject to the compensation committee’s approval, for our named executive officers. | Focus named executive officers on the achievement of individual monthly strategic and financial goals and reinforce value connection by role. | | | | All employees may elect to take their cash awards in the form of fully-vested RSUs with a 20% premium to cash amount based on a volume-weighted average market price and subject to a 2-year lock-up. However, beginning in July 2023, the corporate portion of any short-term incentive awards for all employees were issued in RSUs based on this calculation. Beginning in April 2024, employees could again elect to take their short-term incentive award in cash or equity. | Enhance ownership mindset of the team with the option to forgo cash for equity for achievement of individual goals. | | | | For 2023, short-term incentive awards to our Chief Executive Officer and President were based solely on Company performance goals, whereas short-term incentive awards to other named executive officers were based on a 50/50 mix of corporate and individual performance goals. | | | Long-Term Incentive Awards | RSUs or Stock Options (determined annually) | Historically, aggregate amount of long-term incentive awards to be granted is based on the calculation of the growth of our intrinsic value per share - the higher the growth of our intrinsic value per share, the larger the amount of equity we make available for grant in aggregate to all employees and directors. | Promote stock ownership. | | | | For 2023 performance, however, the compensation committee approved equity grants to reflect performance achieved despite not hitting intrinsic value per share growth targets and as a direct reflection of the decision making across the business to improve our margin shortfall. In recent years, stock options and RSUs have been awarded with a vesting period over four years, subject to the holders’ continued service with the Company, with standard vesting for stock options vesting as to 1/4th on the one year anniversary and then 1/48th monthly thereafter, and RSUs vesting as to 1/4th on the one year anniversary and then 1/16th quarterly thereafter, subject to the recipient being a service provider through each vesting date for the equity award). Beginning with the Long Term Awards granted in February 2024, RSUs awarded for performance will vest over a two-year period subject to the holders' continued service with the company. | Align executives directly with stockholder interests. | | | | | Reward the long-term growth of intrinsic value. | | | | | Enhance long-term perspective and support retention of named executive officers. | | Other Compensation | 401(k) Plan | Broad based retirement plan sponsored by Trupanion and offered to all employees. | Support long term financial planning. | | General Benefits | Healthcare, Life and Disability Insurance, Daycare, Enhanced Mental Health Services, Wellness Flexible Spending Allowance, Employee Assistance Programs, Pet-related Benefits, Public Transit Pass, Generous PTO, Annual Paid Volunteer Day, and Sabbatical | All employees have the opportunity to receive paid healthcare, including life and disability insurance for themselves. Employees in North America receive coverage for their pet on a Trupanion policy. Employees located at our Seattle headquarters receive paid daycare for infants through pre-K (subject to space availability), professional dog walker services for all furry office mates and a prepaid public transit pass. Every five years, employees receive a five-week paid sabbatical. | Overall competitive benefits package that is offered to employees to foster a fulfilling, enjoyable, and productive work environment. |

  17. Compensation for the 2023 Performance Year

    (1) Reflects current titles as of the date of this Proxy Statement. (2) Mr. Qureshi became our Chief Financial Officer as of September 25, 2023. (3) Mr. Li served as our interim Chief Financial Officer from June 1, 2023 until September 25, 2023. Mr. Li's annual base salary was $300,000 from June 1, 2023 until September 30, 2023, and $260,000 beginning on October 1, 2023. (4) Mr. Wolff resigned as our Chief Financial Officer effective June 1, 2023. From June 2, 2023 until August 31, 2023, Mr. Wolff provided consulting services to Trupanion. (5) Ms. Tooth's salary was increased to $400,000 effective June 1, 2023. (6) Mr. Gallagher's base salary from January 1, 2023 to February 1, 2023 was $230,000 and was increased to $260,000 on February 1, 2023 in connection with a promotion. Effective April 1, 2023, Mr. Gallagher's salary was increased to $300,000 in connection with another promotion. Short-Term Incentive Awards: We offer short-term incentive awards to our named executive officers and other employees. The intent of the short-term incentive awards is to reward each individual’s contribution based on the achievement of the Company’s corporate objectives and individual goals. The measures for the individual goals for our named executive officers (other than Ms. Tooth and Mr. Rawlings) were determined by such officer's managers in consultation with our President and Chief Executive Officer and subject to oversight by our compensation committee. Individual goals typically tie to specific Company initiatives that vary based on the role of the named executive officer but are generally aligned to indicators of growth in our calculation of intrinsic value, such as the number of active hospitals and number of enrolled pets. As described below, short-term incentive awards for Mr. Rawlings and Ms. Tooth were based exclusively on achievement of our monthly corporate objectives and these officers did not have individual goals. The monthly achievement scores for corporate objectives were reviewed by the compensation committee quarterly, and the monthly individual achievement scores for named executive officers (other than those named executive officers who became named executive officers during the course of 2023) were approved annually. These short-term incentive awards were paid annually to our named executive officers (other than those named executive officers who became named executive officers during the course of 2023) in the following fiscal year, whereas short-term incentive awards for other employees were paid monthly. Short-term incentive awards for our Chief Executive Officer and President were based exclusively on achievement of our monthly corporate objectives and short-term incentive awards for our other named executive officers were weighted 50% to corporate objectives and 50% to individual objectives. The mechanism for determining the annual short-term incentive payouts for our named executive officers for performance year 2023 is shown below: (1)Mr. Li, Mr. Gallagher and Dr. Weinrauch became named executive officers in 2023 and their short-term incentive awards were paid monthly in calendar year 2023. Once the weighted achievement scores and annual incentive payout amounts for named executive officers are determined, they are reviewed and approved by the compensation committee. Beginning in July 2023, the corporate portion of all short-term incentive awards was paid in the form of fully-vested RSUs with a 20% premium to the cash value, based on a volume-weighted average market price, and subject to a two-year holding restriction. All team members, including named executive officers, could elect to accept the remainder of their short-term incentive award in cash or equity. Team members who elect equity instead of cash receive a 20% premium to the cash value, based on a volume- weighted average market price, and subject to a two-year holding restriction. Our Chief Executive Officer and President recommended the short-term incentive percentage scores below to the compensation committee for consideration. Following this process, the compensation committee approved the percentage payout against the target for each named executive officer. Both corporate and individual goals were intentionally set with a high degree of difficulty and are not designed to be indicative of overall performance. Target awards and actual awards by individual for performance year 2023 are shown below.

  18. Compensation for the 2023 Performance Year

    | | | Corporate & Individual Goals | | | | | | | Name | 2023 Base Salary | Bonus Target as a Percentage of Salary | Bonus Target Percentage Allocation (Corporate/ Individual) | Aggregate Bonus Target Amount (Corporate & Individual) | Earned Aggregate Bonus Amount (Corporate & Individual) | Bonus Amount Paid in Cash | Bonus Amount Granted in RSUs (RSU Value Received) (1) | | Darryl Rawlings (2) | $300,000 | 20% | 100/0 | $60,000 | $17,644 | $— | $21,898 | | Fawwad Qureshi (3) | $300,000 | 40% | 50/50 | $30,000 | $25,935 | $25,935 | $— | | Wei Li (4) | $260,000 | 40% | 50/50 | $104,000 | $76,232 | $44,808 | $25,646 | | Drew Wolff (5) | $300,000 | 40% | 50/50 | $50,000 | $31,061 | $31,061 | $— | | Margi Tooth (2), (6) | $400,000 | 20% | 100/0 | $80,000 | $21,674 | $— | $26,861 | | John Gallagher (7) | $300,000 | 40% | 50/50 | $120,000 | $60,754 | $13,332 | $48,453 | | Dr. Steve Weinrauch | $300,000 | 40% | 50/50 | $120,000 | $95,276 | $— | $79,864 |

  19. Compensation for the 2023 Performance Year

    (1)In lieu of taking their full cash bonus amount, team members may convert all or a portion of their cash bonus into Company equity, in the form of RSUs, with a 20% premium to cash value and subject to a two year lock-up. The amounts represent aggregate grant date fair value of such RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of the assumptions we apply in calculating these amounts. (2)The Bonus Target as a Percentage of Salary for Mr. Rawlings and Ms. Tooth was increased to 40% effective January 1, 2024. (4)Mr. Li served as our interim Chief Financial Officer from June 1, 2023 until September 25, 2023. Mr. Li's salary was $300,000 from June 1, 2023 until September 30, 2023. On October 1, 2023, Mr. Li's salary was changed to $260,000. (5)Mr. Wolff resigned as our Chief Financial Officer effective June 1, 2023. From June 2, 2023 until August 31, 2023, Mr. Wolff provided consulting services to Trupanion. (6)Ms. Tooth's salary was increased to $400,000 effective June 1, 2023. (7)Mr. Gallagher's base salary from January 1, 2023 to February 1, 2023 was $230,000 and was increased to $260,000 on February 1, 2023 in connection with a promotion. Effective April 1, 2023 Mr. Gallagher's salary was increased to $300,000 in connection with another promotion. The aggregate bonus target amount is further broken down by total opportunity below.

  20. Compensation for the 2023 Performance Year

    | | | Weighting | | | | Total Opportunity (Aggregate Short-Term Incentive Award Bonus Target Amount) | Corporate | Individual | | Darryl Rawlings, CEO | $60,000 | 100% | —% | | Fawwad Qureshi, CFO | $30,000 (1) | 50% | 50% | | Margi Tooth, President | $80,000 | 100% | —% | | John Gallagher, EVP | $120,000 | 50% | 50% | | Dr. Steve Weinrauch, EVP | $120,000 | 50% | 50% |

  21. Compensation for the 2023 Performance Year

    Short-term incentive awards are typically paid annually to our Chief Executive Officer, President, and Chief Financial Officer in the following fiscal year. Because Mr. Li became acting Chief Financial Officer during the course of 2023, his short-term incentive awards were paid monthly, subject to oversight from our compensation committee. Short-term incentive awards for all other executive officers are paid monthly, subject to oversight from our compensation committee. Long-Term Incentive Awards: We currently grant long-term incentive awards under the 2014 Prior Plan and, assuming approval of Proposal 2, we will cease issuing awards under the 2014 Prior Plan and grant long-term incentive awards under the 2024 EIP. Our long-term incentive awards deliver equity-based awards to executives and other employees who contribute to the long-term success of the Company. We have historically determined the aggregate amount of long-term incentive awards to be granted based on our estimates of the growth of our intrinsic value per share. The higher the growth of our intrinsic value per share, the larger the amount of equity we made available for grant in aggregate to all employees and non-employee directors. In contrast to preceding years (2016 to 2021) during which our team consistently surpassed a 10% year-over-year growth in intrinsic value, we acknowledge that in 2023 this threshold was not achieved, largely due to severe margin compression at the mid-year point. Through diligent efforts, our team worked to rectify our margin trajectory, making numerous sacrifices and difficult decisions to stabilize the Company and align with our growth targets. Consequently, in recognition of their efforts in positively impacting performance during the year, the compensation committee unanimously established a grant pool of 551,122 shares in February 2024 in recognition of performance in calendar year 2023. These shares were granted in the form of RSUs in 2024 to certain employees, including named executive officers, and will vest over two years. In addition, consistent with our guiding compensation principles and emphasis on long-term stockholder value creation and the retention of a strong leadership team, in August 2023, the compensation committee established a grant pool of 120,100 shares. These shares were then granted in the form of RSUs in 2023 to certain employees, including named executive officers, and will vest over four years. While these grant pools are departures from our historical policy of granting performance-based compensation solely upon exceeding a 10% increase in intrinsic value, the compensation committee deemed it appropriate to acknowledge our team's efforts in 2023 and to support team member retention. This is especially pertinent with 2023 being the second consecutive year when a grant pool was not available for distribution to the team. We intend to deduct these shares from future performance pools over the coming years, ensuring that dilution remains consistent with our established framework of value creation sharing with the team based on outperformance. Equity Allocations for the 2023 Performance Year: As noted, in acknowledgement of the team execution to recover from margin expansion at the mid-year point, an aggregate grant pool of 847,117 shares was awarded during and for 2023 (including the 120,100 share pool established in August 2023). From the pool, deductions were made for new hire grants, spot bonus grants, promotional grants and non-employee director grants already made in performance year 2023. After deductions, the remaining 551,122 shares were granted in the form of RSUs in 2024 for the 2023 performance year to certain employees, including named executive officers. These RSUs will vest over two years. We recognize this is a deviation from our historical practice yet we believe it was the right decision to show our appreciation for our dedicated team. It is our intention to deduct these shares from future performance pools to ensure our long-term shareholders only see dilution consistent with rewarding intrinsic value growth using long-term incentive awards. To determine the specific amounts granted to each named executive officer for performance year 2023, our Chief Executive Officer and President, considering team member input, determined the value each individual contributed toward our intrinsic value per share. In making this determination, our Chief Executive Officer and President also reviewed how each of such persons demonstrated leadership to achieve those results and the officer's ability to impact future growth of the Company. The compensation committee considered these recommendations and assessed potential long-term incentive awards against each named executive officer's base pay and bonus levels. Our Chief Executive Officer and President were not present for the compensation committee discussions and decisions relating to their own long-term equity incentive awards. The following table sets forth the long-term incentive grants approved by the compensation committee to our named executive officers in connection with performance year 2023:

  22. Compensation for the 2023 Performance Year

    | Name | Long-Term Incentive Awards (Number of RSUs Granted) | RSU Value (1) | | Darryl Rawlings | 55,000(2) | $1,499,850 | | Fawwad Qureshi | 72,304(3) | $1,697,530 | | Wei Li | 10,691(4) | $294,085 | | Drew Wolff (5) | — | $— | | Margi Tooth | 75,000(6) | $2,079,250 | | John Gallagher | 28,963(7) | $800,152 | | Dr. Steve Weinrauch | 23,031(8) | $662,326 |

  23. Compensation for the 2023 Performance Year

    (1)The amounts represent aggregate grant date fair value of such RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of the assumptions we apply in calculating these amounts. (2)Includes RSUs representing (i) 50,000 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years and (ii) 5,000 shares of the Company’s common stock issued in February 2024 as a spot bonus, which will vest over four years. (3)Includes RSUs representing (i) 60,000 shares of the Company’s common stock issued in November 2023 pursuant to Mr. Qureshi’s offer letter, which will vest over four years, (ii) 7,304 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, and (iii) 5,000 shares of the Company’s common stock issued in February 2024 as a spot bonus, which will vest over four years. (4)Includes RSUs representing (i) 3,500 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 6,697 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, and (iii) 494 shares of the Company’s common stock issued in May 2023 as a spot bonus, which will vest over four years. (5)Mr. Wolff resigned as our Chief Financial Officer effective June 1, 2023. From June 2, 2023 until August 31, 2023, Mr. Wolff provided consulting services to Trupanion. (6)Includes RSUs representing (i) 20,000 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 50,000 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, and (iii) 5,000 shares of the Company’s common stock issued in February 2024 as a spot bonus, which will vest over four years. (7)Includes RSUs representing (i) 7,223 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 20,559 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, (iii) 460 shares of the Company’s common stock issued in May 2023 as a promotion bonus, which will vest over four years, and (iv) 721 shares of the Company’s common stock issued in August 2023 as a promotion bonus, which will vest over four years. (8)Includes RSUs representing (i) 5,655 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 16,229 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, (iii) 649 shares of the Company’s common stock issued in February 2023 as a promotion bonus, which will vest over four years, and (iv) 498 shares of the Company’s common stock issued in February 2023 as a spot bonus, which were fully vested at grant. The table below provides an overview of performance year 2023 compensation for all named executive officers.

  24. Compensation for the 2023 Performance Year

    | Name | 2023 Base Salary | Short-Term Incentive Award Payout (Cash Received for 2023 Performance Year) (1) | Short-Term Incentive Award Payout (RSU Value Received for 2023 Performance Year) (2)(3) | Long-Term Incentive Award Issuance (RSU Value Received for 2023 Performance Year) (3) | Total Compensation | | Darryl Rawlings | $300,000 | $— | $21,898 | $1,499,850(4) | $1,821,748 | | Fawwad Qureshi | $300,000(5) | $25,935 | $— | $1,697,530(6) | $2,023,465 | | Wei Li | $260,000(7) | $44,808 | $25,646 | $294,085(8) | $624,539 | | Drew Wolff (8) | $300,000 | $31,061 | $— | $— | $331,061 | | Margi Tooth | $400,000(10) | $— | $26,861 | $2,079,250(11) | $2,506,111 | | John Gallagher | $300,000(12) | $13,332 | $48,453 | $800,152(13) | $1,161,937 | | Dr. Steve Weinrauch | $300,000 | $— | $79,864 | $662,326(14) | $1,042,190 |

  25. Compensation for the 2023 Performance Year

    (1)For the 2023 performance year, we issued short-term incentive awards to Mr. Rawlings, Mr. Qureshi, and Ms. Tooth in 2024. (2)In lieu of taking their short-term incentive award amount in cash, team members may convert all or a portion of their short-term incentive award amount into Company equity, in the form of RSUs, with a 20% premium to cash on value and subject to a two year lock-up. (3)The amounts represent aggregate grant date fair value of such RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of the assumptions we apply in calculating these amounts. (4)Includes RSUs representing (i) 50,000 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years and (ii) 5,000 shares of the Company’s common stock issued in February 2024 as a spot bonus, which will vest over four years. (5)Mr. Qureshi's annual salary is $300,000. Mr. Qureshi joined Trupanion as our Chief Financial Officer on September 25, 2023. Mr. Qureshi's pro-rated salary for 2023 was $81,250. (6)Includes RSUs representing (i) 60,000 shares of the Company’s common stock issued in November 2023 pursuant to Mr. Qureshi’s offer letter, which will vest over four years, (ii) 7,304 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, and (iii) 5,000 shares of the Company’s common stock issued in February 2024 as a spot bonus, which will vest over four years. (7)Mr. Li served as our interim Chief Financial Officer from June 1, 2023 until September 25, 2023. Mr. Li's salary was $300,000 from June 1, 2023 until September 30, 2023. On October 1, 2023, Mr. Li's salary was changed to $260,000. (8)Includes RSUs representing (i) 3,500 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 6,697 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, and (iii) 494 shares of the Company’s common stock issued in May 2023 as a spot bonus, which will vest over four years. (9)Mr. Wolff resigned as our Chief Financial Officer effective June 1, 2023. From June 2, 2023 until August 31, 2023, Mr. Wolff provided consulting services to Trupanion. (10)Ms. Tooth’s salary was increased to $400,000 effective June 1, 2023. Her pro-rated salary for 2023 was $358,333. (11)Includes RSUs representing (i) 20,000 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 50,000 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, and (iii) 5,000 shares of the Company’s common stock issued in February 2024 as a spot bonus, which will vest over four years. (12)Mr. Gallagher’s base salary from January 1, 2023 to February 1, 2023 was $230,000 and was increased to $260,000 on February 1, 2023 in connection with a promotion. Effective April 1, 2023 Mr. Gallagher's salary was increased to $300,000 in connection with another promotion. (13)Includes RSUs representing (i) 7,223 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 20,559 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, (iii) 460 shares of the Company’s common stock issued in May 2023 as a promotion bonus, which will vest over four years, and (iv) 721 shares of the Company’s common stock issued in August 2023 as a promotion bonus, which will vest over four years. (14)Includes RSUs representing (i) 5,655 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 16,229 shares of the Company’s common stock issued in February 2024 in connection with 2023 performance, which will vest over two years, (iii) 649 shares of the Company’s common stock issued in February 2023 as a promotion bonus, which will vest over four years, and (iv) 498 shares of the Company’s common stock issued in February 2023 as a spot bonus, which were fully vested at grant. Other Compensation, General Benefits and Perquisites: We provide all employees the opportunity to receive paid healthcare for themselves. We also provide medical coverage for one pet on a Trupanion subscription for employees in North America. At our Seattle, Washington USA headquarters, we provide paid on-site daycare for one child (infants through Pre-K) and professional dog walkers for all furry office mates. After every five years of service, employees receive a five-week paid sabbatical. We also provide a Company-wide broad based retirement 401(k) plan for our U.S. employees. We do not provide any perquisites to our executives. We continue to assess opportunities to enhance benefit offerings to our employees at all locations.

  26. 6.1 Employment Agreements

    6.1 Employment Agreements No named executive officers have employment agreements though we did enter into an offer letter with Mr. Qureshi in connection with his appointment as our Chief Financial Officer. Pursuant to his offer letter, Mr. Qureshi is entitled to an annual base salary of $300,000, an annual bonus of up to 40% of his base salary (based 50% on corporate goals and 50% on individual goals), participation in our Severance Plan (as defined below) with six months of salary and estimated COBRA premiums (less required tax withholding). Mr. Qureshi’s offer letter also entitled him to receive RSUs representing 60,000 shares of our common stock. This summary is not complete and is qualified in its entirety by reference to the full text and terms of the offer letter, which is filed as Exhibit 10.15 to our Annual Report on Form 10-K for the year ended December 31, 2023. Mr. Qureshi's employment is at-will and his compensation is subject to change.

  27. 6.2 Severance and Change-in-Control Protection

    6.2 Severance and Change-in-Control Protection Our Employee Severance and Change in Control Plan (our Severance Plan) provides certain severance benefits to eligible employees. Our Severance Plan is intended to standardize the severance paid to current and future employees. We believe our Severance Plan creates an equitable framework for situations when an employee leaves us involuntarily that applies equally to all team members regardless of title. Severance Policy: Under our Severance Plan, if an employee, including any named executive officer, is terminated without cause (defined to include willful or gross neglect of job duties, material breach of a fiduciary duty or Company policy, willful failure to comply with instructions from the Board or such person’s supervisor, continued unsatisfactory performance which has continued for more than thirty days following written notice, engagement in dishonest or illegal or gross misconduct, and conviction of a felony), then they are entitled to the following benefits: •a payment equal to the employee’s salary for a minimum of two weeks with an additional two weeks for each completed year of employment, up to a maximum of 26 weeks; •for each full calendar quarter prior to the date of termination, any bonuses earned by the employee but unpaid as of the date of such termination; and •a payment equal to one month of the medical insurance premium for the team member. In order to receive these benefits, the employee must sign a separation agreement containing a full and unconditional release of claims. Change in Control Policy: If an employee, including any named executive officer, is terminated without cause in the three-month period before the occurrence of a Change in Control (the definition of "Change in Control" is set forth in footnote 5 to the "Termination of Employment and Change of Control Payments Table" below) or during the period of time beginning on the first occurrence of a Change in Control and lasting through the one-year anniversary of the occurrence of the Change in Control, then, in lieu of the severance payments set forth above, we will provide the employee with the following benefits: •six months of salary; •for each full calendar quarter prior to the date of such termination, any bonuses earned by the employee but unpaid as of the date of such termination; and •immediate vesting of all unvested equity awards. In order to receive these benefits, the employee must sign a separation agreement containing a full and unconditional release of claims. If any total payment determined by this policy would result in an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (Code)), then we would reduce the payment to produce a payment value that would maximize the “net after-tax amount” payable to the employee.

  28. 6.4 Risk Assessment

    6.4 Risk Assessment Our compensation committee assessed the risk profile of our executive pay programs and determined that it does not encourage undue risk-taking by executives. Pay opportunities reflect a mix of fixed and at-risk compensation. At-risk compensation is tied to short- and long-term Company objectives and supports the pay-for-performance philosophy. The Company's pay program emphasized the sustained viability of the business through the use of long-term incentive awards, especially for senior management. The long-term incentive awards are typically subject to an objective measurement (i.e., our calculation of intrinsic values per share) that assesses our long-term sustainable growth and health, and all of the long-term incentive awards carry four or two-year vesting, which encourages executives to make decisions that are in the best long-term interests of the business. Further, we require executives to hold meaningful levels of Company stock which results in stockholder alignment and a long-term focus. We also maintain a clawback policy, as more fully described below.

  29. 6.7 Discussion on Key Performance Metrics

    6.7 Discussion on Key Performance Metrics We use certain non-GAAP financial metrics when determining compensation. Adjusted operating income is a non-GAAP financial measure that adjusts operating income (loss) to remove the effect of acquisition cost, development expenses, non-recurring transaction or restructuring expenses, and gain (loss) from investments in joint ventures. Non-cash items, such as stock-based compensation expense and depreciation and amortization, are also excluded. Acquisition cost, development expenses, gain (loss) from investments in joint ventures, stock-based compensation expense, and depreciation and amortization are expected to remain recurring expenses for the foreseeable future, but are excluded from this metric to measure scale in other areas of the business. Management believes acquisition costs primarily represent the cost to acquire new subscribers and are driven by the amount of growth we choose to pursue based primarily on the amount of our adjusted operating income period over period. Accordingly, this measure is not indicative of our core operating income performance. We also exclude development expenses, gain (loss) from investments in joint ventures, stock-based compensation expense, and depreciation and amortization because some investors may not view those items as reflective of our core operating income performance. Management uses adjusted operating income and the margin on adjusted operating income to understand the effects of scale in its nonacquisition cost and development expenses and to plan future advertising expenditures, which are designed to acquire new pets. Management uses this measure as a principal way of understanding the operating performance of its business exclusive of acquisition cost and new product exploration and development initiatives. Management believes disclosure of this metric provides investors with the same data that the Company employs in assessing its overall operations and that disclosure of this measure may provide useful information regarding the efficiency of our utilization of revenues, return on advertising dollars in the form of new subscribers and future use of available cash to support the continued growth of our business. The following is a reconciliation of GAAP measures to non-GAAP measures (in thousands, except percentages):

  30. 6.7 Discussion on Key Performance Metrics

    | | Year Ended December 31, 2023 | | Revenue | $1,108,605 | | Cost of paying veterinary invoices | 827,604 | | Variable expenses | 144,990 | | Fixed expenses | 52,466 | | Adjusted operating income | 83,545 | | Acquisition cost | 70,372 | | Development expenses | 5,100 | | Stock-based compensation expense | 31,864 | | Depreciation and amortization | 12,474 | | Non-recurring transaction or restructuring expenses | 4,175 | | Loss from investment in joint venture | (219) | | Operating loss | $(40,659) |

  31. 6.7 Discussion on Key Performance Metrics

    As a percentage of revenue:

  32. 6.7 Discussion on Key Performance Metrics

    | | Year Ended December 31, 2023 | | Revenue | 100.0% | | Cost of paying veterinary invoices | 74.7% | | Variable expenses | 13.1% | | Fixed expenses | 4.7% | | Adjusted operating income | 7.5% | | Acquisition cost | 6.3% | | Development expenses | 0.5% | | Stock-based compensation expense | 2.9% | | Depreciation and amortization | 1.1% | | Non-recurring transaction or restructuring expenses | 0.4% | | Loss from investment in joint venture | —% | | Operating loss | (3.7)% |

  33. 6.7 Discussion on Key Performance Metrics

    Our internal rate of return is calculated assuming the new subscription pets we enroll during the period will behave like an average subscription pet. Specifically, our 2023 calculation assumes an estimated profit per pet per month of $7.48 for 73.0 months (calculated as the quotient obtained by dividing one by the churn rate, which equals one minus the average monthly retention rate of 98.63% based on our trailing three year experience). As our business continues to expand, we do not believe that blending all metrics into one always provides a fair measurement of impact and returns on dollars invested. Across our different business units, we are updating our methodology for calculating internal rate of return to better reflect our expectations of how these new pets will perform over their life with us by segment. The following tables include our calculation of the monthly per pet unit economics for our subscription business for the trailing twelve months ended December 31, 2023, as well as the estimated internal rate of return for a single average new subscription pet. Subscription business monthly per pet unit economics1:

  34. 6.7 Discussion on Key Performance Metrics

    | | 2023 | | | | | | | | | Monthly average revenue per pet | $65.26 | | | | | | | | | Cost of paying veterinary invoices | $49.50 | | | | | | | | | Variable expenses | $6.34 | | | | | | | | | Fixed expenses | $3.10 | | | | | | | | | Estimated profit per pet per month | $6.32 | Multiplied by 66.2 months = $419 (average lifetime value of a pet, including fixed expenses based on trailing twelve months) | | | | | | | | 1Calculated on a trailing twelve month basis. Excluding managing general agent activity for products underwritten by third parties. | | | | | | | | | | Estimated IRR calculation for the year ended December 31, 2023: | | | | | | | | | | Year | — | 1 | 2 | 3 | 4 | 5 | 6 | | | Months2 | 6.0 | 12.0 | 12.0 | 12.0 | 12.0 | 12.0 | 7.0 | 73.0 | | Estimated Profit per Pet per Month* | $7 | $7 | $7 | $7 | $7 | $7 | $7 | | | Estimated Profit per Pet | $45 | $90 | $90 | $90 | $90 | $90 | $52 | $419 | | Capital Charge3 | $(4) | $(7) | $(7) | $(7) | $(7) | $(7) | $(4) | | | PAC | $(228) | | | | | | | IRR | | | $(187) | $82 | $82 | $82 | $82 | $82 | $48 | 36% | | * Calculated on a trailing three year basis. Excluding managing general agent activity for products underwritten by third parties. | | | | | | | | | | 2This represents the average subscriber life in months, for the period presented, which is calculated as the quotient obtained by dividing one by one minus the average monthly retention rate based on our trailing three year experience. | | | | | | | | | | 3We include a capital charge in this calculation to estimate cost of capital on reserves which must be set aside to meet regulatory capital requirements. These reserves are included on our balance sheet. | | | | | | | | |

  35. Summary Compensation Table

    Summary Compensation Table The following table provides information regarding all long-term incentive equity compensation earned by our named executive officers during the 2023, 2022 and 2021 fiscal years, and all short-term incentive compensation and salary earned by our named executive officers during the 2023, 2022 and 2021 fiscal years.

  36. Summary Compensation Table

    | Name and Principal Position | Year | Salary | Stock Awards (1) (2) | Non-Equity Incentive Plan Compensation (3) | | All Other Compensation | Total | | Darryl Rawlings | 2023 | $300,000 | $— | $21,898 | (4) | | $321,898 | | Chief Executive Officer | 2022 | $300,000 | $1,356,281 | $— | (5) | | $1,656,281 | | | 2021 | $300,000 | $4,623,067 | $39,355 | | | $4,962,422 | | Fawwad Qureshi | 2023 | $81,250(6) | $1,362,000(7) | $25,935 | | $28,940(8) | $1,498,125 | | Chief Financial Officer | 2022 | $—(6) | $— | $— | | | $— | | | 2021 | $—(6) | $— | $— | | | $— | | Wei Li | 2023 | $244,167(9) | $111,458(10) | $70,454 | ('11) | | $426,079 | | Former Chief Financial Officer | 2022 | $—(9) | $— | $— | | | $— | | | 2021 | $—(9) | $— | $— | | | $— | | Drew Wolff | 2023 | $126,136(12) | $— | $54,009 | | | $180,145 | | Former Chief Financial Officer | 2022 | $300,000 | $1,184,819 | $22,964 | (13) | | $1,507,783 | | | 2021 | $181,818(14) | $1,578,224 | $44,240 | (15) | | $1,804,282 | | Margi Tooth | 2023 | $358,333 | $579,400(16) | $26,861 | (17) | | $964,594 | | President | 2022 | $300,000 | $4,683,168 | $— | (5) | | $4,983,168 | | | 2021 | $300,000 | $4,941,857 | $23,493 | (18) | | $5,265,350 | | John Gallagher | 2023 | $287,501(19) | $239,508(20) | $61,785 | (21) | | $588,794 | | Executive Vice President, Global Support Services | 2022 | $0(19) | $— | $— | | | $— | | | 2021 | $0(19) | $— | $— | | | $— | | Dr. Steve Weinrauch | 2023 | $300,000(22) | $219,761(23) | $79,864 | (24) | | $599,625 | | Executive Vice President, | 2022 | $—(22) | $— | $— | | | $— | | North America and Veterinary Strategy | 2021 | $—(22) | $— | $— | | | $— |

  37. Summary Compensation Table

    (1) The amounts represent aggregate grant date fair value of the RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of the assumptions we apply in calculating these amounts. (2) In lieu of taking their short-term incentive award in cash, team members may convert all or a portion of their short-term incentive award into Company equity, in the form of RSUs, with a 20% premium to cash on value and subject to a two year lock-up. (3) For additional information regarding the non-equity incentive plan compensation, please refer to the CD&A, under the section titled "5.2 Detailed Description of Each Element of Compensation and Determination of Compensation for the 2023 Performance Year". This column includes amounts earned for the prior fiscal year but paid the following fiscal year. (4) For performance year 2023, Mr. Rawlings earned a short-term incentive award in the amount of $17,644. Of that amount, Mr. Rawlings converted 100% into RSUs. Such RSUs were granted in February 2024 in the amount of 803 shares with an aggregate grant date fair value of $21,898. (5) For the 2022 performance year, Mr. Rawlings and Ms. Tooth each waived receipt of their earned short-term incentive award, in the amounts of $21,534 and $21,534, respectively. (6) Mr. Qureshi's annual salary is $300,000. Mr. Qureshi joined Trupanion as our Chief Financial Officer on September 25, 2023. Mr. Qureshi's pro-rated salary for 2023 was $81,250. Mr. Qureshi became a named executive officer for the first time in 2023. (7) Includes RSUs representing 60,000 shares of the Company's common stock issued in November 2023 pursuant to Mr. Qureshi's offer letter, which will vest over four years. (8)Represents $17,457 in travel reimbursement and $11,483 tax gross up for such expenses. (9) Mr. Li served as our interim Chief Financial Officer from June 1, 2023 until September 25, 2023. Mr. Li's salary was $300,000 from June 1, 2023 until September 30, 2023, and $260,000 beginning on October 1, 2023. Mr. Li's pro-rated salary for 2023 was $244,167. Mr. Li became a named executive officer for the first time in 2023. (10) Includes RSUs representing (i) 3,500 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years and (ii) 494 shares of the Company’s common stock issued in May 2023 as a spot bonus, which will vest over four years. (11)For performance year 2023, Mr. Li earned a short-term incentive award in the amount of $76,232. Of that amount, Mr. Li received cash in an aggregate amount of $44,808 and elected to convert the remainder of his short-term incentive award into an aggregate of 1,278 RSUs with an aggregate grant date fair value of $25,646. (12)Before his resignation as our Chief Financial Officer, effective June 1, 2023, Mr. Wolff’s salary was $300,000. Mr. Wolff’s pro-rated salary for 2023 was $126,136. (13)For the first half of the 2022 performance year (January 2022 through June 2022), Mr. Wolff waived receipt of his earned short-term incentive award in the amount of $37,480. (14)Mr. Wolff's annual salary was $300,000. Mr. Wolff became an employee on May 24, 2021 and was appointed to serve as Trupanion's Chief Financial Officer on September 24, 2021. Mr. Wolff's pro-rated salary for 2021 was $181,818. (15)Prior to Mr. Wolff's appointment to Chief Financial Officer and becoming a named executive officer, Mr. Wolff received short-term incentive awards in the aggregate amount of $19,065. Of that amount, Mr. Wolff elected to convert $11,370 of his short-term incentive award into RSUs, receiving the remaining $7,695 in cash. Such RSUs were granted in November 2021, in the amount of 145 shares with an aggregate grant date fair value of $12,413. In February 2022, Mr. Wolff's 2021 cash bonus as Chief Financial Officer was approved in the amount of $25,175. Mr. Wolff elected to convert 100% of his cash bonus into RSUs. Such RSUs were granted in February 2022 in the amount of 262 shares with an aggregate grant date fair value of $15,049. (16)Includes RSUs representing 20,000 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years. (17)For performance year 2023, Ms. Tooth earned a short-term incentive award in the amount of $21,674. Ms. Tooth converted 100% of her short-term incentive award into RSUs. Such RSUs were granted in February 2024 in the amount of 985 shares with an aggregate grant date fair value of $26,861. (18)Ms. Tooth’s 2021 cash bonus was approved in the amount of $39,355. In February 2022, Ms. Tooth converted 100% of her short-term incentive award into RSUs. Such RSUs were granted in February 2022, in the amount of 409 shares with an aggregate grant date fair value of $23,493. (19)Mr. Gallagher’s base salary from January 1, 2023 to February 1, 2023 was $230,000 and was increased to $260,000 on February 1, 2023 in connection with a promotion. Effective April 1, 2023 Mr. Gallagher's salary was increased to $300,000 in connection with another promotion. Mr. Gallagher became a named executive officer for the first time in 2023. (20)Includes RSUs representing (i) 7,223 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 460 shares of the Company’s common stock issued in May 2023 as a promotion bonus, which will vest over four years, and (iii) 721 shares of the Company’s common stock issued in August 2023 as a promotion bonus, which will vest over four years. (21)For performance year 2023, Mr. Gallagher earned a short-term incentive award in the amount of $60,754. Of that amount, Mr. Gallagher received cash in an aggregate amount of $13,332 and elected to convert the remainder of his short-term incentive awards into an aggregate of 2,207 RSUs with an aggregate grant date fair value of $48,453. (22)Dr. Weinrauch became a named executive officer for the first time in 2023. (23)Includes RSUs representing (i) 5,655 shares of the Company’s common stock issued in August 2023 in connection with 2023 performance, which will vest over four years, (ii) 649 shares of the Company’s common stock issued in February 2023 as a promotion bonus, which will vest over four years, and (iii) 498 shares of the Company’s common stock issued in February 2023 as a spot bonus, which were fully vested at grant. (24)For performance year 2023, Dr. Weinrauch earned a short-term incentive award in the amount of $95,276. Dr. Weinrauch converted his short-term incentive awards into an aggregate of 3,953 RSUs with an aggregate grant date fair value of $79,864.

  38. Grants of Plan-Based Awards

    Grants of Plan-Based Awards The following table sets forth information regarding the short-term incentive awards earned by our named executive officers during fiscal year 2023, and the long-term incentive awards granted to our named executive officers in fiscal year 2023.

  39. Grants of Plan-Based Awards

    | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan (1) | | | | | | Name | Award Type | Approval Date | Grant Date | Threshold | Target | Maximum | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards (2) | | Darryl Rawlings | Annual short-term incentive award (3) | | | $— | $60,000 | $— | | | | | RSU | | | | | | | | | Fawwad Qureshi | Annual short-term incentive award (3) | | | $— | $30,000 | $— | | | | | RSU (5) | 9/2/2023 | 11/13/2023 | | | | 60,000 | $1,362,000 | | Wei Li | Annual short-term incentive award (3) | | | $— | $104,000 | $— | | | | | RSU (6) | 2/27/2023 | 2/27/2023 | | | | 54 | $2,057 | | | RSU (6) | 5/15/2023 | 5/5/2023 | | | | 281 | $4,209 | | | RSU (7) | 5/15/2023 | 5/15/2023 | | | | 494 | $10,063 | | | RSU (8) | 8/3/2023 | 8/14/2023 | | | | 3,500 | $101,395 | | | RSU (6) | 11/13/2023 | 11/13/2023 | | | | 536 | $8,865 | | Drew Wolff | Annual short-term incentive award (3) | | | $— | $50,000 | $— | | | | | RSU | | | | | | | | | Margi Tooth | Annual short-term incentive award (3) | | | $— | $80,000 | $— | | | | | RSU (8) | 8/3/2023 | 8/3/2023 | | | | 20,000 | $579,400 | | John Gallagher | Annual short-term incentive award (3) | | | $— | $20,000 | $— | | | | | RSU (10) | 5/15/2023 | 5/15/2023 | | | | 460 | $9,370 | | | RSU (6) | 8/14/2023 | 8/14/2023 | | | | 841 | $17,737 | | | RSU (11) | 8/3/2023 | 8/14/2023 | | | | 721 | $20,887 | | | RSU (8) | 8/3/2023 | 8/14/2023 | | | | 7,223 | $209,250 | | | RSU (6) | 11/13/2023 | 11/13/2023 | | | | 609 | $10,073 | | Dr. Steve Weinrauch | Annual short-term incentive award (3) | | | $— | $120,000 | $— | | | | | RSU (6) | 2/27/23 | 2/27/23 | | | | 533 | $20,302 | | | RSU (10) | 2/27/23 | 2/27/23 | | | | 649 | $36,967 | | | RSU (12) | 2/27/23 | 2/27/23 | | | | 498 | $18,969 | | | RSU (6) | 5/15/23 | 5/15/23 | | | | 904 | $13,542 | | | RSU (6) | 8/14/23 | 8/14/23 | | | | 1,118 | $23,579 | | | RSU (8) | 8/3/23 | 8/14/23 | | | | 5,655 | $163,825 | | | RSU (6) | 11/13/2023 | 11/13/2023 | | | | 924 | $15,283 |

  40. Grants of Plan-Based Awards

    (1)The amounts in these columns represent the threshold, target and maximum amounts of cash that might have become payable to each named executive officer as a short-term incentive award. Trupanion employees (including named executive officers) may elect to take their short-term awards in the form of equity with a 20% premium to cash on value but subject to a 2-year lock-up. (2)The amounts represent the aggregate grant date fair value of the RSUs, as computed in accordance with Accounting Standards Codification Topic 718 (without regard to forfeitures). The amounts reflect accounting cost and may not correspond to the actual economic value realized by our officers. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of the assumptions we apply in calculating these amounts. (3)These rows represent possible payouts pursuant to the annual short-term incentive awards. Trupanion employees (including named executive officers) may elect to take their short-term awards in the form of equity with a 20% premium to cash on value but subject to a 2-year lock-up. (4)Mr. Qureshi joined Trupanion and became our Chief Financial Officer as of September 25, 2023. (5)Pursuant to his offer letter, Mr. Qureshi received RSUs representing 60,000 shares of the Company's common stock. (6)Represents a portion of a short-term incentive award paid in the form of fully-vested RSUs with a 20% premium to the cash value, based on a volume-weighted average market price, and subject to a two-year holding restriction. (7)Reflects a spot bonus paid in RSUs, which vests as to 1/4th on the approximate one year anniversary of the date of grant and then 1/16th quarterly thereafter, subject to the named executive officer being a service provider through each vesting date. (8)Reflects the long-term incentive awards received in the form of RSUs, which vests as to 1/4th on the approximate one year anniversary of the date of grant and then 1/16th quarterly thereafter, subject to the named executive officer being a service provider through each vesting date. (9)Mr. Wolff resigned as our Chief Financial Officer effective June 1, 2023. From June 2, 2023 until August 31, 2023, Mr. Wolff provided consulting services to Trupanion. (10)Reflects a promotion grant, which vests as to 1/4th on the approximate one year anniversary of the date of grant and then 1/16th quarterly thereafter, subject to the named executive officer being a service provider through each vesting date. (11)Reflects a promotion grant, which vests as to 1/4th on the approximate nine month anniversary of the date of grant and then 1/16th quarterly thereafter, subject to the named executive officer being a service provider through each vesting date. (12)Reflects a spot bonus paid in RSUs, which was fully vested upon grant.

  41. Outstanding Equity Awards at Fiscal Year-End

    Outstanding Equity Awards at Fiscal Year-End The following table provides information regarding stock options and RSUs held by our named executive officers as of December 31, 2023.

  42. Outstanding Equity Awards at Fiscal Year-End

    | | | Option Awards | | | | | Stock Awards | | | Name | Grant Date | Number of Securities Underlying Options Total Grant | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (1) | | Darryl Rawlings | 2/28/2022(2) | | | | | | 8,512 | $259,701 | | | 2/22/2021(3) | | | | | | 13,689 | $417,651 | | | 4/3/2020(4) | | | | | | 2,098 | $64,010 | | | 5/4/2017(6) | 23,448 | 23,448 | — | $17.97 | 5/4/2027 | | | | | 8/8/2016(7) | 50,000 | 2,000 | — | $14.95 | 8/8/2026 | | | | Fawwad Qureshi | 11/13/2023(8) | | | | | | 60,000 | $1,830,600 | | Wei Li | 8/14/2023(9) | | | | | | 3,500 | $106,785 | | | 5/15/2023(10) | | | | | | 494 | $15,072 | | | 8/12/2022(11) | | | | | | 62 | $1,892 | | | 2/28/2022(2) | | | | | | 1,755 | $53,545 | | | 5/10/2021(12) | | | | | | 44 | $1,342 | | | 2/22/2021(3) | | | | | | 1,538 | $46,924 | | | 4/3/2020(4) | | | | | | 81 | $2,471 | | Drew Wolff | 2/28/2022(2) (21) | | | | | | 7,436 | $226,872 | | Margi Tooth | 8/14/2023(9) | | | | | | 20,000 | $610,200 | | | 2/28/2022(2) | | | | | | 29,391 | $896,719 | | | 2/22/2021(3) | | | | | | 14,634 | $446,483 | | | 4/3/2020(4) | | | | | | 2,172 | $66,268 | | | 5/4/2017(6) | 23,448 | 23,448 | — | $17.97 | 5/4/2027 | | | | | 12/21/2015(13) | 40,000 | 40,000 | — | $8.93 | 12/21/2025 | | | | | 7/24/2015(14) | 19,200 | 200 | — | $7.78 | 7/24/2025 | | | | | 11/7/2014(15) | 10,000 | 7,500 | — | $6.54 | 11/7/2024 | | | | John Gallagher | 8/14/2023(9) | | | | | | 7,223 | $220,374 | | | 8/14/2023(16) | | | | | | 721 | $21,998 | | | 5/15/2023(10) | | | | | | 460 | $14,035 | | | 2/28/2022(2) | | | | | | 6,611 | $201,702 | | | 2/22/2021(3) | | | | | | 93 | $2,837 | | | 2/22/2021(3) | | | | | | 4,079 | $124,450 | | | 5/11/2020(17) | | | | | | 49 | $1,495 | | | 4/3/2020(4) | | | | | | 216 | $6,590 | | Dr. Steve Weinrauch | 8/14/2023(9) | | | | | | 5,655 | $172,534 | | | 2/27/2023(18) | | | | | | 649 | $19,801 |

  43. Outstanding Equity Awards at Fiscal Year-End

    | 2/28/2022(2) | | | | | | 4,776 | $145,716 | | 2/22/2021(3) | | | | | | 322 | $9,824 | | 2/22/2021(3) | | | | | | 5,527 | $168,629 | | 4/3/2020(4) | | | | | | 1,491 | $45,490 | | 5/4/2017(19) | 23,448 | 23,448 | — | $17.97 | 5/4/2027 | | | | 7/22/2016(20) | 8,500 | 8,500 | — | $15.46 | 7/22/2026 | | |

  44. Outstanding Equity Awards at Fiscal Year-End

    (1)Value is calculated by multiplying the number of RSUs or restricted stock awards that have not vested by the closing market price of our stock ($30.51) as of the close of trading on December 29, 2023 (the last trading day of the fiscal year). (3)RSUs vested as to 1/4th of the shares on February 25, 2022 and 1/16th vests each quarter thereafter. (4)RSUs vested as to 1/4th of the shares on February 25, 2021 and 1/16th vests each quarter thereafter. (5)RSUs vested as to 1/4th of the shares on February 25, 2020 and 1/16th vests each quarter thereafter. (6)Stock option vested as to 1/4th of the shares underlying this option on May 4, 2018 and 1/48th vested monthly thereafter. (7)Stock option vested as to 1/4th of the shares underlying this option on August 8, 2017 and 1/48th vested monthly thereafter. (8)RSUs will vest as to 1/4th of the shares on November 25, 2024 and 1/16th vests each quarter thereafter. (9)RSUs will vest as to 1/4th of the shares on August 25, 2024 and 1/16th vests each quarter thereafter. (10)RSUs will vest as to 1/4th of the shares on May 25, 2024 and 1/16th vests each quarter thereafter. (11)RSUs vested as to 1/4th of the shares on August 25, 2023 and 1/16th vests each quarter thereafter. (12)RSUs vested as to 1/4th of the shares on May 25, 2022 and 1/16th vests each quarter thereafter. (13)Stock option vested as to 1/4th of the shares underlying this option on January 7, 2017 and 1/48th vested monthly thereafter. (14)Stock option vested as to 1/4th of the shares underlying this option on July 24, 2016 and 1/48th vested monthly thereafter. (15)Stock option vested as to 1/4th of the shares underlying this option on September 1, 2015 and 1/48th vests monthly thereafter. (16)RSUs will vest as to 1/4th of the shares on May 25, 2024 and 1/16th vests each quarter thereafter. (17)RSUs vested as to 1/4th of the shares on May 25, 2021 and 1/16th vests each quarter thereafter. (18)RSUs vested as to 1/4th of the shares on February 25, 2024 and 1/16th vests each quarter thereafter. (19)Stock option vested as to 1/4th of the shares underlying this option on May 4, 2018 and 1/48th vested monthly thereafter. (20)Stock option vested as to 1/4th of the shares underlying this option on July 22, 2017 and 1/48th vested monthly thereafter. (21)Mr. Wolff resigned as our Chief Financial Officer effective June 1, 2023. On March 29, 2023, Trupanion and Mr. Wolff entered into a separation agreement and release of claims, pursuant to which, Trupanion accelerated the vesting of 9,914 shares of common stock issuable upon settlement of RSUs held by Mr. Wolff. The settlement of such RSUs aligned with the historical vesting schedule of the RSUs through March 15, 2024, by which date all remaining RSUs were settled but subject to a contractual lockup that aligns with the historical vesting schedule of the RSUs.

  45. Option Exercises and Stock Vested Table

    Option Exercises and Stock Vested Table The following table provides information regarding stock options exercised, restricted stock and RSUs vested which were held by our named executive officers during fiscal year 2023.

  46. Option Exercises and Stock Vested Table

    | | | Option Awards | | Stock Awards | | | Name | Grant Date | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | | Darryl Rawlings | 2/28/2022 | | | 6,620 | $287,232 | | | 2/22/2021 | | | 10,951 | $367,200 | | | 4/3/2020 | | | 8,392 | $281,384 | | | 2/22/2019 | | | 1,505 | $85,078 | | Wei Li | 11/13/2023 | | | 536 | $12,167 | | | 5/15/2023 | | | 281 | $5,724 | | | 2/27/2023 | | | 54 | $3,076 | | | 8/12/2022 | | | 28 | $823 | | | 2/28/2022 | | | 1,366 | $59,280 | | | 5/10/2021 | | | 29 | $959 | | | 2/22/2021 | | | 1,229 | $41,195 | | | 4/3/2020 | | | 322 | $10,816 | | | 11/12/2019 | | | 50 | $1,693 | | | 2/22/2019 | | | 89 | $5,031 | | Drew Wolff | 2/28/2022 | | | 5,783 | $250,921 | | | 11/12/2021 | | | 880 | $33,955 | | | 8/16/2021 | | | 880 | $33,955 | | Margi Tooth | 2/28/2022 | | | 22,859 | $991,813 | | | 2/22/2021 | | | 11,707 | $392,549 | | | 4/3/2020 | | | 8,685 | $291,231 | | | 2/22/2019 | | | 2,377 | $134,372 | | John Gallagher | 11/13/2023 | | | 609 | $13,824 | | | 8/14/2023 | | | 841 | $24,364 | | | 2/28/2022 | | | 5,141 | $223,066 | | | 2/22/2021 | | | 3,338 | $111,949 | | | 5/11/2020 | | | 98 | $3,267 | | | 4/3/2020 | | | 863 | $28,949 | | | 8/6/2019 | | | 57 | $2,034 | | | 2/22/2019 | | | 94 | $5,314 | | Dr. Steve Weinrauch | 11/13/2023 | | | 924 | $20,975 | | | 8/14/2023 | | | 1,118 | $32,388 | | | 5/15/2023 | | | 904 | $18,414 | | | 2/27/2023 | | | 1,031 | $58,726 | | | 2/28/2022 | | | 3,714 | $161,166 | | | 2/22/2021 | | | 4,678 | $156,899 | | | 4/3/2020 | | | 5,961 | $199,895 | | | 2/22/2019 | | | 951 | $53,760 | | | 7/24/2015 | 3,322 | $71,855 | | | | | 2/26/2014 | 15,000 | $305,100 | | |

  47. Pay Ratio

    Pay Ratio For fiscal year 2023: •the annual total compensation, calculated as described below, of our Chief Executive Officer, Darryl Rawlings, was $341,277; and •the estimated median of the annual total compensation of all employees of our Company, other than Darryl Rawlings, calculated as described below was $86,557. Based on this information, for 2023 the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual compensation of all employees was 4:1. To determine the median employee as of December 31, 2023, we used the total base earnings, bonuses earned, and the grant date fair value of equity granted in 2023 for all employees, full-time and part–time who were employed as of December 31, 2023. We excluded independent contractors, as they are not employees. We also excluded 17 employees located in Czechia, 13 employees located in Germany, seven employees located in Poland, four employees located in Belgium, and one employee located in Switzerland, who collectively, represent less than 5% of our workforce of 1,137 employees worldwide. Finally, we also excluded one employee hired in December 2023 who had not received compensation before December 31, 2023. The 2022 annual bonus (for certain executives) and the 2022 fourth quarter bonus for eligible employees were included as they were paid out in 2023. We did not include the 2023 annual bonus (for certain executives) nor the December 2023 bonus for eligible employees, as these were paid out in 2024. For employees hired throughout the year, we annualized earnings based on amounts paid during the portion of 2023 in which they were employed. With the factors noted above, we identified the median role. We then used the total compensation set forth in the summary compensation table for Mr. Rawlings, added to it the amounts we pay on behalf of Mr. Rawlings pursuant to benefits programs that are available on a non-discriminatory basis to all our employees, including health, life and disability insurance premiums, child care at our headquarters, and enrollment of employee pets in our Trupanion medical insurance policy (Non-discriminatory Benefits) and compared that amount to the total compensation paid in 2023 for the identified role, which also included the Non-discriminatory Benefits paid out for the identified role. For the identified role and Mr. Rawlings, we included the applicable 2022 bonus which was paid in 2023 but did not include the December 2023 bonus which was paid in 2024. This determined the ratio set forth above. In identifying the median employee under SEC rules, companies are permitted to use reasonable estimates, assumptions, and methodologies based on their own facts and circumstances. As a result, the disclosure regarding the compensation of our median employee may not be directly comparable to similar disclosure by other reporting companies.

  48. Pay Versus Performance

    Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to our Chief Executive Officer and to our other named executive officers and certain company financial performance metrics. Compensation actually paid, as determined under SEC requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning our compensation philosophy and how we align executive compensation with our performance, please refer to the Compensation Discussion and Analysis section of this proxy statement.

  49. Pay Versus Performance Table

    Pay Versus Performance Table

  50. Pay Versus Performance Table

    | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year (1) | Summary Compensation Total For CEO | Compensation Actually Paid to CEO (2) | Average Summary Compensation Total for Other NEOs | Average Compensation Actually Paid to Other NEOs (2) | Cumulative TSR | Peer Group Cumulative TSR (3) | Net Income | Company Selected Measure - Adjusted Operating Income (4) | | 2023 | $321,898 | $(231,457) | $705,736 | $252,893 | $83.00 | $176.19 | $(44,693,000) | $83,545,000 | | 2022 | $1,656,281 | $(4,037,132) | $3,470,294 | $(1,316,756) | $129.30 | $105.70 | $(44,672,000) | $89,255,000 | | 2021 | $4,962,422 | $5,890,091 | $3,953,082 | $4,603,908 | $359.17 | $175.96 | $(35,530,000) | $78,454,000 | | 2020 | $1,160,767 | $6,273,363 | $1,249,292 | $6,331,959 | $325.65 | $138.58 | $(5,840,000) | $57,107,000 |

  51. Pay Versus Performance Table

    (1)The CEO and other NEOs for the indicated years were as follows: (i) for 2023, our CEO was Darryl Rawlings, and our other NEOs were Fawwad Qureshi, Wei Li, Drew Wolff, Margi Tooth, John Gallagher, and Dr. Steve Weinrauch, (ii) for 2022, our CEO was Darryl Rawlings, and our other NEOs were Drew Wolff, Margi Tooth, Tricia Plouf, and Emily Dreyer, (iii) for 2021, our CEO was Mr. Rawlings, and our other NEOs were Mr. Wolff, Ms. Tooth, Ms. Plouf, and Mr. Gavin Friedman, and (iv) for 2020, our CEO was Mr. Rawlings, Ms. Plouf, Ms. Tooth, Mr. Friedman, and Mr. Asher Bearman. (2)Amounts reported in this column are based on total compensation reported for our CEO and other NEOs in the Summary Compensation Table for the indicated fiscal years and adjusted as shown in the table below. Fair value of equity awards was computed in accordance with our methodology used for financial reporting purposes.

  52. Pay Versus Performance Table

    | Year | Executive(s) | Summary Compensation Table Total ($) | Subtract Stock Awards ($) | Add Year-End Equity Value ($) (i) | Change in Value of Prior Equity Awards ($) | Add Change in Value of Vested Equity Awards ($) | Subtract Value of Equity Awards that Failed to Meet Vesting Conditions ($) | Compensation Actually Paid ($) | | 2023 | CEO | 321,898 | — | — | (268,695) | (284,660) | — | (231,457) | | | Other NEOs | 705,736 | (418,688) | 605,318 | (507,704) | (131,770) | — | 252,893 | | 2022 | CEO | 1,656,281 | (1,356,281) | 719,224 | (3,095,658) | (1,960,698) | — | (4,037,132) | | | Other NEOs | 3,470,294 | (3,169,003) | 1,680,494 | (2,038,922) | (1,259,619) | — | (1,316,756) | | 2021 | CEO | 4,962,422 | (4,623,067) | 5,788,691 | 340,352 | (578,307) | — | 5,890,091 | | | Other NEOs | 3,953,082 | (3,635,556) | 4,529,917 | 376,093 | (619,628) | — | 4,603,908 | | 2020 | CEO | 1,160,767 | (822,367) | 4,018,186 | 1,719,513 | 197,264 | — | 6,273,363 | | | Other NEOs | 1,249,292 | (907,511) | 4,434,208 | 1,821,721 | (265,751) | — | 6,331,959 |

  53. Pay Versus Performance Table

    i.With the exception of named executive officers, the Company issued short-term incentive awards (cash bonuses) to its team members on a monthly basis. In lieu of taking their full cash bonus amount, team members may elect to convert all or a portion of their cash bonus into equity, in the form of RSUs, with a 20% premium to cash on value, fully vested on grant date and subject to a two year lock-up. To avoid double counting, the average grant date fair value of RSUs granted pursuant to certain named executive officers electing to convert their cash bonus into RSUs is excluded from the column in this table for each covered fiscal year. (3)The Company used the NASDAQ-100 Tech Peer Group Cumulative TSR for each covered fiscal year. (4)In accordance with SEC rules, we are required to include in the Pay versus Performance table the "most important" financial measure (as determined by us) used to link compensation actually paid to our Chief Executive Officer and to our other named executive officers to our performance for the most recently completed fiscal year. We determined Adjusted Operating Income, which is a measure included in our incentive program, meets this requirement and therefore, we have included this performance measure in the Pay versus Performance table.

  54. Description of the Relationship Between Compensation Actually Paid to Our Named Executive Officers and Company Performance

    Description of the Relationship Between Compensation Actually Paid to Our Named Executive Officers and Company Performance The charts below describe the relationship between compensation actually paid to our Chief Executive Officer and to our other named executives officers (as calculated above) and our financial and stock performance for the indicated years. In addition, the first table below compares our cumulative TSR and peer group cumulative TSR for the indicated years.