Q4 2023 Wag! Group Co Earnings Call

Operator: Greetings. Welcome to the WAG Q4 2023 Earnings Conference. At this time, all participants are on a listen-only basis. A 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.

Greetings and welcome to the Wag Q4 of 2023 earnings Conference call. At this time, all participants are in a listen only mode.

A 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. Please note. This conference is being recorded I will now turn the conference over to your host Gary Smallwood, Chief Executive Officer, and Chairman you may begin.

Operator: Please note this conference is being held, I will now turn the conference over to you. Gary Smallwood, Chief Executive Officer and Chairman, you may begin. Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our fourth quarter and full year 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. 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. A discussion of these risks and uncertainties is included in our earnings release today and our filings with the SEC, including our upcoming 10K for the year ended December 31, 2023. We also remind you that we undertake no obligation to update the information contained in this call. These statements should be considered estimates only and are not a guarantee of future performance.

Good afternoon, everyone and thank you for joining lags conference call to discuss our fourth quarter and full year 2023 financial results on the call today are Gary small, our Chief Executive Officer, and Chairman, Adam Storm, President and Chief product Officer, and Alice Davidian, Chief Financial Officer 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 and discussion of these risks and uncertainties is included in our earnings release today.

And our filings with the SEC, including our upcoming 10-K for the year ended December 31 2023.

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 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 today's earnings release.

Matt Koranda: 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 today's earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results. Lastly, you can find our earnings release and earnings presentation posted on the investor relations page of our website. And with that, I'll now turn the call over to Garrett Small

These non-GAAP measures are not intended to be a substitute for our GAAP results.

Lastly, you can find our earnings release and earnings presentation posted on the Investor Relations page of our website and with that I'll now turn the call over to Gary Smalley.

Matt Koranda: Good afternoon, and thank you for joining us today to discuss our financial performance for the fourth quarter and full year 2023 and provide guidance for fiscal year 2024. First, I'll provide a brief overview of our financial results for the fourth quarter and discuss our 2024 plan. Following that, Adam, our President and Chief Product Officer, will share updates on our strategic plans and key initiatives for 2024 and beyond. Then, Alec, our Chief Financial Officer, will provide a more detailed analysis of our fourth quarter and full year 2023 results, discuss our capital allocation priorities, and share our 2024 guidance. We're excited to announce another successful quarter for the WAG team in line with our expectations for revenue and adjusted EBITDA, which resulted in the high end of our range for fiscal year 2023 for revenue and the midpoint of our range for adjusted EBITDA. During the quarter, revenue grew 27% year over year to $21.7 million, which was a new quarterly record.

Good afternoon, and thank you for joining us today to discuss our financial performance for the fourth quarter and full year 2023, and provide guidance for fiscal year 2024.

First I'll provide a brief overview of our financial results for the fourth quarter and discuss our 2024 plants.

Following that Adam our President and Chief product Officer will share updates on our strategic plans and key initiatives for 2024 and beyond.

And Alec our Chief Financial Officer will provide a more detailed analysis of our fourth quarter and full year 2023 results discuss our capital allocation priorities and share our 2020 for guidance.

We were excited to announce another successful quarter for the wag team in line with our expectations for revenue and adjusted EBITDA, which resulted in the high end of our range for fiscal year 'twenty to 'twenty three for revenue and midpoint of our range for adjusted EBITDA.

During the quarter revenue grew 27% year over year to 21, 7 million, which was a new quarterly record. This growth was driven by the success of our wellness business fueled by pet parent demand for pet insurance and wellness products and.

Matt Koranda: This growth was driven by the success of our wellness business, fueled by pet parent demand for pet insurance and wellness products. In addition, we are seeing early signs of success with Maxbone within services, which validates our longer-term growth initiatives by expanding our reach within retailers to the premium product category. Our adjusted EBITDA was breakeven, an increase from a loss of $0.4 million in the same period last year.

In addition, we are seeing early signs of success with Maxwell and services, which validates our longer term growth initiatives by expanding our reach with retailers to the premium product category.

Our adjusted EBITDA was breakeven and increased from a loss of 0.4 million in the same period last year.

Matt Koranda: As we navigated the dynamic macroeconomic landscape, our primary objective centered around achieving a sustainable equilibrium between growth, profit, and margin. In the fourth quarter, platform participants increased to 600,000, an increase of 38% year-over-year, and WAC premium penetration remained above our 50% target. To summarize 2023, this was a year of operational efficiency as we demonstrated adjusted EBITDA profitability for three consecutive quarters, reaching fiscal year adjusted EBITDA profitability significantly ahead of schedule. We did this while growing revenues 53% year-over-year and reinvesting in the platform. A few highlights for the year include entering the pet food and treat category with our acquisition of Dog Food Advisor and the launch of Cat Food Advisor, deepening our offerings in the wellness category with our exclusive offering at Paw Protect, the only pet insurance product offering instant pay in the U.S., and entering the Premium Pet Essentials category with the acquisition of MaxBow.

As we navigated the dynamic macroeconomic landscape our primary objective centered around achieving a sustainable equilibrium between gross profit and margin.

In the fourth quarter platform participants increased to 600000.

Increase of 38% year over year, and one premium penetration remained above our 50% target.

To summarize 2023 this was a year of operational efficiency as we demonstrated adjusted EBITDA profitability for three consecutive quarters, reaching fiscal year adjusted EBITDA profitability significantly ahead of schedule.

We did this while growing revenues, 53% year over year and reinvesting in the platform.

A few highlights for the year include entering the pet food and treat category with our acquisition of dog food advisor and the launch of Cat food adviser deepening our offerings in the wellness category with our exclusive offering all protect the only pet insurance product offering instant pay in the U S and entering the prime.

Pat a central category with the acquisition of Baxter.

Matt Koranda: We couldn't be more excited about the proprietary technology, breadth of our platform, and deep relationships we have with premium households as we enter into 2024. In 2024 and beyond, we are focused on profitable revenue growth and reaching more U.S. households as the all-encompassing trusted partner for premium wellness, service, and product. We will do this by reinvesting free cash flow into growth, which we expect to achieve in the back half of 2024. We believe we are in the early innings of a secular growth trend in the premium wellness, service, and product categories in which we operate. We are nearly overwhelmed by the opportunities ahead of us and the resilience and strength of the premium households we serve, who are showing no signs of slowing down.

We couldn't be more excited about the proprietary technology breadth of our platform and deep relationships, we have with premium households, as we enter into 2024.

In 2024 and beyond we are focused on profitable revenue growth and reaching more U S households, as the all encompassing trusted partner for premium wellness service and products.

We will do this by reinvesting free cash flow when the growth, which we expect to achieve in the back half of 2024.

We believe we are in the early innings of a secular growth trend in the premium wellness service and product categories in which we operate.

We are nearly overwhelmed with the opportunities ahead of us and the resilience and strength of the premium households me service, who are showing no signs of slowing down.

Matt Koranda: Accordingly, we are eager to build, innovate, and acquire in order to expand the WAG platform and deliver for our customers. As of today, we're setting a path to reach more than $200 million in revenue by fiscal year 2027, which quantifies the clear demand for our platform. This translates into year-over-year profitable growth of at least 25% for the next four years. We will do this while maintaining disciplined headcount growth through the use of AI and process automation.

Accordingly, we are eager to build innovate and acquire in order to expand the wag platform and deliver for our customers.

As of today, we are setting a path to reach more than 200 million in revenue by fiscal year, 2027, which quantifies the clear demand for our platform.

This translates into a year over year profitable growth of at least 25% for the next four years, we will do this while maintaining disciplined head count growth.

And process automation.

Matt Koranda: In summary, the team at WAG continues to execute against our goals and deliver strong and sustainable growth. Our fourth quarter and full-year results demonstrate our ability to scale our 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 U.S. households. Our 2024 guidance, which Alec will outline shortly, demonstrates our commitment to durable, year-over-year, profitable revenue. And with that, I will turn the call over to Adam to review our strategy for 2024. Thanks, Garrett.

In summary, the team at WAC continues to execute against our goals and deliver strong and sustainable growth.

Our fourth quarter and full year results demonstrate our ability to scale, our 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 U S households.

Our 'twenty 'twenty, four guidance, which Alex will outline shortly demonstrates our commitment to durable year over year profitable revenue growth.

And with that I will turn the call over to Adam to review our strategy for 'twenty 'twenty four.

Thanks, Garrett I'm excited to share the three top level elements of our strategy to drive long term shareholder value and profitable growth in 2024 and beyond.

Adam: I'm excited to share the three top-level elements of our strategy to drive long-term shareholder value and profitable growth in 2024 and beyond. 1, Best-in-Class Technology As a technology company, we're excited to continue building proprietary solutions to capture the hearts and minds of our customers. We'll leverage our technology, and invest in a world-class user experience to innovate on comparison tools for wellness products, matchmaking services for the highly fragmented pet services landscape, and white label solutions for premium partners such as Tractor Supply, Forbes, and Bright Horizons. These proprietary partnerships develop a unique and defensible business model in combination with our offerings that make WAG a leader in the market.

One best in class technology.

As a technology company. We're excited to continue building proprietary solutions to capture the hearts and minds of our customers.

We will leverage our technology and best in class user experience to innovate on comparison pools for wellness products matchmaking services for the highly fragmented pet services landscape and White label solutions for premium partners, such as tractor supply Forbes and bright horizons.

These proprietary partnerships develop a unique and defensible moat in combination with our offerings that make wag a leader in the market.

True platform expansion and M&A.

Adam: Platform Expansion and M&A, As evidenced by our successful acquisitions and seamless integrations of Dogfood Advisor, Maxbone, and Firmacy, we will continue to pursue opportunities that expand the scope of our offerings for our customers. Our technology-first DNA allows us to move swiftly, both on the buy and the integration, increasing the return profile of the deal and delivering value for the end customer. We are excited to announce another incredible opportunity in WoofWoofTV, one of the largest social media platforms for pet lovers, which we closed in Q4 2023. WoofWoofTV expands our reach with pet lovers with more than 18 million followers across Facebook, Instagram, TikTok, and more. WoofWoofTV provides a unique media asset that enables WAG to develop proprietary content for WAG-owned brands and partner brands. Don't hesitate to give them a follow on Instagram or a like on Facebook.

As evidenced by our successful acquisitions and seamless integration of dogs with adviser Max bone and pharmacy will continue to pursue opportunities to expand the scope of our offerings for our customers. Our technology first DNA allows us to move swiftly both on the buy and the integration increasing the return profile.

While the deal and delivering value for the customer.

We are excited to announce another incredible opportunity and work with TV one of the largest social media platforms for pet lovers, which we closed in Q4 2023.

With what TV expands our reach with pet lovers with more than 18 million followers across Facebook Instagram tick tock and more.

The fourth TV provides a unique media asset that enables wag to develop proprietary content. The wag on brands and partner brands don't hesitate to give them a follow on Instagram or like on Facebook.

Adam: 3. Operational efficiency. We believe a hallmark pillar of a successful technology company is the ability to scale revenue without a corresponding increase in headcount. In 2023, we achieved a record $1 million in revenue per employee, which we expect to increase in 2024 and beyond. This was accomplished through intense focus on automation, proprietary marketplace technology that does not require significant customer service or sales headcount, and the inherent scalability of our digital product.

Three operational efficiency.

We believe our hallmark pillar of a successful technology company is the ability to scale revenue without a corresponding increase in head count.

In 2023, we achieved a record $1 million in revenue per employee, which we expect to increase in 2024 and beyond.

This was accomplished through intense focus on automation proprietary marketplace technology that does not require significant customer service or sales head count and the inherent scalability of our digital products.

As Gary alluded to 2023 was our year of efficiency.

Alec: As Garrett alluded to, 2023 was our year of efficiency. 2024 will set the foundation for consistent and repeatable growth this year and beyond. This growth will be achieved by doubling down on our best-in-class technology, broad and accessible platform, seamless M&A, and intense focus on operational efficiency. I will now turn the call over to Alec to discuss our fourth quarter and full year financials and 2024 forecast in more detail. Thanks. Adam.

'twenty 'twenty four will set the foundation for consistent and repeatable growth for this year and beyond.

This growth will be achieved by doubling down on our best in class technology brought an accessible platform seamless M&A and intense focus on operational efficiency.

I will now turn the call over to Alex to discuss our fourth quarter and full year financials, and 2024 forecast in more detail.

Thanks, Adam.

Alec: We had previously described 2023 as a year of efficiency and optimizing the business for future success, which we continue to define as consistent, profitable growth. While executing on this, we have finished 2023 and Q4 Strong, which are as follows. For the full year, 2023, we generated record revenues of 83.9 million, which represents 53% year-over-year growth and is at the top end of our guidance range. Record adjusted EBIT was $0.7 million, representing the midpoint of our guidance range.

We had previously described 2023 as a year of efficiency and optimizing the business for future success, which we continue to define that's consistent profitable growth.

While executing to this we have finished 2023 and keep those stroke, which are as follows.

For the full year 2023.

Generated record revenues of $83 9 million, which represents 53% Europe and us.

The top end of our guidance range.

Record adjusted EBITA point, 7 million, representing the midpoint of our guidance range.

Alec: And finally, record platform participants, with Q4 totaling 600,000 platform participants, representing 38% growth from a year ago. The meaningful growth of these three key metrics, as compared to last year, demonstrate the strength of our business model, strategy, and execution. For Q4, revenue was $21.7 million, a Q4 quarterly record, representing 27% year-over-year growth, and adjusted EBITDA was break-even.

And finally record platform participants with Q4 totaling 600000 platform participants representing 38% from a year ago.

The meaningful growth with these three key metrics as compared to last year demonstrate the strength of our business model strategy and execution.

But Q4 revenue was $21 7 million Q4 quarterly record representing 27% year over year of course adjust.

Adjusted EBITDA breakeven.

Alec: I will note this was slightly lower than our prior guidance, which is a result of post-holiday demand in conjunction with the fact we saw a significant opportunity to lean into sales and marketing in the back of Q4, primarily in December. The opportunity was too great to not deploy capital and take advantage of the surge in consumer demand, which we expect to be recognized in Q1 2024. Delving deeper into the financial results, writing a category results blast bullet: full year services of $24.4 million, growing 12% year-over-year. Wellness was 52.9 million, growing 60% year-over-year, and pet food and treats were 6.6 million.

This was slightly lower than our prior guidance, which as a result of post holiday demand in conjunction with the fact, we saw significant opportunity to lean into sales and marketing in the back half of Q4, primarily in December.

The opportunity was too great to not to play capital and take advantage of the surge in consumer demand, which we expect to be recognized in Q1 2024.

Delving deeper into the financial results revenue category results were as follows.

Well, we have services was $24 4 million growing 12% year over year.

Well this was 52.9 million growing 60% year over year.

Pet food and treats with $6 6 million.

Alec: Services in 2023 will include a nominal amount of e-commerce revenue from the award-winning portfolio of products on maxbone.com. Looking at the fourth quarter specifically, services were $6.3 million, growing 7% from a year ago, driven by favorable sitting and boarding mix uptake. Wellness was $13.5 million, growing 21% from a year ago, driven by strong pet insurance and wellness plan demand. And finally, pet food and treats was $1.9 million.

Services in 2023 include a nominal amount of E Commerce revenue from the award winning portfolio of products on Max but didn't outcome.

Looking at the fourth quarter specifically.

Since was $6 3 million growing 7% from a year ago, driven by favorable sitting on boarding mix uptick.

Wellness was $13 5 million growing 21% from a year ago, driven by a stroke pet insurance in wireless plant demand.

And finally pet food and treats with 1.9 billion.

Alec: As a reminder, Pet Food and Treats is a new revenue category we entered into at the start of 2023, encompassing Dog Food Advisor and Cat Food Advisor, which has grown 40% from Q1 to Q4. Our expenses analyze the percentage of revenue, illustrate operational excellence and scaling, and are as follows. For the full year 2023, cost of revenue, excluding depreciation and amortization, totaled $5.5 million, representing 7% of revenue, consistent with last year. In the fourth quarter, cost of revenue totaled $1.8 million, representing 8% of revenue, up from 6% a year ago. The incremental costs in 2023 were driven by the max spend product as well as related costs.

As a reminder, pet food and treats is a new revenue category, we entered into at the start with 2023 encompassing dog food adviser and Cat food advisor, which is great. It's 40% from Q1 to Q4.

Our expenses analyzed as a percentage of revenue illustrate operational excellence and scaling and are as follows.

For the full year 2023 cost of revenue, excluding depreciation and amortization totaled $5 5 million, representing 7% of revenue consistent with last year.

In the fourth quarter cost of revenue totaled $1.8 million, representing 8% of revenue up from 6% a year ago.

The incremental cost in 2023 was driven by mass spec product a wellness related costs.

Alec: Full year 2023 platform operations and support expense totaled $12.5 million, representing 15% of revenue versus 25% last year. In the fourth quarter, platform operations and support expense totaled $2.8 million, representing 13% of revenue, down from 16% a year ago. The 10% absolute percentage points decrease year-over-year was achieved through the deployment of our highly efficient processes, automation, and software tools throughout 2023. For the full year, 2023 sales and marketing expense totaled $50.5 million, representing 60% of revenue, down from 64% last year. In the fourth quarter, sales and marketing expense totaled $13.7 million, representing 63% of revenue compared to 62% a year ago. As mentioned earlier, we experienced record consumer demand post-holidays and deployed capital thoughtfully to take advantage of the opportunity. Full-year G&A expense totaled $19.2 million, representing 23% of revenue, down from 59% last year, which did include one-time costs of going public. Fourth quarter G&E expense totaled $4.7 million, representing 22% of revenue, down from 23% a year ago.

But what are your 2023 platform operations and support expense totaled $12 5 million, representing 15% of revenue versus 25% last year.

In the fourth quarter platform operations and support expense totaled $2 8 million, representing 13% of revenue down from 16% a year ago.

The 10% absolute percentage points decrease year over year was achieved through the deployment of our highly efficient processes automation and software tools throughout 2023.

For the full year 2023 sales and marketing expense totaled 55 million, representing 60% of revenue down from 64% last year.

In the fourth quarter sales and marketing expense totaled $13 7 million, representing 63% of revenue compared to 62% a year ago.

As mentioned earlier, we experienced record consumer demand post holidays and deployed capital thoughtfully to take advantage of the opportunity.

Full year G&A expense totaled $19 2 million, representing 23% of revenue down from 59% last year, which did include one time costs of going public.

Fourth quarter, G&A expense totaled $4 7 million, representing 22% of revenue down from 23% a year ago.

Alec: This is the outcome of revenue scale, operating leverage, and hiring discipline. From a balance sheet perspective, we ended the year with $28.3 million in cash, cash equivalents, and accounts receivable. This balance also reflects the full cash payment of $1.25 million for Wolf of TV that closed in December.

This is the outcome of break any scale operating leverage and hiring discipline.

From a balance sheet perspective, we ended the year with $28 3 million in cash cash equivalents and accounts receivable.

This balance also reflects full cash payment of 1.25 million, but wolf with T V that closed in December.

Alec: Becoming adjusted EBITDA positive in the second half of 2023 has significantly reduced cash burn compared to last year. Now looking ahead to our 2024 guidance and longer-term outlook, we expect to generate the following. Revenues of $105 million to $115 million in 2024, which represents a score of 25% to 57% over 2023. Adjusted EBITDA in the range of $2-6 million, representing 177-731% over 2023. This guide anticipates 2% to 5% adjusted EBITDA margin together with positive free cash flow in the second half of 2024. Additionally... On the heels of a strong 2023 and expectations for 2024, we are also announcing that our Board of Directors has authorized a debt pay-down of up to $10 million of principal in 2024. If the full $10 million paydown is executed, it would result in $1.6 million of cash interest payment savings on an annual basis, which directly contributes to free cash flow.

Becoming adjusted EBITDA positive in the second half of 2023 and significantly reduced cash burn compared to last year.

Now looking ahead to our 2020 full guidance and longer term outlook, we expect to generate the following.

Revenues of $105 million to $115 million in 2024.

This represents growth of 25% to 37% of the 2023.

Adjusted EBITDA in the range of $2 6 million, representing 177% to 731%.

23.

This guide anticipates, 2% to 5% adjusted EBIT margin together with positive free cash flow in the second half of 'twenty 'twenty four.

Additionally on.

On the heels of a strong 2023 and expectations for 'twenty 'twenty. Four we are also announcing that our board of directors has authorized a debt pay down of up to $10 million of principal in 2024.

If the full 10 million pay down if executed it would result in one 6 million of cash interest payments savings on an annual basis, which directly contributes to free cash flow.

Alec: Looking beyond 2024, we expect an average of 25% compound revenue growth for the time periods of 2024 through 2027, assuming no meaningful change in the macroeconomic environment, with the expectation of driving over $200 million of revenue in 2027. In summary, a strong fourth quarter and annual results illustrate, firstly, the strong demand and tailwinds within the PEC category, which according to Morgan Stanley, is set to grow at a CAGR of 8% over 2022 to 2030, reaching a projected total of $277 billion. Secondly, management's ability to execute and drive disciplined growth, which we have achieved for seven consecutive quarters.

Looking beyond 2024, we expect an average of 25% compound revenue growth for the time periods of 2024 through 2027, assuming no meaningful change in the macroeconomic environment with the expectation of driving towards the $200 million of revenue in 2027.

In summary.

Our strong fourth quarter and annual results illustrate.

Especially the strong demand Intel wins within the pet category, which according to Morgan Stanley is set to grow at a CAGR of 8% over 2022 'twenty 30, reaching a projected total of 207 7 billion.

Secondly, management's ability to execute and drive disciplined growth, which we had achieved seven consecutive quarters.

And thirdly confidence in the next day, you waxed journey as a profitable growth company in 'twenty, 'twenty, four and beyond which we have outlined here today.

Operator: And thirdly, confidence in the next stage of WAG's journey as a profitable growth company in 2024 and beyond, which we have outlined here today. And with that, we now welcome Q&A. Operator, can you kindly open it up for Q&A? Thank you. And at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in. You may have pressed star 2 if you would like to remove your...

And with that we now welcome Q&A.

Can you kind of put it up for Q&A.

Thank you and at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

Press Star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Jeremy Hamblin: If you are using speaker equipment, it may be necessary to pick up your handset before pressing the button. Our first question comes from the line of Jeremy Hamblin from Craig Hallam Capital. Cleared for Seaweed, Thanks and congratulations on the strong results and guidance. I wanted to start by just asking a little more detail on your FY24 revenue guidance. So it implies a 25 to 37 percent year-over-year growth. But included within that, what's the organic growth rate that's embedded within there?

Our first question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.

Thanks, and congratulations on the strong results and guidance.

I wanted to start with just asking a little more detail on your FY 'twenty for revenue guidance. So it implies a 25% to 37% year over year growth.

Hum and included within that how what's the organic growth rate.

That's embedded within there and that's part one and then part two is on the EBITDA portion of the deals that you've done whether it's will fall for a Max bone what is the EBITDA contribution from acquiring those platforms, that's embedded within that guidance in terms of my.

Matt Koranda: And that's part one. And then part two is on the EBITDA portion of the deal that you've done, whether it's WolfWolf or MaxBone. What is the EBITDA contribution from acquiring those platforms that's embedded within that guidance? In terms of my assumption, it would be that they are going to be a drag on EBITDA, but any clarification? Super helpful. Hey, Jeremy. It's Garrett

Sumption would be that they are going.

Going to be a drag on EBITDA, but.

Any clarification would be super helpful.

Hey, Jeremy it's Gary Yeah, great.

Matt Koranda: Great to hear from you. Thanks, everyone, for being here. So, these are two questions. Let me make sure I get them right.

To hear from you thanks, everyone for being here.

I think there are two questions, let me make sure I get them right. So in terms of our fiscal year 2024 guidance on revenue of 105 to $1 15.

Matt Koranda: So in terms of our fiscal year 2024 guidance on revenue of 105 to 115, that is entirely organic, not assuming any M&A-related growth. Second, question related to EBITDA of businesses that we have acquired and integrated into the WAC platform, taking a step back. Generally, we look at businesses that are highly efficient and have the ability to cross sell or upsell into our existing customer base. It's part of our kind of M&A thesis. These businesses should not be a drag coefficient on the business. They also won't be kind of at scale.

It is entirely organic.

But assuming.

M&A related growth.

Growth.

Second question related to EBITDA of businesses that we have.

Acquired an integrated platform.

Just taking a step back generally we look at businesses that are highly efficient and have the ability to cross sell upsell into our existing customer base as part of our M&A. He says.

These business should not be a drag coefficient on the business. They also won't be at scale frankly, that's why we that's why we acquire them. So I think about them as kind of a neutral effect on both revenue and EBIT.

Matt Koranda: Frankly, that's why we acquired them. So I think about them as kind of a neutral effect on both revenue and EBIT. Hope I answered both your questions, Jeremy. Yeah, no, great.

Nobody asked a bunch of questions there.

Yeah no great. That's that's helpful. And then just in terms of you know one of the things that has been a bit tricky here as we start 2024.

Matt Koranda: That's, that's helpful. And then, just in terms of, you know, one of the things that has been a bit tricky here as we start 2024, you know, weather has had an impact across the country, particularly in January, whether it was kind of storms, freezing temperatures, the first few weeks of January. We've also had Torrential Rains on the West Coast, where you guys have some exposure.

You know weather has had an impact across the country, particularly in January whether it was you know kind of storms freezing temperatures first few weeks of January. We've also had a you know some torrential.

It'll rings, you know on the West Coast, where you guys have some exposure.

Wanted to just get a sense for how that might be impacting your business. As you know and then kind of related to that you know.

Matt Koranda: I wanted to just get a sense for how that might be impacting your business, and then kind of related to that, platform participation. You know, the number of participants that you're seeing here in Q1, and kind of the typical, a reminder just of the typical seasonality that we should expect. Yeah. Hey, Jeremy, Garrett again.

Platform participation you know the number of participants that you're seeing here in Q1 and kind of the typical a reminder, just of the typical seasonality that we should expect.

Yeah, Hey, Darrin Darrin again, thanks for the question I guess two questions. One how has weather impacted the business taking a step back again, we are very fortunate to have a incredibly diverse platform business at this point I'd remind her pet parents and households kind of ups or anything from pet food advice to pet treat advice to purchasing the right insurance or wellness plant.

Matt Koranda: Thanks for the question. I guess I have two questions. One, how has this kind of weather impacted the business? Taking a step back again, we are very fortunate to have an incredibly diverse platform business at this point. As a reminder, pet parents and households count on us for anything from pet food advice to pet treat advice to purchasing the right insurance or wellness plan, in addition to daytime and overnight services.

In addition to daytime and overnight services. So there's.

Certainly been some impact of weather nothing outside of normal and I think it's already kind of baked in one thing I'd add there Jeremy is.

Matt Koranda: One thing I'd add there, Jeremy, is January was one of our strongest starts of the year in the history of the business. So we are not seeing a slowdown in the consumer that we service, which is generally the premium household. I think your second question was around seasonality.

January I think some of our strongest start to the year in the history of the business. So we are not seeing a slowdown in the consumer that we service, which is generally the premium household.

I think your second question was around seasonality generally I would expect 2024 to trend similar to 2023 in terms of quarter over quarter growth and and kind of mix of revenue contribution by different parts of the business.

Matt Koranda: Generally, I would expect 2024 to trend similar to 2023 in terms of quarter-over-quarter growth and the kind of mix of revenue contribution by different parts of the business. So, you know, Q1, Q3 versus Q2, Q4 as a function of adoptions and weather and summer, and everything else should stay consistent. Got it. And in terms of the comment, particularly the strongest start that you've ever seen, is that being driven? Like, which segment?

As you know Q1 Q3 versus Q2, Q4 is a function of adoptions and weather and summer and everything else should stay consistent.

Okay.

Got it and then in terms of the comment are particular to the strongest start that you've ever seen is that is that being driven like which which segment are you seeing that is it across all three of your segments. Whether it's services bookings are you know food and treats or is that being driven more by wellness.

Matt Koranda: Are you seeing that? Is it across all three of your segments, whether it's services, bookings, or, you know, food and treats? Or is that being driven more by wellness, you know, and kind of pet adoption, maybe being higher than? I certainly did that one.

You know and and kind of pet adoption, maybe being higher than expected.

Is it related to that one I think we've seen.

Matt Koranda: I think we've seen, just from a macro perspective, more adoptions, more premium adoptions. Those premium pet parents need things like premium pet food, early pet insurance, early wellness plans, and are starting to think about services. As a reminder, 12 to 18 weeks is a little bit early for dog walks.

Just from a macro perspective are more adoptions more premium adoptions those premium pet parents need things like premium pet food early pet insurance early wireless players and are starting to think about services. As a reminder, about 12 weeks, a little bit or at least the dog walks and it might be meeting a walker for the first time or considering an overnight, but it's not yet a current priority.

Matt Koranda: They might be meeting a walker for the first time or considering an overnight stay, but it's not yet a current priority. It's probably more of a Q2, Q3 thing once you've adopted your pet. But I would generally say the strength is mostly in pet food, treats, insurance, and wellness. Got it. Okay. And then last one for me, and I'll hop out of the queue, but in terms of the cost of revenues, right, and that's obviously going to change from what your prior business model looked like, kind of a pre-food and treats business. But how do we think about scaling that portion of your financial model as you guys move forward? I mean, I think your platform operations and support have been, you know, pretty remarkable. And, you know, basically flat year-over-year on revenue growth that was up, high 20s on a percent, but you're obviously going to see your COGS move higher, as you have that food and drink business. But, you know, just a sense for what you're expecting on that.

Probably more of a Q3 thing once you've adopted your pet I would generally say that strength, mostly in pet food and treats insurance wellness and health.

Got it Okay, and then and then last one for me and I'll hop out of acute but in terms of the cost of revenues right and you know.

That's obviously going to change from what your prior business.

It'll look like you know kind of a you know a pre food and treats business, but you know how do we think about scaling that that portion of your financial model. As you guys move forward I mean, I think you like your platform operations and support has been you know pretty remarkable.

And you know just.

You know that that's.

It was basically flat year over year on revenue growth that was up you know high twenties on a percent, but you're obviously going to see your your Cogs you know move higher.

As you have that that food and treat business, but you know just a sense for what you're expecting on that and then kind of within the component of.

Matt Koranda: And then kind of within the component of, of your projected growth for this year, you know, what is coming from the food and treat category? I'll take the cost of revenue line. It was 7% in 2023.

Of your projected growth for this year, you know what what is coming from the food and treats piece of your business.

Well I'll take the cost of revenue like.

It was 7% and 23 I would expect it to be consistent in 'twenty, that's going to be a function of course, there are function of payment processing fees and background checks, which increase with revenue.

Matt Koranda: I'd expect it to be consistent in 2024. That's going to be a challenge because they're a function of payment processing fees and background checks, which increase with revenue volume. There will be some scaling.

There will be some scaling of hit come down down to six as the business does scale, but it will be in that six to seven.

Matt Koranda: It could come down to six as the business does scale, but it will be in that six to seven. And then, Jeremy, on the second question, in terms of pet food and treat contribution overall, we really like that category, really like the space. I think you'll see us continue to lean in there.

Yes.

And then Jeremy on the second question in terms of pet food and treat contribution overall, we really like that category really like the space I think you'll see us continue to lean in there.

Matt Koranda: What was the 2023 growth for that business? But that didn't grow. From Q1 to Q4, it grew. So I think we're going to continue there, Jeremy. I think, generally, the revenue mix in 24 will look something like the revenue mix in 23, which is broadly. Got it. Super helpful and best wishes.

What did it grow at what it was.

23 grocery business.

For Q1, Q School, who.

Okay.

Bush.

Great.

We're going to continually there Jeremy I think generally the revenue mix in 'twenty four will look something like the revenue mix in 'twenty three.

Great.

Got it Super helpful and best wishes this year.

Jeremy Hamblin: Thank you. Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer. Please proceed with your question. Hey, this is Steve on behalf of J.

Thanks, Jeremy.

Thank you. Our next question comes from the line of Jason <unk> with Oppenheimer. Please proceed with your question.

Hey, this is Steve on for Jason. So we just have two questions first off how do you see the revenue mix when you reach that $200 million in revenue.

Jason Helfstein: So, we just have two questions. First off, how do you see the revenue mix? million in revenue, guidance for 27, and then, secondly, how do you think about price? Hey, Steve, great to hear from you. Thanks for being here.

For 27, and then secondly, how do you think about pricing or fee increases this year if any.

Hey, Steve Great to hear from you and thanks for being here 2027 revenue mix.

Matt Koranda: 2027 revenue mix. I think we have a lot of confidence in all parts of the business, Steve. I certainly think we'll take advantage of the tailwinds we're seeing in the premium pet parent. Premium pet parent certainly seems to be leaning into healthy pet food and treats, things like CBD, joint medicine, supplements, etc., as well as insurance. I think insurance penetration went from three to seven percent and is expected to grow at eight to nine percent CAGR. So I think those would be the two current tailwinds I would call out.

I think we have a lot of confidence in all parts of the business, Steve I think I certainly think we'll take advantage of the tailwind we're seeing in the premium pet parent free and pet parents, certainly seems to be leaning into a healthy pet food and treats things like CBD joint medicine supplements et cetera, as well as insurance and insurance penetration went from 3% to 7%.

And do you expect it to grow at 8% to 9% CAGR. So I think those would be the two current tailwind I would call out I'm not to say services and a great business isn't growing nicely, but I think that is certainly been more impacted by the return to office, which has been a little bit slower. So I think we'll see how 2027 plays out as office space resumes People's kind of mobility.

Matt Koranda: Not to say services isn't a great business and isn't growing nicely, but I think that has certainly been more impacted by the return to the office, which has been a little bit slower. So I think we'll see how 2027 plays out as office space resumes, people's mobility resumes, and the premium pet parent continues to stay resilient. But we're confident in all three parts of the business for what it's worth. Your second question on pricing, you know, taking 10 steps back, pet caregivers on the WAG platform set their own rate. So that's pretty nice in terms of how people manage market equilibrium and supply and demand. It kind of happens organically, frankly.

Resumes in the premium pet parents continues to stay resilient.

But we're confident kind of all three parts of the business to for what it's worth your second question on pricing.

You know taking 10 steps back.

Pet caregivers on the wag platform set their own rates.

So that's pretty nice in terms of how people manage market librium in supply and demand kind of happens organically frankly.

Matt Koranda: We don't think we'll do too much experimenting with pricing within the actual services being delivered that are related to the pet caregiver. In terms of pricing for things like subscription products, our telehealth product mix, or any of our new product launches, I generally think we are very aware that we have a premium pet parent who's looking for a massive amount of convenience and simplicity in their life, and they want to pay for that. So I think we'll continue to flex our muscle on benefiting from price resilience as long as we're delivering the right experience. Great, thank you.

We don't think we'll do too much experimenting with pricing within the actual services being delivered that's up related to the caregiver in terms of pricing or things like subscription products, our telehealth product mix or any of our new product launches I. Generally think we are very aware that we are a premium pet parents, who is looking for a massive amount of convenience and simplicity in there.

Our life and they're willing to pay up for that I think will continue to flex our muscle on benefiting from our price resilience as long as we're delivering the right experience.

Great. Thank you very much.

Steve: Thanks, Steve. Thank you. Our next question comes from the line of Matt Koranda with RAAF MKM. Hey, guys. Good afternoon.

Thanks, Steve.

Thank you. Our next question comes from the line of Matt Koranda with Roth M. Kam. Please proceed with your question.

Hey, guys. Good afternoon, just wanted to clarify on the 20th of our guide.

Matt Koranda: Just wanted to clarify on the 24 guide. It sounded like you said sort of rateable compared to 23 in terms of mix between services, wellness, and food and treats, but I just want to give the opportunity to maybe expound upon relative growth rates between those three categories. I think at 23, Matt, I didn't mean to ignore you.

It sounded like you said sort of ratable compared to 23 in terms of mix.

Between services wellness and food and treats but just wanted to give the opportunity to maybe expound upon relative growth rates between those three categories.

Yeah, I mean, I think at 23, and it matters, where you're going to see you can talk to you are not actually seeing if it's good to hear from you in terms of twenty-three you saw our wellness group of businesses, which is purchasing pet insurance purchasing wellness plans getting advice from of that et cetera grow pretty tremendously and I think that's a function of a phenomenal product in <unk>.

Matt Koranda: Good to see you. Good to talk to you. I'm not actually seeing you, but it's good to hear from you.

Matt Koranda: In terms of 23, you saw our wellness group of businesses, which is purchasing pet insurance, purchasing wellness plans, getting advice from a vet, et cetera, grow pretty tremendously. I think that's a function of, A, we have a phenomenal product and a phenomenal marketplace, and two, consumer demand, which is kind of unbound, frankly. I think we'll continue to lean aggressively into that business. It's hyper-

I'm in the marketplace and to consumer demand are.

We're just kind of unbound, frankly, I think we will continually and aggressively in that business are hyper efficient. It's a great market places are amazing product experience. If you haven't tried it not to say pet food and treats and services growth is less important but I think you will continue its yes, I mean very aggressively into wellness and services in pet food and treats them.

Matt Koranda: It's a great marketplace, and it's an amazing product experience if you haven't tried it. Not to say pet food and treat and services growth is less important, but I think you will continue to see us lean very aggressively into wellness and services, and pet food and treats will follow. Okay. That helps. And then just in terms of the, I guess, the pull through to the EBITDA outlook, when you guys talk about sort of the margin improvement that's expected year over year, I guess I would have expected, with the level of revenue growth that you're projecting, that you may see a little bit more leverage. Are we reinvesting somewhere in the P&L? Maybe just talk about sort of where we're leaning in. I would imagine sales and marketing is going to be a bigger line item this year, but maybe just talk about the puts and takes around where we're reinvesting dollars in the P&L in 24. That's right.

Hello.

Okay, all right that helps.

And then just in terms of the I guess the pull through to the EBITDA outlook. When you guys talk about sort of the margin improvement, but as expected year over year.

I would have expected with the level of revenue growth that you're projecting so you may see a little bit more leverage are we reinvesting somewhere on the P&L and maybe just talk about sort of where we are leaning in and I would imagine sales and marketing is going to be a bigger line item. This year, but maybe just talk about the puts and takes a while around where we're reinvesting dollars off the P&L and 24.

That's right Yeah, Great question, we actually published in our management presentation available on WAC Darko.

Matt Koranda: Yeah, great question. We actually published in our management presentation available on wag.co, slide 15, which provides kind of an illustrative platform participant growth and consolidate P&L reflective of kind of different examples of quarterly platform participants, both at a million and 1.5 million platform participants, along with consistent growth in sales and marketing spend along with operating expenses. And the flow through is pretty compelling, we believe, pretty compelling. To answer your question, though, we do expect in 2024, just as a function of what we're seeing in the marketplace, that we'll continue to reinvest profits back into growth. I think we've seen it in kind of other comps, you know, $2 to $250 million of revenue got you real EBITDA scale, and I expect similar for us, maybe a little bit earlier, $150 to $200. But we're just seeing a tremendous amount of demand. We have a great product people love, and we really want to take advantage of that.

Slide 15, which provides kind of a illustrative platform participant growth and consolidated P&L reflective of kind of different examples of quarterly black from participants both in a million and $1 5 million participants along with consistent growth in sales and marketing spend along with operating expenses and the flow through is pretty we believe pretty compelling.

To answer your question, though we do expect that 'twenty 'twenty four it just a function of what we're seeing in the marketplace that will continue to reinvest profits back into growth are I think we've seen any kind of other comps you know two to 250 million of revenue got you really but at scale and I expect similar for US you know a little bit earlier 150 to 200, but we just we're just seeing a tremendous amount of demand we have a great <unk>.

Product people are we really want to take advantage of that so the mandate from US does continue to be really efficient and thoughtful and judicious on managing gross profit margin, but more growth I think in the foreseeable future.

Okay Gotcha, and then just last one.

Matt Koranda: So the mandate from us is to continue to be really efficient and thoughtful and judicious in managing growth, profit, and margin, but more growth, I think, in the foreseeable future. And then just last one, projecting second half free cash flow positive, I guess, and then you mentioned some debt pay-down plans or authorization for $10 million paid down. Maybe Alec, if you want to just cover sort of the thought process behind the level of paydown that we're targeting, if we're kind of hitting that sustainable projected free cash flow level in the second half, why not pay more down and just save on the higher cost of debt there? Let me just talk about the rationale there. Yeah, that's a great question, Matt.

Rejecting second half free cash flow positive I guess, and then you mentioned some debt pay down plans or authorization for 10 million pay down maybe Alex do you want to just cover sort of the thought process behind the level of pay down that we're targeting.

We're we're kind of hitting that sustainable projected free cash flow level in the second half why not pay more down in just save on the the higher cost of debt. There maybe just talk about the rationale there that'd be helpful.

Yes, it's great question Matt.

We're thinking through pay down across the rest of the year.

We will most likely staggered through the year, but it depends on the ultimately the level of performance through the different quarters. So that you can.

Alec: So we're thinking through pay down across the rest of the year. We will most likely stagger it through the year, but it depends on, ultimately, the level of performance in the different quarters. So you're quite possibly seeing us paying down a bigger chunk to begin with, to your point, and then, as free cash flow hits later in the year, topping up to the remaining amount. Okay, makes sense. I'll jump back into you guys. Thank you. Our next question comes from the line of Gregory Pendy with Chardon.

Mostly seeing is paying down a big chunk just to begin with to your point and then as free cash flow later in the year topping up to the remaining amounts.

Okay makes sense I'll jump back in queue guys. Thank you.

Thank you. Our next question comes from the line of Greg <unk> Chardan. Please proceed with your question.

Hey, guys. Thanks for taking my question just a quick one I guess within the guidance and the EBITDA guidance can you talk about how youre thinking about the bright horizons deal is that something that you're going to be putting some some dollars behind and hopefully that'll gradually rollout.

Gregory R. Pendy: Hey guys, thanks for taking my question. Just a quick one, I guess within the guidance and the EBITDA guidance, can you talk about how you're thinking about the Bright Horizons deal? Is that something that you're going to be putting some dollars behind? And hopefully, that'll gradually roll out. And then also, where were you thinking in terms of your guidance? Yeah. Hey, Greg.

And then also is that don't what where are you where are you thinking in terms of your guidance.

Yeah, Hey, Greg Great to talk to you thanks for being here.

In terms of bright horizons and is there a fresher bright horizons is a public company or be fam.

They offer.

Take care and childcare I believe ages six months to seven years across the U S.

Matt Koranda: Great to talk to you. Thanks for being here. In terms of Bright Horizons, and this is a refresher, Bright Horizons is a public company, a trainer at BFAM. They offer daycare and childcare for, I believe, ages six months to seven years across the U.S.

Phenomenal business from everything I can understand and we partner with them to offer pet care.

They are distributed kind of employer sponsored channels and aren't really marks our entrance related employer sponsored channel. So we really like this deal because it unlocks a great audience thinking about major employers across the U S brands like Salesforce et cetera, and a great brand in bright horizons, and we kind of are able to piggyback and provide a great experience to bear.

Matt Koranda: Phenomenal business, from everything I can understand. And we've partnered with them to offer pet care via their distributed kind of employer-sponsored channels. And Mark's our entrance really into the employer-sponsored channel. And so we really like this deal because it unlocks a great audience.

You know these things generally have a ramp time is and I think you're alluding to it takes time to roll out to an employer and then lots of employees and then figure out actually use it and forgot actually benefit from it actually put to work. So it probably is more of a back half 'twenty four 'twenty five thing than it is the first half of 'twenty 'twenty four thing frankly, but it's not to say we aren't already seeing some of it.

Matt Koranda: Think about major employers across the U.S., brands like Salesforce, et cetera, and a great brand in Bright Horizons. And we kind of were able to piggyback on and provide a great experience to their customers. You know, these things generally have a ramp time, as I think you're alluding to.

These signs of promise and we're not really excited about the partnership it's probably more of a back half last 2025 win for us as it's rolled out.

Matt Koranda: It takes time to roll out to an employer and then to employees and then figure out how to actually use it and then figure out how to actually benefit from it and actually put it to work. So it probably is more of a back half 24-25 thing than it is a first half 2024 thing, frankly. But that's not to say we aren't already seeing some early signs of promise, and we're not really excited about the partnership. It's probably more of a back half slash 2025 win for us as it's rolled out.

Got it and then just one final one just on the return to office trends I think you mentioned that it was a little bit sluggish in the fourth quarter and you called out boarding on top of it so just kind of wondering.

I'm wondering you know in the fourth quarter did you see maybe some of the hybrid workers choosing to work remotely more often and given the holidays or just kind of any anything notable to call out on that and how did you think about that in light of that the revenue guidance for 2024.

Yeah.

What we saw throughout 'twenty, three frankly was really trepidation employer and employee.

Matt Koranda: Got it. And then just one final one on the return to office trends. I think you mentioned that it was a little bit sluggish in the fourth quarter, and you called it boarding on top of it.

Like no real push or incentive to go back to the office I think we generally hovered around 48%, 50% throughout the year across the major markets.

Matt Koranda: So just kind of wondering, you know, in the fourth quarter, did you see maybe some of the hybrid workers choosing to work remotely more often given the holidays, or just kind of anything notable to kind of call out on that? And how did you think about that in light of the revenue guidance for 2024? Yeah, you know, I think what we saw throughout 23, frankly, was a really trepidatious employer and employee, meaning no real push or incentive to go back to the office. I think we generally hovered around 48 to 50% throughout the year across the major markets. And that's just a few days a week.

Yeah, that's a few days a week, we're not assuming some massive step change there. We certainly think the macro pressure in the layoffs were seeing especially of course larger companies may accelerate the return to office and kind of a dependency on wag daytime services, but we're not necessarily planning it.

But it isn't just migrated we really it wasn't any sort of step change that year I think we saw kind of a slower employer than maybe we had originally thought to push people back to office, but it didn't really change the pattern or use case I think people still depend on us while they're stuck in meetings all day people still dependent and that's why we're out on the weekend people still depend on that's why they're.

Matt Koranda: We're not assuming some massive step change there, but we certainly think the macro pressures and the layoffs we're seeing, especially across larger companies, may accelerate the return to office and kind of a dependency then on WAG daytime services. But we're not necessarily penning it in.

And then in terms of 'twenty 'twenty four I think we might see some level of improvement, but I don't expect it to get the 85, it probably gets to 55 or 60 by the end of the year is my guess.

Matt Koranda: But just in terms of 2030, we really didn't see any sort of step change that year. I think we saw kind of a slower employer than maybe we had originally thought to push people back to office, but it didn't really change the pattern or use case. I think people still depend on us while they're stuck in meetings all day. And they still depend on us while they're out on the weekends. People still depend on us while they're traveling. And then, in terms of 2024, I think we might see some level of improvement, but I don't expect to be at 85. It probably gets to 55 or 60 by the end of the year, my guess.

Got it thanks a lot.

Thank you. Our next question comes from the line right.

Right.

[laughter].

Our next question comes from the line of.

Area called they call capital.

With your question.

Thank you very much that was fine and I hope it was an excellent pronunciation of my name.

Question can you hear me.

Yeah, Hey, how are you.

Alright. Thank you for taking my two questions I'm sure when you do.

Our financial analysis, you look at a comparison to other companies as you well know Rover had been public when they reached 110 million of sales a number of years ago. They were reporting EBITDA margins of 11%.

Matt Koranda: Got it. Thanks a lot. Thank you. Our next question comes from the line... Thank you. Our next question comes from the line... Aria Cole with Cole Capital.

And if you hit the guidance, you're suggesting here for 2024, you'll be at $110 million in the middle range as well reporting about 4% EBITA margin. So the question really is is.

Aria Cole: Thank you very much. That was fine. I hope that was an excellent pronunciation of "Quick question, can you hear me?

What is different about the mix of your business.

Aria Cole: Yeah, hey, R.A. Hi, thank you for taking my two questions. Um, I'm sure when you do financial analysis, you look at comparisons to other companies. As you well know, Rover has been published.

Two businesses that your margins are going to be lower or is there. Some some structural reason for why your margins are lower versus theirs because of the what you offer or is it a function of you're just investing more money in sales and marketing to drive future growth.

Aria Cole: When they reached 110 million in sales a number of years ago, they were reporting EBITDA margins of 11%. And if you hit the guidance you're suggesting over 2024, you'll be at $110 million in the middle range as well, reporting about 4% EBITDA margin. So the question really is, is... What is different about the mix of your business? to the businesses that your margins are going to be lower? Is there some structural reason for why your margins are lower versus theirs versus what you offer, or as a function of you're just investing more money in sales and marketing to drive? Hey, how are you?

Yeah, Garen again and again, thanks for being here.

I'm not sure if Rover was a public company when they were doing 100% or I can certainly say that when you were a public company you are burdened by additional costs, which probably takes EBIT margins down.

As a reminder, it is not a cheap being public in terms of head count compliance regulation generally best practices. So I would add that in there, it's probably actually a multi percentage point impact to our fully loaded EBIT margin.

Matt Koranda: It's Garrett again. And again, thanks for being here. I'm not sure if Rover was a public company when they were doing 110. I can certainly say that when you are a public company, you are burdened by additional costs, which probably takes EBITDA margins down. As a reminder, it is not cheap being public in terms of both headcount, compliance, regulation, and just generally best practices. So I would add that to the

The second part of that is I think we're probably in.

A different stage as we think about you know future growth I think we're really investing in durable long term growth.

Maybe a bit differently than maybe they were the second to the third point I would add is you know there is a major validation we publish it gets a sense of kind of EBITDA margin scale, along with gross that's right free cash flow scale, which was just published I think that gives us a everyone a better idea of kind of how we look.

Matt Koranda: It's probably actually a multi-percentage point impact on our fully loaded EBITDA margin. The second part of that is I think we're probably in a different stage as we think about future growth. I think we're really investing in durable long-term growth, maybe a bit differently than maybe they were. The third point I would add is there is a management presentation we published that gives a sense of the EBITDA margin scale along with gross – sorry, free cash flow scale, which was just published. I think that gives everyone a better idea of how we look as we get to higher platform participants. Got it, thank you.

As we get to a higher platform participant numbers.

Got it. Thank you and then just a follow up question just looking at the quarterly seasonality of your business as you look at 2023 of the year just finished.

The number of platform participants.

I actually did not rise between March 24, and December 24, but then in 2022.

It had more of a sequential quarterly rise during the year, what I'm trying to understand is going forward. How should we think about the seasonality of your business is it a business that can grow the number of participants every three months versus the prior three months or is there a real seasonality in the business where the business.

Aria Cole: And then just a follow-up question, just looking at the quarterly seasonality of your business... As you look at 2023, the year just finished, the number of platform participants actually did not rise between March 24 and December 24. But then, in 2022, it had more of a sequential quarterly rise during the year. What I'm trying to understand is going forward, how should we think about the seasonality of business? Is it a business that can grow the number of participants every three months versus the prior three months? Or is there real seasonality in the business, where the business has the most participants early in the year?

Has the most participants early in the year and it plateaus there.

Yes, I certainly think that there is some level of seasonality in the business in Q1, and Q3, primarily Q1 Q3, our win more sitting in boardings occur in the services business.

Significant number of pet insurance plans wellness plans that communications happened as a function of new pet adoptions and a few other unique marketplace dynamics, but I would say 23 is going to look a little bit different in 2020 for us, we're really going to be reinvesting in growth in 2020 for it whereas maybe a little more prudent twenty-three to reach adjusted EBITDA profitability.

Matt Koranda: Plot Codes Yeah, I certainly think that there is some level of seasonality in the business in Q1 and Q3, primarily because Q1, Q3 are when more sitting and boarding occur in the services business. A significant number of pet insurance plans, wellness plans, and vet communications happen as a function of new pet adoptions and a few other unique marketplace dynamics.

So we expect quarterly parties.

Quarterly part.

Participants to grow.

Matt Koranda: But I would say 23 is going to look a little bit different than 2024 as we're really going to be reinvesting in growth in 2024, whereas we may be a little more prudent in 23 to reach just a bit of profitability. So we expect quarterly participants to grow, you know, year on year, maybe not always quarter on quarter, but certainly year on year. Last thing on that REA is, can you please send me an email with your Rover numbers? The last numbers I have are 97 million in revenue and 21 at minus nine in EBIT.

Year on year, maybe not always quarter on quarter, but certainly year on year. The last thing I had already asked can you. Please send me an email with your Rover numbers. The last numbers I have are $97 million in revenue with 'twenty, one at minus 9% EBIT. So if you have somebody there, but I'd love to see it.

Okay. No problem again, thank you very much and best of luck in the year ahead.

I'm sorry.

Thank you we have reached the end of the question and answer session I will now turn the call back over to Gary small wood for closing remarks.

Yeah. Thank you everyone for being here I'm extremely excited for 2024 and the years to follow again I've said this for three or four times now we have updated our management presentation available wag dot com under investor.

Matt Koranda: So if you have something different, I'd love to see it. Okay, no problem. Again, thank you very much and best of luck in the year ahead. Thank you, Ariane. Thank you. We have reached the end of the question and answer session. Back over to Garrett Smallwood for. Thank you, everyone, for being here. We're extremely excited for 2024 and the years to follow. Again, I've said this for three or four times now, we have updated our management presentation available at wag.co under Investor. I think it's under press releases and presentations. Please give it a try.

I think it's under press releases and presentations. Please give it a look I think it answers. The majority of questions. You may have as you think about the business of our customers and us as management and we look forward to keeping in touch for a great year. Thanks, everyone.

And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Okay.

[music] Goodbye.

Okay.

[music].

Matt Koranda: I think it answers the majority of questions you may have as you think about the business, the customers, and us as management. And we look forward to keeping in touch and having a great year. Thanks, everyone. This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation. Goodbye. Thank you for watching. www.mytrendyphone.co.uk

Okay.