Total Subscription Pets Enrolled: the number of pets subscribed to our plan at the end of each period presented. We monitor total pets enrolled because it provides an indication of the growth of our business.

Monthly Adjusted Revenue per Pet: calculated as adjusted revenue divided by the total number of pet months in that period. We monitor monthly adjusted revenue per pet because it is an indicator of the effectiveness of our pricing for our business.

  • Adjusted Revenue (non- GAAP financial measure): calculated as revenue, excluding sign- up fee revenue and the change in deferred revenue. We exclude sign- up fee revenue since it is collected at the time a new pet is enrolled and is used to cover initial setup costs, which are included in sales and marketing expenses. We exclude changes in deferred revenue in order to present monthly adjusted revenue per pet in a consistent manner across periods.
  • Total Pet Months in a Period: the sum of all pets enrolled for each month during the period.

Lifetime Value of a Pet (LVP): calculated in a reporting period as the average monthly contribution margin per pet over the 12 months prior to the period end date, multiplied by the implied average subscriber life in months. We monitor LVP to assess how much lifetime contribution margin we might expect from new pets over their implied average subscriber life in months and to evaluate the amount of sales and marketing expenses we may want to incur to attract new pet enrollments.

  • Average Monthly Contribution Margin per Pet: calculated by dividing gross profit for the period (excluding sign- up fee revenue, the change in deferred revenue and stock based compensation expense recorded in cost of revenue) by the number of pet months in the 12- month period.
  • Implied Average Subscriber Life in Months: calculated as the quotient obtained by dividing one by one minus the average monthly retention rate.

Average Pet Acquisition Cost (PAC): calculated as acquisition cost divided by the total number of new pets enrolled in that period. We monitor average pet acquisition cost to evaluate the efficiency of our sales and marketing programs in acquiring new members.

  • Acquisition Cost (non- GAAP financial measure): calculated in a reporting period as sales and marketing expenses, excluding stock- based compensation, offset by sign- up fee revenue. We offset sales and marketing expenses with sign- up fee revenue since it is a one- time charge to new members used to cover initial setup costs, which are included in sales and marketing expenses.

Average Monthly Retention: measured as the monthly retention rate of enrolled pets for each applicable period averaged over the 12 months prior to the period end date. As such, our average monthly retention rate as of December 31, 2013 is an average of each month's retention from January 1, 2013 through December 31, 2013 and our average monthly retention rate as of March 31, 2014 is an average of each month's retention from April 1, 2013 through March 31, 2014. We calculate monthly retention as the number of pets that remain after subtracting all pets that cancel during the month, including pets that enroll and cancel within that month, divided by the total pets enrolled at the beginning of the month. We monitor average monthly retention because it provides a measure of member satisfaction and allows us to calculate the implied average subscriber life in months and manage our business.

Adjusted EBITDA (a non- GAAP financial measure): calculated as net loss excluding stock- based compensation expense, depreciation and amortization expense, interest income, interest expense, change in fair value of warrant liabilities and income tax expense (benefit). A measure used by our management, board of directors, investors, securities analysts, rating agencies and other parties to evaluate and discuss our operating and financial performance as well as our debt service capabilities.