Q3 2023 Wag! Group Co Earnings Call
Speaker 1: Greetings, and welcome to the WAC Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the third quarter 'twenty to 'twenty three earnings conference call at.
At this time all participants are in a listen only mode.
Speaker 1: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker 1: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Robles with Investor Relations. Thank you, sir. You may begin.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Greg Roadless with Investor Relations. Thank you Sir you may begin.
Speaker 2: Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our third quarter 2023 financial results. On the call today are Garrett Smallwood, Chief Executive Officer and Chairman, Adam Storm, President and Chief Product Officer, and Alec Davidian, Chief Financial Officer.
Good afternoon, everyone and thank you for joining <unk> conference call to discuss our third quarter 2023 financial results on the call today are Gary Smallwood, Chief Executive Officer, and Chairman, Adam Storm, President and Chief product Officer, and Alice Davidian, Chief Financial Officer.
Speaker 2: Before we get started, please note that today's comments include forward-looking statements. These forward-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.
Before we get started please note that today's comments include forward looking statements. These forward looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.
Speaker 2: A discussion of these risks and uncertainties are included in our filings within the SEC.
A discussion of these risks and uncertainties are included in our filings with the FCC.
Speaker 2: We also remind you that we undertake no obligation to update the information contained on this call. These statements should be considered estimates only and are not a guarantee of future performance.
We also remind you that we undertake no obligation to update the information contained on this call.
These statements should be considered estimates only and are not a guarantee of future performance.
Speaker 2: Also, during the call, we present both GAAP and non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued today. The earnings release is available on the Investor Relations page of our website and is included in Exhibit and Form 8K, furnished to the SEC.
So during the call we present, both GAAP and non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued today.
The earnings release is available on the Investor Relations page of our website and has included an exhibit in form 8-K furnished to the SEC.
Speaker 2: These non-GAAP measures are not intended to be a substitute for our GAAP results. Lastly, you can find our earnings presentation posted on our IR website and with the SEC.
These non-GAAP measures are not intended to be a substitute for our GAAP results. Lastly, you can find our earnings presentation posted on our IR website and with the FCC.
Speaker 2: And with that, I will now turn the call over to Garrett Smallwood.
And with that I will now turn the call over to Garett Smallwood.
Speaker 3: Good afternoon and thank you for joining us today to discuss our financial performance for the third quarter of 2023. We are excited to announce another successful quarter for the WAG team, exceeding our own expectations for both revenue and adjusted EBITDA. This quarter further demonstrates that we are transforming the pet industry by becoming an all-inclusive, trusted partner for the premium pet parent and capitalizing on the secular growth of pet ownership.
Good afternoon, and thank you for joining us today to discuss our financial performance for the third quarter of 2023.
Started to announce another successful quarter for the wag team exceeding our own expectations for both revenue and adjusted EBITDA base.
This quarter further demonstrates that we are transforming the pet industry by becoming an all inclusive trusted partner premium pet parents are capitalizing on the secular growth patterns yet.
Speaker 3: We continue to build lasting high-frequency relationships with households across the U.S. By becoming their go-to destination for premium services, health, and wellness.
We continue to build lasting I used frequency relationships with households across the U S.
Becoming the go to destination for premium services.
And well.
Speaker 3: While we remain laser focused on profitability for the remainder of 2023, we continue to invest in our platform and technology, building proprietary solutions to the most important needs.
While we remain laser focused on profitability for the remainder of 2023.
We continue to invest in our platform and technology building proprietary solutions to their most important needs.
Speaker 3: In 2024 and beyond, we will continue to use our proprietary technology, scalable platform, and deep and trusted relationships with premium households strike the right balance of growth and profitability.
In 2024 and beyond we will continue to use our proprietary technology.
Billable platform.
Deep and trusted relationships with premium households strike, the right balance of growth and profitability.
Speaker 3: With that, I will provide a brief overview about financial results for the third quarter.
With that I will provide a brief overview about financial results for the third quarter.
Speaker 3: Following that, Adam, our President and Chief Product Officer, will share updates on our strategic plans and key initiatives for the remainder of 2023 and beyond.
Following that Adam our President and Chief product Officer will share updates on our strategic plans and key initiatives for the remainder of 2023 and beyond.
Speaker 3: Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our third quarter results. Discuss our capital allocation priorities and reiterate our 2023 guys.
And Alex <unk>, Chief Financial Officer will provide a more detailed analysis of our third quarter results discuss our capital allocation priorities and reiterate our 2023 guidance.
Speaker 3: During the quarter, revenue grew by 42% year-over-year to $21.8 million. This growth was driven by the success of our wellness business, fueled by demand for pet insurance and wellness products. In addition to the success of Paw Protect, the only pet insurance product in the U.S. was Instant Pet. We're seeing early signs of success with Cat Food Advisor, which validates our longer-term growth initiatives by expanding our reach within the pet food and treats category.
During the quarter revenue grew by 42% year over year to $21 8 million. This growth was driven by the success of our wellness business fueled by demand for pet insurance and wellness products. In addition to the success of Piper Jaffrey.
The only pattern insurance product in the U S with instant that we're.
We're seeing early signs of success with Chatbot advisor, which validates our longer term broke initiatives by expanding our reach in the pet food and treats category.
Speaker 3: Our adjusted EBITDA was $1 million, an increase from a loss of $0.5 million in the same period last year.
Our adjusted EBITDA was $1 million, an increase from a loss of <unk> 5 million in the same period last year.
Speaker 3: As we navigate the dynamic macroeconomic landscape, our primary objective remains centered around achieving a sustainable equilibrium between growth, profit, and margin.
We navigate a dynamic macroeconomic landscape our primary objective remains centered around achieving a sustainable equilibrium between growth.
Profit and margin.
Speaker 3: In the third quarter, plaffle participants increased to 632.
In the third quarter platform participants increased to 632000 and.
Speaker 3: an increase of 34% year-of-year. And the WAC premium maintained strong penetration at 52%.
An increase of 34% year over year.
<unk> premium maintained strong penetration at 52%.
Speaker 3: Our third quarter organic acquisition rate was more than 70%, which is a result of our focus on dynamic partnerships, a best-in-class experience, and our referral program.
Our third quarter organic acquisition rate was more than 70%, which is a result of our focus on dynamic partnerships.
Best in class experience and our referral partners.
Speaker 3: we continue to be thoughtful and deliberate around capital allocation and brand building. And as a result, our LTV to CAC ratio was a deliberate nine to one.
We continue to be thoughtful and deliberate around capital allocation and brand building and as a result, our LTV to CAC ratio with a deliberate nine to one.
Speaker 3: On the supply side of the business, we maintained a supply and demand equilibrium through a variable platform fee, which averaged $50.26 in Q3 2020.
On the supply side of the business maintained its supply and demand equilibrium variable platform.
Which averaged $50.26 in Q3 2023.
Speaker 3: In summary, the team at WAG continues to execute against our goals and deliver strong and sustainable results. Our third-quarter results demonstrate our ability to scale the platform faster and more profitably than anticipated, and show the effectiveness of our strategy and business model to become the number one platform for premium pet care.
In summary, the team continues to execute against our goals and deliver strong and sustainable results. Our third quarter results demonstrate our ability to scale the platform faster and more profitably than anticipated and show the effectiveness of our strategy and business model to become a nurse.
Number one platform for premium pet parents siblings.
Speaker 3: Simply plus, we have out executed on the strategy we set forth almost two years ago for the seventh consecutive clip.
It looks like we are executing on the strategy, we set forth almost two years ago.
Seventh consecutive quarter.
Speaker 3: And with that, I will turn the call over to Adam Storm to review our strategy for the remainder of 2023.
And with that I will turn the call over to I'm, sorry, I'm sure of you our strategy for the remainder of 2023.
Speaker 3: Thank you. I'll once again walk through the five top level elements of our strategy to drive long term shareholder value and top level growth. One, accelerate growth.
Thanks, Karen I'll once again walk through the five top level elements of our strategy to drive long term shareholder value and profitable growth.
One accelerate growth in a few markets.
Speaker 3: As Garrett mentioned, the third quarter was another record revenue quarter driven by the demand of pet insurance and wellness products across the US, as well as a post-summer return to normal daytime service app.
Already mentioned the third quarter was another record revenue quarter, driven by the demand for insurance and wellness products across the U S as well as the post summer returning to normal daytime service costs.
Speaker 4: We will continue to leverage our technology, investing cross user experience to innovate on comparison tools and nation-aiding services for highly fragmented experiences with the largest total of restful markets, such as pet feeding treats and pet insurance. Two, expand.
We will continue to leverage our technology and best in class user experience innovate on comparison tools and that's making services are highly pragmatic experiences with the largest total addressable markets such as pet food and treats.
Yes.
Expanded premium subscription offerings.
Speaker 3: Our pre-in penetration rate remained at a robust 52% ahead of our long-term goal of 50%.
Our Korean penetration rate remains at a robust 50% ahead of our long term goal of 50%.
Speaker 4: We are continuing to test the value of the lag premium bundle by introducing new benefits and experimenting with current authors.
We are continuing to test the value of the life premium bundle by introducing new benefits next year messing with current offers.
Speaker 4: We're actively experiencing around a 10% price discount for new subscribers with an emphasis on the upcoming holidays, which she toward overnight sitting in boarding. There's a higher average order value service.
Actively experimenting around 10%.
For new subscribers.
On the upcoming holidays, which skewed toward overnight sitting importing.
Higher average order value service.
Speaker 4: three, platform expansion. Last quarter, we rolled out the lag store in partnership with Max Stone, which we acquired in Q2.3, bringing modern pedestentials to engage to meet the pet parents and pet caregivers.
Great.
Spansion last quarter, we rolled out the Max or in partnership with Blackstone, which we acquired in Q2 of 'twenty, three bringing modern kind of central to our engaged.
Uh huh.
Speaker 4: Maxone has incredible assortment of premium products. For example, the Christian Cowan Collab jumper, which can provide us with an organically posted about on her Instagram page with her PromoRanian sushi. I urge you to check it out.
Nexon has incredible assortment of premium products for example, kristian, calling collapse jump with Kim Kardashian organically posted out on our Instagram page with her.
I urge you to check it out.
Speaker 4: Other best dollars include the Eto's one carrier and the E-D fit harness, which come in fun colors such as peach, yellow, ivory and dust glue.
Other best sellers, including Eco swim carrier and the easy on us with comment on colors, such as teach yellow I agree and that split.
Yeah.
Speaker 4: We'll continue to roll out seasonal products, collaborations, and nut tabs to span the lag grain while capturing additional share of wallets.
We will continue to rollout seasonal products collaborations and must haves.
Wag brand, while capturing additional share of wallet.
Speaker 4: Fourth, opportunistic M&M. RAD continues to be strategically positioned to leverage pet-specific M&M opportunities to our ability to swiftly integrate new assets into our platform, supported by our deep understanding of the consumer and our technology first in. We are most excited about assets that have high rates of organic acquisition, the product or service that is beloved by customers and or categories of household spend would you not currently capture.
Fourth opportunistic M&A.
I continue to be strategically positioned to elaborate.
M&A opportunities due to our ability to quickly integrate new assets into our platform supported by our deep understanding of the consumer and our technology firsthand.
We are most excited about at high.
High rates of organic acquisition Kratos servicing a longtime customers anti-war categories household spend we do not currently capture.
Speaker 4: Fifth operating scale. This quarter we thought operating margin improvements across all areas due to the positive impact of our unit economics and fixed cost operating rates.
[laughter] operating scale.
This quarter, we saw operating margin improvements across all areas due to the positive impact of our unit economics and fixed cost operating leverage.
Speaker 4: Adjusting even a margin improves substantially your over year from minus 3% to positive 5% and 8% point improvement.
Adjusted EBITDA margin improved substantially year over year from minus 3% positive, 5% and eight percentage point improvement.
Speaker 4: The significant year over year improvement is inherent to our high margin, software marketplace model, where incremental revenue significantly enhanced is to be adjusted EBITDA profile of the entire platform.
The significant year over year improvement is inherent to our high margin software marketplace model, where incremental revenue significantly enhances the adjusted EBITDA profile of the entire platform.
Speaker 4: 2023 continues to be our year of efficiency and focused on full year adjusted even of profitability, which we have achieved as of 2, 3, 23.
2023 continues to be a year of efficiency and focus on full year, adjusted EBITDA profitability, which we achieved as of Q3 'twenty three.
Speaker 4: We will continue to invest in a different marketing A-back cycles, operational excellence, platform integration, bank cross-bale, and best-in-class customer experience.
We will continue to invest in it.
A lot of cycles operational excellence platform integrations and cross sell.
Best in class customer experience.
Speaker 4: I will now turn the call over to Alec to discuss our third quarter financial results in more detail.
I will now turn the call over to Alec.
Third quarter financial results in more detail.
Thanks, Adam.
Speaker 5: Q3 building on Q1 and Q2 momentum, close with record platform participants, which is $520,000, revenue is $1.8 million, and adjusted the EBITHA for one million. Resulting back-to-back, adjusted the EBITHA classical culture.
Q3 building on our Q1 and Q2 momentum places like what platform participants of 692000 revenue to 1.8 million.
Adjusted EBITA of one minute, where they'll come in back to back adjusted EBITDA profitable quarters.
Speaker 5: This also takes us to four year, twenty three, the jeopardy, but it's a profitable year to date, a huge milestone in the companies.
It's also it takes us to where we get 23 adjusted EBITDA profitable year to date, a huge milestone in the company's history.
Speaker 5: That cultural revenue of 21.8 million exceeded our expectations. Up 42% from last year. During my study, of course, all three revenue categories.
Third quarter revenue of 21.8 million exceeded our expectations.
42% from last year, driven by strength of course, okay revenue categories.
Speaker 5: This resulted in an adjusted ebit of profit of 1 million for G3 versus an adjusted ebit of loss of .5 million lost here. Thanks.
This resulted in an adjusted EBITDA perfect 1 million Q3, adjusted EBITDA loss of $5 million last year.
I can download three revenue categories.
Speaker 5: DeVos's revenue is $6.6 million, growing 12% from Q3 last year, making it the largest DeVos revenue to date.
That was $6 6 million growing 12% Q3 last year, making it the largest debit frankly want to debate.
Speaker 5: Continue to see post-Summer Regents, normal service habits, combined with continued slow and steady return to office trends.
We continue to see some return to normal status habits.
A continued slow steady retention is shrinking.
Speaker 5: This also includes normal amounts of e-commerce revenue from Maxma and Wagstor.
And since all to increase no more amounts of e-commerce revenue from Axa and Blackstone.
Speaker 5: Well, it's revenue is stating paid by millions increasing 42% from Q3 last year.
Wireless revenue was 35 million, increasing 42% from Q3 last year.
Speaker 5: driven by Milan for our pet insurance wellness permits throughout proprietary comparison engine kick roll.
Driven by demand for our pet insurance wellness programs through our proprietary comparison engine technology.
Speaker 5: Our technologies ability to add value to customers is clear. And in key three weeks, we experienced record traffic and some have turned to normal activities regime.
Our technology's ability to add value to customers with class and in Q3, we experienced record traffic.
Summit tend to normal activities, where zinc.
Speaker 5: Pet food and treats revenue and new revenue category for this year was $1.7 million.
Pet food and treats racking and your revenue category for this year was $1 7 million.
Speaker 5: Delta advisor, I knew you won't you to provide the team to provide pet parents with high quality information to allow them to make the right three decisions for their pets.
By that I mean, we watch carefully to buy that you need to provide pet parents with high quality information to allow them to make the right think it seems but that pets.
Turning to expenses.
Speaker 5: fostering new excluding depreciation and amortization. One point formerly was consistent euro year at 7% on revenue.
I'll stick rising excluding depreciation and amortization $1 4 million was consistent year on year, 7% already.
Speaker 5: that cost for down year of year as a result of very full operational experience and scalability of my tech stack offset by product cost from the sale of products through Max-Burnum.
Total costs were down year over year as a result, Barry for operational excellence and the scalability of our tech stack offset by product costs from the sale of products through Mexico.
Speaker 5: Platform operations and support expense of $3 million equates to 14% of revenue, down from 37% a year ago.
Operations and support expenses, three more equates to 14% of revenue.
7% a year ago.
Speaker 5: While non-regulatory generating platform operations and support functions remain a key backbone to the business, our operations have become higher efficient over the past year to redesign and use AI tools to get on the spot.
While non revenue generating platform operations and support markets remain I came back into the business.
Operations have become highly efficient posture redesign and use AI tools.
Awesome.
Speaker 5: Delta marketing expense of 12.8 million equates to 59% of right-winging down from 70% to 3% a year ago.
Sales and marketing expense of $12 8 million equates to 59% of revenue down from 73% a year ago.
Speaker 5: and so numerous opportunities to put dollars to worth in sales and marketing across the various revenue stream. And we'll continue to take advantage of efficient because we identify them.
We see numerous opportunities to put dollars to work in sales and marketing person embarrass revenue stream and we will continue to take advantage of efficiency because we identified.
Speaker 5: G and expense of $4.7 million equates to 21% of revenue, down from 165% a year ago, which included transactions.
G&A expense of $4 7 million equates to 21% of revenue.
155%, a year ago, which included transaction costs.
Speaker 5: 21% represents the lowest ratio since we have become public and illustrate the state ability of our platform and operation will expand our leadership team.
21% represent the lowest ratio since we have become public.
Great.
G box platform and oppression well excellence of our leadership team.
Speaker 5: From a balance sheet perspective, we ended a third quarter with approximately 31 million in cash, cash, equivalent and accounts receivable.
From a balance sheet perspective, we ended the quarter with approximately 13 1 million in cash cash equivalents and accounts receivable.
Speaker 5: are adjusted in the beta positive results in a strong position to continue to deploy cash from sales and marketing, product innovation, and value add acquisitions.
Our adjusted EBITDA positive results put us.
In a strong position to continue to deploy cash for sales and marketing product innovation and value add acquisitions.
Moving to our guidance of 23.
Speaker 5: taking into consideration results. We activate, we reiterate our fully air 23 forecast all.
Taking into consideration results year to date, we reiterate our full year 'twenty three full cost at all.
Speaker 5: So total revenue in the range of 80 to 84 million and adjusted the ecosystem guidance to a range of 0 to 2 million.
Total revenue in the range of 80 to 84 million and adjusted EBITDA guidance to a range of zero to $2 million.
Speaker 5: 82 million and 1 million are the midpoint of the respective rings.
$82 million and 1 million at the midpoint of their respective ranges.
Speaker 5: For the fourth quarter, we expect total revenue of 20 million at the midpoint of the four-year 23 range, which would be an 8% increase in revenue over 2.22 and adjusted the e-bitch at a point 3 million at the midpoint of the four-year 23 range, which would be a 168% increase in the improvement over 2.22 at the midpoint of the four-year 23 range.
For the fourth quarter, we expect total revenue of $22 million.
Only at 23 range, which would be an 18% increase in revenue at a cheaper 22.
And adjusted EBITA point 3 million at the midpoint, you get 23 range, which would be a 168 said they pretty much equaled 22 adjusted EBITA.
Speaker 5: with our strong Q3 results which took me to date adjusted the amount of $2.7 million. We are in a strong position.
With a strong teacher results, which took a year to date adjusted EBITDA 7 million, we are in a stroke and mission.
Speaker 5: to complete 23-year as an adjusted ebit of profitable company.
To complete 23 person yet as an adjusted EBITDA profitable company.
Speaker 5: We continue to be thoughtful and consider of the macro economic environment and potential slowdown in consumer spending. A financial guidance.
We continue to be thoughtful and consider the macroeconomic environment. It takes us to slowdown in consumer spending.
Our financial guidance includes the following.
And considerations.
Speaker 5: The full-coffee cup rates are internal target of rule of 50, meaning a total of greater than 50% from revenue growth plus adjusted the e-bit margin for the full year.
The forecast incorporates our entitled target.
Leaving a total of greater than 50% for writing agree with Jeff.
You can imagine.
Oh yeah.
Speaker 5: We expect holidays to drive incremental overnight versus daytime service demand, but also expect that severe weather will impact service demand.
We expect holiday to drive incremental.
Daytime side, it's been long, but also expect that the bad weather will impact service demand.
Speaker 5: had adoption during the whole day's also positively impacts penetration and demand for wellness plans.
Pet adoption during the whole days, let's say positively impact pet insurance penetration and demand of wireless plans.
Speaker 5: We anticipate that continued growth in the pet industry driven by factors such as higher rates of pet ownership, pet insurance penetration, and increasing demand for premium pet products and services will have a positive impact on our full year 23 results, including on our entrance to pet food and treat.
We anticipate continued growth in the pet industry by far.
It's not just higher rates of pet ownership pet insurance penetration and increasing demand for premium pet food service. It will have a positive impact on our full year 'twenty three results.
A lot of entrance to pet food and treats.
Speaker 5: General trends related to the state of the economy interest rates can change the confidence. We have factored in potential risk and opportunities related to these micro economic factors in order to accurately focus our financial performance.
General trends related to the state of the economy interest rates consumer companies when you factored in potential risk and opportunities where I get to these macroeconomic factors.
Wanted to actually focus on financial performance.
Speaker 5: And finally, we recognize that there may be potential risks to our financial performance in 23, such as disruptions to global supply chains, changes in consumer behavior due to unexpected events, such as a delay to imbalance return to office, judicial and performance marketing trends.
And finally, we recognize that there may be potential risks to our financial performance in 'twenty, three such as disruptions to global supply chain changing human behavior unexpected events.
And then later imbalanced for Tenda, Okay excellent marketing trend.
Speaker 5: the potential impact of AI and our ability to expand through partnerships.
The potential impact of AI, and our ability to expand through partnerships.
Speaker 5: In summary, a strong culture results illustrate a team strong ability to execute across identifiers by grabbing the strings, taking advantage of opportunities that arise to build a profitable business and shareholder value. And with that, we now welcome Q&A.
In summary.
Our strong cultural results illustrate our teams strong ability to execute across identifies five revenue streams.
Advantage of opportunities not alright perfect.
Profitable business and shareholder value.
And with that we now welcome Q&A.
Oh breakup.
Open it up for Cuba.
Right.
Speaker 1: Thank you. We will now conduct a question and suggestion. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in a question queue.
Thank you we will now conduct a question and answer session.
We would like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is in the question queue.
Speaker 1: You may press star 2 if you would like to remove your question from the queue.
You May press Star two if you would like to remove your question from the queue.
Speaker 1: for participants using speak equipment and maybe necessary to pick up your handset before pressing the star.
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Speaker 1: Once again, that's star one to ask a question at this time. One moment while we pull for the first question.
Once again, that's star one to ask a question at this time one moment, while we poll for the first question.
Speaker 1: The first question comes from Jason Hesstein with Oppenheimer. Please proceed.
The first question comes from Jason <unk> with Oppenheimer. Please proceed.
Speaker 6: Everyone, thanks. So Garrett, you're coming off of over 40% revenue growth this quarter. You know, want to push you to kind of comment on how you're thinking about growth potentially next year. And then, you know, how you're thinking about marketing relative...
Everyone. Thanks, So so Gary Youre coming off of over 40% revenue growth this quarter.
You know why I'm, pushing you to kind of comment on how youre thinking about potentially.
Potentially next year and then yeah. How are you thinking about marketing relative to the kind of grows you know you're talking about a rule of 50 is that something that you want to focus on next year.
Speaker 6: kind of grows. You know, you talked about a rule of 50, is that something that you want folks to focus on next year, or whatever you can talk about, kind of like, growth versus marketing, is what we're thinking about next year. And then secondly, any kind of color on mix of service versus wellness is we move into next year. Do we just kind of look at the current trends and just kind of assume the same mix shift as we move into next year? Thank you.
Whatever you can talk about kind of like growth versus marketing as we're thinking about next year and then secondly, any kind of Colorado mix of service cars as well on this as we move into next year do we just kind of look at the current trends and just kind of assuming the same mix shift as we move into next year. Thank you.
Speaker 4: Thanks, Rayson. Good to hear from you. Great question. I think taking a step back, we're certainly very excited about the progress in 2023. Some good news. We haven't really seen any sort of consumer slowdown or change in behavior. I think maybe some were anticipating as a function of the macro this year. We feel like we have a really resilient, premium consumer base.
Thanks, Jason good to hear from you.
Great question, I think taking a step backwards certainly very excited about the progress in 2023.
Some good news, we haven't really seen any sort of consumer slowdown or change in behavior thinking maybe some we're anticipating as a function of the macro this year, we feel like we have a really resilient premium consumer base in terms of next year. Obviously, we'll have more to share next quarter in terms of forecast, but I definitely think the minimum expectation.
Speaker 4: In terms of next year, obviously, we'll have more to share next quarter in terms of forecast, but I definitely think the minimum expectation just broadly is we're a rule of 30, if not 40 marketplace. I think we're going to see how this quarter pans out, frankly, meaning Q4, but I think we're very excited about next year's potential. There's a lot of great products and services on the roadmap.
Just broadly is where our rule of 30, if not 40 market place I think we're going to see how this kind of quarter pans out frankly, meaning Q4.
But I think we're very excited about next year's potential there's a lot of great products and services on our roadmap.
Speaker 3: In addition to the ones we launched this year, let's answer your questions specifically. We're really just laying the groundwork to accelerate growth in 2024, and that growth should be very possible as our expectation.
In addition to the ones we launched this year.
But to answer your question, specifically, we're really just laying the groundwork to accelerate growth in 'twenty 'twenty four and that growth should be very profitable is our expectation.
Thank you.
Speaker 1: Our next question comes from Jeremy Hamlin with Craig Hallum. Please proceed.
Our next question comes from Jeremy Hamblin with Craig Hallum. Please proceed.
Speaker 4: Thanks and congrats on the strong results here across your segment. So, you know, I wanted to dive into your wellness segment here and just understand in terms of driving that growth also, you know, over 40% growth in that segment.
Thanks, and congrats on the strong results here across your your segments. So.
Yeah, I wanted to dive into your your wellness segment here. It just understand in terms of you know.
Driving that growth also you know over 40% growth in that segment.
Speaker 4: Is that being driven by more participation, more participants? I mean, you had a record number here in Q3, at 632,000, or being more driven by higher spend, or the cost of...
Is that being driven.
By more participation more participants I mean, you had a record number here in Q3 at 632000 or are being more driven by higher spend or the combination of both.
Speaker 4: Hey, Jeremy. Great to hear from you again, Garrett here. Wellness is certainly a very exciting category. You know, I think you're seeing a number of insurers and wellness players and health players leaning into our marketplace.
Hey, Jeremy Great here for Neal again guarantee or <unk>.
Wellness is certainly a very exciting category.
You know I think you're seeing a number of insurers insurers and wellness players in health players leaning into our marketplace is a great place to find and meet customers. We're certainly enjoying it in terms of our opportunity to match customers, great experiences and services and products. They care about in terms of participant growth wellness is a functionally going.
Speaker 3: The great place to find and meet customers were certainly enjoying it in terms of our opportunity to match customers with great experiences and services you're probably to care about. In terms of participant growth, wellness is...
Speaker 3: Functionally gonna grow as a bunch of met new customers. Really, we're seeing, but basically, a one to one more revenue from all this implies more net new participants in the platform. And then you can imagine those customers then cross sell to the other ecosystems of products, right? So you come for purchasing the right pet insurance product somewhere or finding the right pet insurance product somewhere and then you stay for a daytime service or an overnight service or purchasing a maximum product.
<unk> hundred met new customers I'm really that's where it seemed like maybe like a one to one more revenue from all of this implies more net new participants in the platform and then you can imagine that those customers and cross sell to the other ecosystems of products right. So you come for purchasing the right pet insurance product somewhere or finding the right that insurance product somewhere and then stay for.
A daytime service or an overnight service or purchasing a maximum product.
Speaker 4: Got it. Okay. And then let me, let me shift gears here and talk about, you know, sales and marketing, you know, as we, as we look ahead here, you know, we're going to get into, you know, an election year, sometimes
Got it Okay and then let me let me shift gears here and talk about you know sales and marketing you know as we as we look ahead here.
You know, we're gonna get into you know an election years, sometimes you know costs are a little bit higher for advertising you guys are still running really strong you know CAC ratio. Neither one I think in the quarter.
Speaker 4: you know costs are a little bit higher for advertising. You guys are still running really strong, you know, CAC ratio 9 to 1, I think in the quarter. You know, any color that you might be able to share in terms of, you know, the strategy you're utilizing to reach new customers as well as to, you know, keep existing customers engaged on the platform or to react to a, you know, lapse of customers.
Any color that you might be able to share in terms of you know the the strategy you're utilizing to reach new customers as well as to you know keep existing customers engaged on the platform or to reactivate lapsed customers.
Speaker 3: Yeah, but I certainly think, have you look at the LPV to CACs, we're running incredibly efficiently. It's probably the best way to put it. We certainly think there's room to run.
Yeah. So I certainly think have you look at the LTV to CAC, we're running incredibly efficiently, it's probably the best way to put it. We certainly think there's room to run you made it pretty clear I think in the last two earnings that we're very focused on profitability for this year and we're thrilled that we were adjusted EBITDA profitable for the fiscal year as of this quarter.
Speaker 4: We made it pretty clear, I think, in the last two earnings that we're very focused on profitability for this year, and we're thrilled that we're just even profitable for the fiscal year as of this quarter.
Speaker 4: We don't expect that to change, obviously, for the remainder of the year. So now we know we have kind of adjusted even profitability as a minimum expectation. Now I think we're feeling more comfortable about our ability to deploy more in sales and marketing. So in terms of next year's thinking, I'd be surprised if we weren't leaning further into sales and marketing, whether that's with, you know, the big partners you'd expect, whether that's with partners that are offline that we already have in place.
That could change obviously for the remainder of the year. So that we know we have kind of adjusted EBITDA profitability at the minimum expectation now where I think we're feeling more comfortable rock our ability to deploy more in sales and marketing. So in terms of next year's thinking I'd be surprised if we werent leaning further into sales and marketing whether that's with the big partner as you'd expect.
That's with partners that are offline.
Have you already have in place or just.
Speaker 4: or just existing customers that we want to retarget or reach with custom offers. But generally, I think next year we expect to lean even further into sales.
Existing customers that we want to retarget, our reach with custom offers but generally I think next year, we expect to lead even further into sales and marketing.
Speaker 7: got it and then just a couple other questions here you know in terms of your pet care giver pipeline you know have you seen any change and we still have
Got it and then just a couple of other questions. Here you know in terms of your pet care Giver pipeline. You know have you seen any change I mean, we still have.
Speaker 7: You know, unemployment is still quite low, but you are seeing an uptick, you know, in, in, you know,
You know unemployment is still quite low, but you are seeing an uptick you know in.
And you know first time.
Speaker 7: you know, unemployment. Are you guys seeing that pipeline still strong is it getting better? And then are you still experimenting in terms of the fee that you're charging to join the platform for the PCG?
You know unemployment are you guys seeing that pipeline still strong is it getting better and then are you still experimenting in terms of our fees that you're charging to join the platform for the P. T G I.
Speaker 4: Hey, Jeremy, this is Adam. Good set of questions. Long story short, no, there's no change in our supply characteristics. We really think it's the best gig in America, you know, walking dogs and sunny days and nice neighborhoods. It's, you know, it's kind of what everybody wants to do. In terms of kind of how the broader macro affects it, you know,
Hey, Jeremy this is Adam.
Good good set of questions a long story short no. There's no change in our supply characteristics. We really think it's the best Gagan America up you know walking dogs.
Sunny days at nice neighborhoods. It's it's you know it's.
Kind of what everybody wants to do in terms of kind of how the <unk>.
Broader macro effects it you know.
Speaker 4: In theory, unemployment would be good for us because it would make the gig more competitive or whatever you want to call it. But I really don't think that there's a macro tie-in. I think this is an awesome gig that people want to do. Rain or shine, no pun intended. I don't think it would be like this what happens to the macro. I don't think that's going to be a level of a large impact. In terms of the onboarding fee you mentioned, it's really about finding price equilibrium or supply demand equilibrium in a market. We're not looking to really...
In theory unemployment would be good for us because it makes it the gig more kind of.
Competitive or whatever you want to call it but I really don't think that there's a macro tie in I think this is an awesome gig that you know.
People want to do rain or shine no pun intended.
Don't think regardless what happens to the macro I don't think that's going to be S haven't have a large impact in terms of the.
Onboarding C. You mentioned, it's really about finding price equilibrium or supply demand equilibrium in our markets. We're not looking to really drive that as a primary revenue source. So any fluctuation you see in that Onboarding fees is really just a.
Speaker 4: drive that as a primary revenue source.
Speaker 4: So any fluctuation you see in that onboarding fee is really just a supply and demand.
Supply and demand mechanism.
Speaker 7: got it last one for me high level question you know that the focus on profitability which you look well on track to achieve in terms of looking a little bit ahead here uh... you know
Got it last one for me a high level question you noted what's your focus.
Focus on profitability, which you look well on track to achieve yeah.
Kind of looking a little bit of head here get away what is the.
Speaker 7: In an environment like this, where you get a shaky set of investors, a little more uncertainty in the macro, what's a reasonable timeline that you guys are thinking about to get your EBITDA margins into, let's say, the high single-digit range, or maybe even up to 10%?
In an environment like this where you get kind of shaky set of investors I'm, a little more uncertainty in the macro what's the what's a reasonable timeline that you guys are thinking about to get your EBITDA margins into let's say the high single digit range or maybe even up to 10%.
Yeah, So I think last quarter I agree.
Speaker 3: Yeah, I know I think last quarter, Alec hinted that we plan on reaching pre-cashlo by second half of 2024, which means it's a really important milestone journey to your point. It's kind of default our ability to manage the business and depend on many macro factors. And I think that would also then apply a strong even a margin of, you know, high single digit. So I think that's sooner than anticipated. And we certainly expect to, you know, hit our pre-cashlo targets second half of 2020.
Yeah, I know I think last quarter, Alex hinted that we plan on reaching free cash flow by second half of 2020 for which things are really important milestone Jeremy to your point, it's kind of defaults are our ability to manage the business independently as many macro factors.
And I think that would also then imply a strong EBITDA margin of you know high single digit. So I think that's sooner than anticipated and we certainly expect to you know.
Our free cash flow target in second half of 'twenty 'twenty four.
Speaker 7: Well, okay, great. Thanks for taking all the questions. Best wishes.
Wow, Okay great.
Thanks for taking all the questions best wishes.
Thanks, Jamie.
Speaker 1: Thank you. The next question comes from Tom White with DA Devison. Please proceed.
Thank you. The next question comes from Tom White with D. A Davidson. Please proceed.
Speaker 8: Great. Thanks for taking my questions, guys. Walking dogs in nice weather, in a nice neighborhood. Sounds like a gig I need right about now. Two if I could, just I guess first on the fourth quarter revenue outlook. It looks like you beat the high end of the third quarter guide, but you're holding the full year.
Oh, great. Thanks for taking my questions guys walking dogs in nice weather in a nice neighborhood sounds like I need right about now.
Two if I could just I guess first on the fourth quarter revenue outlook.
It looks like you beat the high end of the third quarter Guide.
But you are holding the full year.
Speaker 8: kind of unchanged, and I guess at the midpoint kind of implies the fourth quarter could be down a little bit sequentially. Is that just kind of seasonality or some of the weather kind of implications that you touched on, Alec?
They are unchanged and I guess at the midpoint kind of implies the fourth quarter could be down a little bit sequentially is that just kind of seasonality or some of the weather kind of implications that you touched on Alec.
Speaker 8: Or is there something else about the fourth quarter that maybe you're thinking a little bit differently about than you were a few months ago and then I have a quick follow up.
Or is there something else about the fourth quarter that maybe you're thinking a little bit differently about than you were a few months ago, and then I have a quick follow up.
Speaker 3: Hey, Tom. Great to hear from you. We'd love to have you. So, to answer your question on Q4, I don't know if you're following, but we expect a lot of incremental weather this quarter. I think California is already expecting catastrophic storming next week, which obviously is a headwind in terms of some of the services business. Second thing is we certainly saw a really strong Q3 in our wellness business as a function of insurance products, wellness plans, and other premium healthcare products.
Hey, Tom good to hear from you we'd love to have you is so to answer your question on Q4 I.
I I don't have a following but we expect a lot of incremental weather. This quarter I think California's arent expecting like Kenneth catastrophic storming next week, which obviously is a headwind in terms of some of the services business second thing is we certainly saw a really strong Q3 in our wellness business as a function of.
Pet insurance products wellness plans and other premium health care products.
Speaker 3: I know we're unclear if that trend will stay, although we've certainly been excited about their initial Q4 results that we've seen. But we really just need about 2024 and 2025 at this point. Most of our focus is on next year and making sure we're growing profitably with strong money.
We're unclear if that trend will stay although certainly been excited about the initial Q4 results that we've seen.
This would be really clear, we're really just thinking about 'twenty 'twenty four and 'twenty five at this point most of our focus is on next year and making sure we're growing profitably with strong margins.
Speaker 8: Okay, that makes sense and I guess just to follow up on the wellness
Okay.
That makes sense and I guess just to follow up on the on the wellness.
Speaker 8: piece and specifically the pet insurers, I'm just curious whether you're seeing any kind of change in behavior on the part of those advertiser partners that maybe could be related to the macro, like in terms of bid levels for leads or any volatility in the bidding. I guess I'm just trying to see whether the macro might be having any kind of influence there. It doesn't seem from the numbers, but I guess maybe just kind of looking ahead, are you seeing any?
Peace and specifically like the pet insurers I'm, just curious whether youre seeing any kind of change your behavior on the part of those advertiser partners that maybe could be related to the macro look in terms of you know.
Bid levels for leads or any volatility in the bidding I'm just I guess I'm just trying to see whether you know the macro that might be having any kind of influence there. It doesn't seem from the numbers, but I guess, maybe just kind of looking ahead are you seeing any.
Speaker 3: Yeah, I think we're seeing strong demands. I think you saw in Q3 actually a bit more leaning in further as he knew if there was more they could be doing a partnership with us.
Yeah, I think where we're seeing strong demand I think you saw in Q3 actually people are leaning in further asking if there was more they could be doing a partnership with us I watched something I think on CNBC. This morning on a progressive CEO, saying, they're gonna be leaning back and aggressively in 2024, I think it's a good sign broadly for insurers.
Speaker 3: I watched something I think on CNBC this morning around the progressive CEO saying they're gonna be leaning back in aggressively in 2024. I think it's a good time broadly for insurers. We're seeing strong demand. We expect to see continued strong demand. I think the macro cooling of it, I don't know if that was true two quarters ago, maybe felt a little more volatility, but I think that certainly calmed, and people certainly seem to be in a better place. Okay.
So we're seeing strong demand we expect to see continued strong demand I think the macros are cooling a bit on if that was true two quarters ago, maybe talk a little more volatility, but I think that certainly comed and people certainly didn't seem to be in a better place.
Okay, great. Thanks, that's it for me.
Thank you.
Speaker 1: The next question comes from Matt Coranda with Roth Capital. Please proceed.
The next question comes from Matt Koranda with Roth Capital. Please proceed.
Speaker 9: Hey, guys. Good afternoon. So, two questions. I guess first one is just more near-term in nature. In the services platform specifically, have you observed any change in behavior with your customer set in response to any of the macro crosscurrents that have happened in the last couple of months? Just curious what you've seen quarter-to-date in terms of behavior, maybe just mix of services. If you could unpack sort of how to think about that, if there's any discernible.
Hey, guys good afternoon.
So two questions I guess first one is just more near term in nature and the services platform. Specifically have you observed any change in behavior with your customer set in response to any of the macro crosscurrents that have happened in the last couple of months just curious what you're seeing quarter to date in terms of behavior, maybe just.
Mix of services, because unpack sort of how to think about that if there's any discernible change.
Speaker 4: Hey, Matt, this is Adam. Yeah, I think that, you know, our daytime services, as we've said, is a function of office occupancy, which is, you know,
Hey, Matt This is Adam.
Yeah, I think that you know our daytime services as we've said as a function of office occupancy wishes you know.
Speaker 4: you know, a challenge relative to let's say 2019, but no, you know, no real change there quarter over quarter, that's something that we've kind of been, you know, pretty open and honest about, where is the hitting and boarding segment, the overnight segment is more so a function of travel and travel is doing great. Travel is actually above 2019 levels for the TFA data.
You know Collin relative to let's say 2019, but no you know.
No real change there quarter over quarter that that's something that we've kind of been pretty open and honest about where is the sitting in boarding segment that the overnight segments is more so a function of travel and travel is doing great travel is actually above 2019 levels per the TSA data. So you know that the services mix.
Speaker 4: So, you know, the services mix is probably going to be a little bit more overnight as we think about Q4, which you see is known and 2024 generally, but we're really just letting the consumer lead us to what they want and then kind of invest.
Probably going to be a little bit more overnight as we think about Q4, which is seasonal and in 2024 generally, but we're really just letting the consumer lead us to what they want and then kind of investing behind them.
Speaker 9: Okay, that sounds fair. And then the other question was on platform participants. Nice growth this quarter, whether you look at it sequentially or year over year. Curious if maybe you could unpack for us sort of where, like maybe the split of platform participants by the segment. And I guess the other question that I had for you, which may be harder to answer is.
Okay. That's fair and then the other question was on platform participants nice growth this quarter or whether you look at it sequentially or year over year.
Curious, if maybe you could unpack for us sort of where.
Like maybe the split our platform participants by the by this segment.
And I.
I guess the other question that I had for you which may be harder to answer is.
Speaker 9: How many of the platform participants that you cite are attaching to more than one of your segments? Just curious to get us, Spencer, cross-sell between the segments that you have. Yeah, hey Matt, Garrett here.
How many of the platform participants that you cite are attaching to more than one of your segments. Just curious to get a sense for cross sell between the segments that you have.
Yeah, Hey, Matt scared here.
Speaker 9: I wish you wanted to walk down the aisle. No, we don't really talk about the profit participants by the revenue group because there's so much happening dynamically in a given quarter, or that's less caregivers doing, you know, daytime or doing overnight. That leads to that to be a different number or more people cross selling in a given quarter because seasonality to things like, let's say, buying wellness plans or insurance products or talking to the vet.
Wish you wanted to walk down so like I say no. We don't really talk about the participant by the revenue group because there's so much happening dynamically in a given quarter or that's less caregivers doing daytime we're doing overnight that needs that to be a different number or more people cross selling in a given quarter because of seasonality to things like let's say buying wellness plans for insurance products.
I'm talking about that.
Speaker 3: But I generally think that you should look at two things. One would be revenue divided by platform participants to get a good sense of our food, kind of how that trend is going. Obviously, we want to see that continue to stay going up, frankly. Like that means we're doing a good job of cross-selling and monetizing the consumer base.
I generally think that you should look at two things won't be revenue divided by by some participants to get a good sense of our two kind of how that trend is going obviously want to see that continue to stay going up frankly like that means we're doing a good job of cross selling and monetizing the consumer base. The second thing would just be kind of revenue split by platform participants probably good.
Speaker 3: The second thing would just be kind of revenues put by platform participants.
Speaker 3: Probably a good way to think about it. I mean, all these products are premium products. They're all somewhat expensive. Like, you know, I don't know if you've looked at Max one recently, but Ron Perscher's $90.
Where do you think about I mean, all these products are premium products, they're all somewhat expensive.
Don't know if you've looked at Max one recently, but Ron pressures $90. So generally I think two things one is there's certainly a strong cross sell happening that I didn't expect even lean into further as we brought in our you know our bench of products and services. The second thing would just be to think about revenue divided by participants who can help you understand how we think that monetize them as customers.
Speaker 9: So, generally, I think two things. One is there's certainly strong cross-sell happening. That's something we expect to even lean into further as we broaden our, you know, our bench of products and services. The second thing would just be to think about revenue divided by platform participants to get a healthy understanding of how we think about monetizing those customers.
<unk>.
Okay helpful guys I'll leave it there thank you.
Speaker 1: Thank you. At this time, I would like to turn the call back over to management for closing comments.
Thank you at this time I would like to turn the call back over to management for closing comments.
Speaker 3: Thanks, all. Two things I want to add that we didn't talk about the management presentation. One is, we've done a lot of questions around the impact of AI and how we think about its efficacy and the wag urbanization. We're totally very excited about AI and its potential. I think it's been a great tool for employees to accelerate their efficiency, their tasks.
Thanks Al two things I want to add that we didn't talk about imagine presentation. One is.
Just kind of we've done a lot of questions.
Around the impact of AI and how we think about its efficacy in the Wag organization. We're certainly very excited about AI and its potential we think it's been a great.
Tool for employees to accelerate their efficiency their task and the ability to just create more frankly like do more with less as a result, we're really thinking about head count and SG&A efficiency in 2024, as a function of AI and automation, we don't expect much head count changes, we have seen have operating leverage in the business. The second thing.
Speaker 3: and ability to just create more, frankly, like do more with less. As a result, we're really thinking about headcount and SGA efficiency in 2024. As a function of AI and automation, we don't expect much headcount changes. We think we're going to have operating leverage in the business.
Speaker 3: The second thing is, we're very excited about the future for WAG, and 2024 specifically. I think you'll continue to see us leaning into long-term profitable growth. We're still very early on this journey, so if you have any two takeaways today other than the fact that we just did record revenue and record EBITDA for the seventh consecutive quarter, it's that we're very excited about 2024 and the opportunity for new technology to improve our customers' lives and our shareholder values.
Is we're very excited about the future for wags in 2024, specifically I think you'll continue to see us leaning into long term profitable growth. We think it's we're still very early on this journey and so if you have any two takeaways today other than the fact that we just did record revenue and record EBITDA for the seventh consecutive quarter. It's that we're very excited about 2024.
And the opportunity for new technology to improve our customers lives and shareholder value.
Speaker 1: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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Speaker 10: The pro.
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