Q1 2024 Wag! Group Co Earnings Call
Operator: Good morning and welcome to the WAG First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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. As a reminder, this conference is being recorded. I now introduce your host, Gregg Robles from Investor Relations. Thank you. You may begin.
Good morning, and welcome to the Wag first quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. 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.
As a reminder, this conference is being recorded.
Gregory R. Pendy: I'll now introduce your host Greg robust with Investor Relations.
Gregory R. Pendy: Thank you you may begin.
Gregory R. Pendy: Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our first quarter 2024 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.
Speaker Change: Good afternoon.
Gregory R. Pendy: Afternoon, everyone and thank you for joining <unk> conference call to discuss our first quarter 2020 for financial results on the call today are Garrett Smallwood, Chief Executive Officer, and Chairman, Adam Storm, President and Chief product Officer, and Alex Davidian, Chief Financial Officer before we get started please note that.
Gregory R. Pendy: 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 filings with the SEC. 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.
Gregory R. Pendy: 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.
Gregory R. Pendy: A discussion of these risks and uncertainties are included in our filings with the SEC.
Gregory R. Pendy: We also remind you that we undertake no obligation to update the information contained on this call.
Gregory R. Pendy: 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 direct comparable GAAP financial measures are available in our earnings release, which we issued today.
Gregory R. Pendy: Also, during the call, we present both GAAP and non-GAAP financial measures. Reconciliations to the most direct 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. 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. And with that, I'll now turn the call over to Garrett Smallwood.
Gregory R. Pendy: 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 does.
Gregory R. Pendy: 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 and with that I'll now turn the call over to Gary small.
Garrett Smallwood: Good afternoon, and thank you for joining us today to discuss our financial performance for the first quarter of 2024. First, I will provide a brief overview of our financial results for the first quarter. Following that, Adam, our President and Chief Product Officer, will share updates on our strategic priorities for 2024 and beyond. Then, Alec, our Chief Financial Officer, will provide a more detailed analysis of our first quarter results and discuss our capital allocation priorities.
Gary: Good afternoon, and thank you for joining us today to discuss our financial performance for the first quarter of 2024.
Gary: First I will provide a brief overview of our financial results for the first quarter following that Adams, our president and Chief product Officer will share updates on our strategic priorities for 2024 and beyond.
Gary: Alex <unk>, our Chief Financial Officer will provide a more detailed analysis of our first quarter results and discuss our capital allocation priorities.
Garrett Smallwood: We're excited to announce another successful quarter for the WAG team, in line with our expectations for revenue and ahead of our expectations for adjusted EBITDA, in addition to achieving positive cash flows from operating activities. During the quarter, revenue grew 13% year-over-year to $23.2 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, wellness products, and veterinary care.
Speaker Change: We're excited to announce another successful quarter for the wag teams in line with our expectations for revenue and ahead of our expectations for adjusted EBITDA. In addition to achieving positive cash flows from operating activities.
Speaker Change: During the quarter revenue grew 13% year over year to $23 2 million.
Speaker Change: It was a new quarterly records this.
Speaker Change: This growth was driven by the success of our wellness business fueled by pet parent demand for pet insurance wellness products and veterinary needs.
Garrett Smallwood: Following the quarter closed and more recently, we announced the launch of prescription, digital e-prescribing, and prescription management SAS tools for veterinary staff across the US with a robust waitlist of veterinary clinics. We also announced We Compare, a new consumer brand that aims to be the easiest way to compare insurance products, starting with auto.
Speaker Change: Following the quarter close and more recently, we announced the launch of prescription digital E. Prescribing prescription management SaaS tools for veterinary staff across the U S with a robust waitlist veterinary clinics.
Speaker Change: We also announced we compare our new consumer brand that aims to be the easiest way to compare insurance products starting with auto.
Garrett Smallwood: Adam will discuss these launches in greater detail. On the operations side, we have found success in AI and automation. Ending Q1'24 with 78 employees, down 8% from 84 in Q4'23. This has been achieved within Customer Success, QA, Marketing, and Design. We have found that senior employees equipped with AI are an order of magnitude more productive than those without.
Speaker Change: Adam will discuss these launches in greater detail.
Speaker Change: On the operation side, we have found success in AI and automation.
Speaker Change: And in Q1, 'twenty four with 78 employees down 8% from <unk> 84 in Q4 23.
Speaker Change: This has been achieved within customer success.
Speaker Change: Marketing and design, we have found a senior employees are equipped with AI.
Speaker Change: Order of magnitude more productive than those without.
Garrett Smallwood: As a result, we reached nearly $1.2 million in annualized revenue per employee in Q1 2024, up 23% year-over-year. Finally, we are sharing that 78% of revenue in Q1 2024 was B2B revenue, which is defined as revenue generated by business partners such as pet insurance companies, pet food companies, wholesale distribution partners, and pet treat companies, which demonstrates the growing value of our platform and creates predictability for future revenues. Our adjusted EBITDA was $0.2 million, an increase from a loss of $0.4 million in the same period last year.
Speaker Change: As a result, we reached nearly $1 2 million in annualized revenue per employee in Q1, 24 up 23% year over year.
Speaker Change: Final year Shine at 78% of revenue in Q1, 24 was <unk> revenue, which is defined as revenue generated by business partners, such as pet insurance companies pet food companies wholesale distribution partners and Petrie companies, which demonstrates the growing value of our platform creates predictability for future revenues.
Speaker Change: Our adjusted EBITDA was zero point $2 million, an increase from a loss of zero point $4 million in the same period last year.
Garrett Smallwood: Our priorities continue to center around achieving a sustainable equilibrium between growth, profit, and margin. In the first quarter, platform participants increased to 671,000, an increase of 10% year over year, and WAC training and penetration continues to hover around our 50% target. In regards to sales and marketing and overall consumer trends, we see CPCs and CPMs continue to be elevated through the end of the year as a result of the election, a competitive consumer environment, and elevated competition in the PEC category. We've seen upwards of a 90% change in spend across key marketing partners and platforms.
Speaker Change: Please continue to send around achieving a sustainable equilibrium between gross profit and margin.
Speaker Change: In the first quarter platform participants increased to 671000.
Speaker Change: An increase of 10% year over year, and Wap premium penetration continues to hover around our 50% target.
Speaker Change: In regards to sales and marketing and overall consumer trends, we see CPC and CPM continued to be elevated to the ended the year as a result of the election, a competitive consumer environment and elevated competition in the pet category.
Speaker Change: Are you seeing upwards of 90% change in spend across key marketing partners and platforms.
Garrett Smallwood: Accordingly, we will continue to invest in proprietary customer acquisition with initiatives such as We Compare and Prescription, which we expect to accelerate in the back half of this year. We remain 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 second half of this year.
Speaker Change: Accordingly, we will continue to invest in proprietary customer acquisition with initiatives, such as we compare and prescription, which we expect to accelerate in the back half of this year.
Speaker Change: We remain focused on profitable revenue growth and reaching more U S households, as the all encompassing trusted partner for premium wellness service and products.
Speaker Change: We will do this by reinvesting free cash flow and the growth, which we expect to achieve in the back half of this year.
Garrett Smallwood: We believe we're in the early innings of a secular growth trend in the premium wellness, service, and product categories in which we operate. In summary, the team at WAG continues to execute against our goals and deliver strong and sustainable growth. Our first quarter results demonstrate our ability to scale our platform profitably and show the effectiveness of our strategy and business model to become the number one platform for premium U.S. households. And with that, I will turn the call over to Adam to review our strategic priorities for 2024. Thanks, Garrett. I'm excited.
Speaker Change: 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.
Speaker Change: In summary, the team at <unk> continues to execute against our goals and deliver strong and sustainable growth. Our first quarter results demonstrate our ability to scale our platform profitably and show the effectiveness of our strategy and business model to become the number one platform for premium U S households.
Speaker Change: And with that I will turn the call over to Adam to review, our strategic priorities for 2024.
Adam Storm: Thanks, Garrett. I'm excited to outline the strategic priorities that will create profitable growth and shareholder value in 2024 and beyond. One, best-in-class technology. As a technology company, we're excited to continue building proprietary solutions that capture the hearts and minds of our customers. As an example, we're thrilled to launch Prescription, which comes after years of real-world experimentation and user research under the pharmacy umbrella. Prescription is a revolutionary SaaS tool for veterinary clinics designed to streamline the prescription process, ensuring pet parents can obtain their pet's medication faster and easier than ever before. Veterinarians can electronically prescribe medications directly through the prescription, eliminating both the need for and risk of handwritten prescriptions and manual prescription management channels such as fax and phone calls.
Adam Storm: Thanks, Garrett I am excited to outline the strategic priorities that will create profitable growth and shareholder value in 2024 and beyond.
Adam Storm: I know that.
Adam Storm: First in class technology.
Adam Storm: As a technology company. We're excited to continue building proprietary solutions to capture the hearts and minds of our customers. As an example, we're thrilled to launch prescription which comes after years of real world experimentation and user research under the pharmacy umbrella prescription is a revolutionary SaaS tool for veterinary clinics.
Adam Storm: And to streamline the prescription process, ensuring pet parents can obtain their pets medication faster and easier than ever before.
Adam Storm: Veterinarians can electronically prescribed medications directly through perscription, eliminating both the need for and risk with handwritten prescriptions and manual prescription management channels, such as fax and phone calls today.
Adam Storm: Today, we have an LOI in place with a veterinary software distributor to provide prescription access to thousands of clinics, a significant waitlist of independent clinics who want to join our beta, and pharmacies who are ready to fulfill orders. The beta went live in early May, and we're excited to continue updating you with our progress on the newly launched veterinary channel.
Adam Storm: Today, we have an LOI in place with a veterinary software distributor to provide prescription access to thousands of clinics are significant waitlist of independent clinics, who want to join our data and pharmacies, who are ready to fulfill orders.
Adam Storm: <unk> went live in early May and we're excited to continue updating you with our progress on our newly launched veterinary channel.
Adam Storm: Platform Expansion and M&A, As evidenced by our successful acquisitions and seamless integrations of Dog Food Advisor, Maxphone, and Phirmacy, we'll continue to pursue opportunities that expand the scope of our offerings for our customers. As Garrett mentioned, we recently announced the launch of WeCompare, a new consumer brand that aims to be the easiest way to compare insurance products. WeCompare will start by providing auto insurance comparisons, with other verticals on the horizon. We are confident we can replicate our success within the pet insurance category in the broader insurance market.
Adam Storm: <unk> platform expansion and M&A.
Adam Storm: As evidenced by our successful acquisitions and seamless integrations of dog food adviser maxed out and pharmacy will continue to pursue opportunities to expand the scope of our offerings for our customers.
Adam Storm: As Garrett mentioned, we recently announced the launch of we compare a new consumer brand that aims to be the easiest way to compare insurance products.
Adam Storm: We can pair will start by providing auto insurance comparison with other verticals on the horizon.
Adam Storm: We are confident we can replicate our success in the pet insurance category in the broader insurance market.
Adam Storm: For some context, the auto category is a $360 billion TAM with 215 million policyholders in the U.S., representing a large opportunity to surprise and delight customers with our technology and easy-to-use software. Three, operational efficiency. We believe a hallmark pillar of a successful technology company is the ability to scale revenue without a corresponding increase in headcount. As Garrett mentioned, we ended Q1 with 78 employees, down 8% from 84 in Q4 of 23.
Adam Storm: For some context, the auto category is a $360 billion Tam of 215 million policyholders in the U S representing a large opportunity to surprise and delight customers with our technology and easy to use software.
Adam Storm: Three operational efficiency.
Adam Storm: We believe our hallmark pillar of successful technology company is the ability to scale revenue without a corresponding increase in head count.
Adam Storm: As Garrett mentioned, we ended Q1 with 78 employees down 8% from 84 in Q4 of 'twenty three.
Adam Storm: Despite the reduction in headcount, annualized revenue per employee hit a record $1.2 million, demonstrating the power of embracing new technology and tools. To wrap up, WAG is firing on all cylinders, with significant progress across the three strategic pillars we reviewed. We are extremely excited about the growth potential of these new business lines, and we will continue to provide updates as they grow. I'll now turn the call over to Alec to discuss our first quarter financials and 2024 forecast in more detail.
Adam Storm: Despite the reduction in head count annualized revenue per employee at a record $1 2 million demonstrating the power of embracing new technology and tools.
Adam Storm: To wrap up wag is firing on all cylinders with significant progress across the three strategic pillars, we reviewed.
Adam Storm: We're extremely excited about the growth potential of these new business lines, we will continue to provide updates as they scale.
Adam Storm: I'll now turn the call over to Alex to discuss our first quarter financials, and 2024 forecast in more detail.
Alec Davidian: Our strong Q1 results, which include all-time record high platform participants and record high revenues, while achieving positive cash flows from operating activities, are a result of our continued execution on our vision of success, which we define as consistent, profitable growth through disciplined capital deployment, specifically. Revenue of $23.2 million, a new record, represents 13% year-over-year growth.
Alec Davidian: Thanks, Adam.
Alec Davidian: Our strong Q1 results, which include all time record high platform participants and record high revenues, while achieving positive cash flows from operating activities are result of our continued execution on our vision of success, which we define as consistent profitable growth disciplined capital deployment.
Adam Storm: Specifically.
Alec Davidian: Adjusted EBITDA of $0.2 million represents 142% year-over-year improvement and adjusted EBITDA margin improvement from negative 2% to positive 1%, platform participants of 671,000, a new record that represents 10% year-over-year growth, and positive cash flows from operating activities of 0.2 million. Delving deeper into the financial results, the results were as follows. Wellness, driven by a proprietary comparison engine technology for insurance and wellness plans, was $15.8 million, growing 14% from a year ago. Chevises was $5.3 million, consistent with the year ago.
Alec Davidian: Revenue of $23 2 million, a new record represents 13% year over year growth.
Alec Davidian: Adjusted EBIT was $2 million represents a 142% year over year improvement and.
Alec Davidian: And adjusted EBIT margin improvement from negative 2% to positive 1%.
Alec Davidian: Platform participants of 671000 can you record representing 10% year over year of course.
Alec Davidian: And positive cash flows from operating activities of $1 2 million.
Alec Davidian: And finally, Pet Food and Treats was $2.1 million, growing 55% from a year ago. As mentioned on our year-end earnings call, we experienced record demand coming into the start of 2024 and opportunistically deployed capital to take advantage of this demand while not losing sight of profitability. Our expenses, which illustrate operational excellence and scaling when analyzed as a percentage of revenue, were as follows. Cost of revenue, excluding depreciation and amortization, totaled $1.6 million, representing 7% of revenue, up from 5% a year ago, and is in line with 2023 average of 7% based on recent trends.
Alec Davidian: Delving deeper into the financial results revenue category results was focused.
Alec Davidian: Wellness driven by our proprietary comparison engine technology for insurance and wireless plans was $15 8 million growing 14% from a year ago.
Alec Davidian: Services was $5 3 million consistent with a year ago.
Alec Davidian: Finally, pet food and treats was $2 1 million growing 55% from year ago.
Alec Davidian: As mentioned on our year end earnings call, we experienced record demand coming into the stock in 2024, and Opportunistically deploy capital to take advantage of this demand while not losing sight on profitability.
Alec Davidian: Our expenses, which illustrate operational excellence and scaling when annualized as a percentage of revenue was as follows.
Alec Davidian: Okay.
Alec Davidian: Cost of revenue, excluding depreciation and amortization totaled $1 6 million, representing 7% of revenue up from 5% a year ago and is in line with 2023 average at 7% and recent trends.
Alec Davidian: The increase compared to Q1 2023 is driven by incremental costs from various new product launches during 2023 as we continue to innovate in building up a robust platform for pets and households. Platform operations and support expense total $3 million, representing 13% of revenue versus 15% a year ago. The decrease year-over-year was achieved through the deployment of highly efficient process automation, AI, and software tooling that has allowed us to do more with less.
Alec Davidian: The increase compared to Q1 'twenty three is driven by incremental cost from various new product.
Alec Davidian: Launches during 2023, as we continue to innovate and building out a robust platform of pets and households.
Alec Davidian: Platform operations and support expense totaled $3 million, representing 13% of revenue versus 15% a year ago.
Alec Davidian: The decrease year over year was achieved through the deployment of a highly efficient process automation and AI.
Alec Davidian: And so flight tooling that has allowed us to do more with less.
Alec Davidian: Sales and marketing expense totaled $15.7 million, representing 67% of revenue, up from 64% a year ago. As mentioned earlier, we thoughtfully deployed capital to take advantage of demand while still aiming to be profitable for the quarter. G&A expense totaled $4.2 million, representing 18% of revenue, down from 24% a year ago.
Alec Davidian: Sales and marketing expense totaled $15 7 million.
Alec Davidian: Presenting 67% of revenue up from 64% a year ago.
Alec Davidian: As mentioned earlier, we thought when we deploy capital to take advantage of demand, while still aiming to be profitable for the quarter.
Alec Davidian: G&A expense totaled $4 2 million, representing 18% of revenue down from 24% a year ago.
Alec Davidian: This is an outcome of revenue scale, operating leverage, and now, as we enter our third fiscal year as a public company, seeing public company costs begin to plateau as we establish efficient processes and muscle memory. Public costs are a significant part of G&A at approximately $1.3 million in Q1, which equates to a 6% drag on our adjusted EBITDA margin. Additionally, this quarter, the P&L includes a $0.7 million charge related to the $5 million debt paydown that we executed on March 24.
Alec Davidian: This is an outcome of the revenue scale operating leverage and now as we enter our third fiscal year as a public company to a public company costs begin to plateau, as we establish efficient processes and muscle memory.
Alec Davidian: Public costs are significant part of G&A and approximately $1 3 million in Q1, which equates to a 6% drag on our adjusted EBIT margin.
Alec Davidian: The charge relates to the accounting acceleration of debt discount related to the prepayment and fees for the early principal payment. The 0.7 million charge had a 2 cent impact on EPS, moving EPS from minus 9 cents to minus 11 cents.
Alec Davidian: Additionally, this quarter. The P&L includes $1 7 million charge related to the $5 million debt Paydown that we executed in March 2004.
Alec Davidian: The charge relates to the accounting acceleration of debt discount related to the prepayment and fees for the early principal payment.
Alec Davidian: The <unk> 7 million charge had a <unk> impact on EPS, leaving EPS from minus nine to minus 11 cents.
Alec Davidian: From a balance sheet perspective, we ended the quarter with $24 million in cash, cash equivalents, and accounts receivable. This balance also reflects the completion of an initial $5 million debt paydown. The $5 million debt paydown has the immediate impact of saving approximately $800,000 of interest expense over an annual period and contributing to our path to achieving free cash flow.
Alec Davidian: From a balance sheet perspective, we ended the quarter with $24 million in cash cash equivalents and accounts receivable.
Alec Davidian: This balance also reflects the completion of an initial 5 million debt pay down.
Alec Davidian: The $5 million debt pay down.
Alec Davidian: Needed impact of saving approximately 800000 of interest expense over an annual period and contribution to our path to achieving free cash flow.
Alec Davidian: Moving to our guidance for 2024, taking into consideration our results year to date, we reiterate our 2024 full-year forecast of revenues of $105M to $115M in 2024, which represents growth of 25% to 37% over 2023. Adjusted EBITDA in the range of 2 to 6 million, representing growth of 177% to 731% over 2023. This guide anticipates a 2-5% adjusted EBITDA margin together with positive free cash flows in the second half of 2024.
Alec Davidian: Moving to our guidance for 2024, taking into consideration our results year to date, we reiterate our 2024 fully equal cosco.
Alec Davidian: Revenues of $105 million to $115 million in 2024, which represents growth of 25% to 37% over 2023.
Alec Davidian: Adjusted EBIT in the range of $2 6 million representing growth of 177% to 731% over 2023.
Alec Davidian: This guide anticipates, a 2% to 5% adjusted EBIT margin together with positive free cash flows in the second half of 2020.
Alec Davidian: We are approaching Q2 cautiously as we are seeing increased competition in the pet category alongside a competitive consumer environment for the premium household we serve. Accordingly, we anticipate revenues to be weighted to the back half of 2024 alongside the growth we compared to prescription and easing CPCs and CPMs post-election. In summary, our strong first quarter illustrates, first, the strong demand and tailwinds within the PET category as reflected in our Q
Alec Davidian: We are approaching Q2 cautiously as we are seeing increased competition in the pet category alongside a competitive consumer environment for the premium household Lisa.
Alec Davidian: Accordingly, we anticipate revenues to be weighted to the back half of 2024, alongside the growth week impact prescription and easing CPC and CPM post election.
Alec Davidian: In summary, our strong first quarter illustrates best.
Alec Davidian: Newmont <unk> within the pet category as reflected in our Q1 results.
Alec Davidian: We are tracking ahead of Morgan Stanley's estimated CAGO growth of 8%, and management's ability to execute and drive consistent, disciplined growth, which we have now executed for eight consecutive quarters. As we progress into the back half of 2024, we are focused on generating free cash flow while maintaining our growth trajectory. And third, confidence in the next stage of WAG's journey as a profitable growth company beyond 2024. We've shared our plans to simplify e-prescribing with prescriptions, expand our propriety comparison technology at WeCompare, and integrate leading technologies like AR into our workflows.
Alec Davidian: We are tracking ahead of Morgan Stanley's estimated CAGR growth of 8%.
Alec Davidian: Second.
Alec Davidian: Management's ability to execute and drive consistent disciplined growth, which we have now executed.
Alec Davidian: For eight consecutive quarters.
Alec Davidian: As we progress into the back half of 2024, we are focused on generating free cash flow, while maintaining our growth trajectory.
Alec Davidian: And that confidence in the next stage of wax journey as a profitable growth company beyond 2024.
Alec Davidian: We've shared our plans to simplify <unk> prescribed with prescription <unk>.
Alec Davidian: <unk>, our proprietary comparison technology, we compare.
Alec Davidian: And integrate leading technologies like AI into our workplace.
Alec Davidian: Across our platform, we continue to believe we're just getting started at WAC and wake up every day excited to delight customers and create shareholder value. And with that, we now welcome Q&A. Operator, can you kindly open up for Q&A?
Alec Davidian: Across our platform. We continue to believe we're just getting started at WAC I wake up every day excited to delight customers and create shareholder value.
Speaker Change: And with that we now welcome Q&A.
Speaker Change: Operator can you kindly open up.
Speaker Change: The Q&A.
Operator: If you would like to ask a question, please press star 1 on your telephone computer now. You will be placed into the queue when you are to receive the call. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question, please press star 1 on your phone now. And our first question comes from Matt Koranda from Roth. Please go ahead, Matt.
Speaker Change: Yeah.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad now.
Operator: You will be placed into the queue in the order received.
Speaker Change: Please be prepared to ask your question when prompted.
Speaker Change: Once again, if you would like to ask a question. Please press star one on your phone now.
Speaker Change: And our first question comes from Matt Koranda from Roth. Please go ahead, Matt.
Matthew Butler Koranda: Hey guys, good morning. Thanks for taking the question. I just want to start off with WeCompare. I guess, how is that built into the guidance for the full year, and does this sort of change the pet platform approach that you guys have historically stated as your strategy? I guess, are there other comparison verticals that may now be in play beyond auto?
Matthew Butler Koranda: Hey, guys. Good morning, Thanks for taking the question.
Matthew Butler Koranda: Well just wanted to start off with when you compare I guess, how how is that built into the guidance for the full year and does this sort of change the pet platform approach that you guys have historically stated as your strategy I guess are there other comparison verticals that may not be in play.
Matthew Butler Koranda: On the auto.
Adam Storm: Hey Matt, happy Thursday.
Speaker Change: Hey, Matt happy, there's an extra being here.
Matt: Two good questions. One the first is how does <unk> compare fit into guidance I think it's too early to update.
Adam Storm: Thanks for being here. One, the first is, how does We Compare fit into guidance? I think it's too early to, you know, update kind of how we're thinking about 2024. I think it's certainly more important for 2025. But we think it's a big opportunity. The second question is, how does it change the pet plopper approach? I don't think it does.
Matthew Butler Koranda: The kind of how we're thinking about 2024 I think it is certainly more important five for 2025.
Matthew Butler Koranda: But we think it's a big opportunity.
Matt: Second question is how does it change the pet proper approach.
Adam Storm: I think, you know, we made it pretty clear from the beginning that we wanted to serve the premium household needs. And we certainly started with pets. But broadly speaking, the premium household is kind of the target audience for us. We call them the chief household officer. They're 27 to 44, usually have two kids and one or two dogs, like 1.25 dogs on average, for what it's worth.
Matt: I think it does I think.
Matt: We made it pretty clear since the beginning that we want to serve the premium household needs and we certainly started with Pat.
Matt: But broadly speaking the premium household is kind of the target audience for us common chief household officer or 27% to 44, usually have two kids in one or two dogs like 1.2 $5 on average for the worst and I certainly think there's a ton of opportunity as we think about we compare broadly.
Adam Storm: And I certainly think there's a ton of opportunity as we think about We Compare broadly, but we're going to start with Otto and see how it goes.
Matt: But we're going to start with auto and see how it goes.
Adam Storm: Okay, gotcha. And then just more specifically on the 24 outlook, I guess what you guys have alluded to in the prepared remarks is that there is an acceleration in growth in the back half of the year. Just curious what gives you the confidence there that we're going to see a re-acceleration in the back half and then maybe just any update on sort of how we're growing quarter to date in the second quarter so we can kind of level set expectations around the current quarter here.
Speaker Change: Okay Gotcha.
Speaker Change: And then just more specifically on the 24 outlook I guess, the what did you guys have alluded to in the prepared remarks is that there was an acceleration in growth in the back half of the year. Just curious what gives you the confidence there that we're going to see a reacceleration in the back half and then maybe just any update on sort of how we are.
Speaker Change: Growing quarter to date in the second quarter. So we can kind of level set expectations around the corner here.
Adam Storm: Yeah, absolutely. This really comes down to we have, you know, a debt that's, we think, kind of holding us back, frankly, and there's a big question we get pretty frequently from investors and shareholders as to when we'll achieve free cash flow and kind of free ourselves from the debt. And that debt, the prepayment penalty expires in August of this year. And so I think we're putting more emphasis, frankly, on EBITDA generation this quarter than maybe we would otherwise.
Speaker Change: Yeah, absolutely this really comes down to.
Speaker Change: We have.
Speaker Change: Debt, that's we can kind of holding us back frankly, and there's a big question, we get pretty frequently from investors and shareholders as to when we will achieve free cash flow kind of free ourselves from the debt and that debt the prepayment.
Speaker Change: Prepayment penalty expires in August of this year, and so I think we're putting more emphasis frankly on.
Speaker Change: EBITDA generation this quarter.
Speaker Change: Otherwise so you just to put it into context or frame. It in terms of April April preliminary April numbers show was having kind of highest monthly adjusted EBITDA in company history. So I think we're gonna be really focus this quarter on profitability on adjusted EBITDA, and then seeing how that enables us.
Adam Storm: So, you know, just to put it into context or frame it in terms of April, preliminary April numbers show us having the kind of highest monthly adjusted EBITDA in company history. So I think we're going to be really focused this quarter on profitability, on, you know, adjusted EBITDA, and then seeing how that enables us to refinance or consider other options for our debt, which in the long term enables a quicker path to free cash flow generation and, frankly, just frees us up to make more bets. So that's the general reason for why we think it's more of a second half thing than a right now thing. We know that if we wanted to, we could kind of deploy dollars to grow.
Speaker Change: To refinance or consider other options for our debt, which in the long term enables quicker quicker path to free cash flow generation and frankly, just frees us up to make more of that so that's the reason generally for why we think it's more of a second half thing than a right now, saying we know if we wanted to we could kind of deploy dollars to grow.
Adam Storm: Okay, super helpful. I'll leave it there.
Speaker Change: Okay Super helpful. I'll leave it there thanks.
Operator: And our next question comes from Jason Helfstein from Oppenheimer. Please go ahead, Jason.
Speaker Change: And our next question comes from Jason <unk> from Oppenheimer. Please go ahead Jason.
Jason Stuart Helfstein: Hey, thanks everybody. So just to keep going with that, so while you did highlight CPCs being kind of high in the pet category and there's other factors that some of your competitors may be doing to kind of bail themselves out of, et cetera, your point is that you could lean into growth if you wanted to, but the point is, again, you're kind of focused on EBITDA in the short term so that you have maximum balance and flexibility, and then once you start to see how some of these newer products resonate with customers, then you can kind of prioritize where you want to lean in because there may be certain areas that will be more efficient to lean into than others. Is that the right way to think about the outlook right now?
Jason: Thanks, everybody.
Jason: So just go over that.
Jason: While you did highlight.
Jason: He has been kind of high in the pet category and the other factor that some of your competitors may be doing the kind of a male themselves out of.
Jason: Decisions et cetera.
Jason: Pointed that you could lean into growth if you wanted to but the point and again, you're kind of focused on ebay.
Jason: EBITDA.
Jason: So then you have maximum balance sheet flexibility and then once you start to see how the some of these newer products resonate with customers and you can kind of prioritize where you want to lean in because there may be certain areas. It will be more efficient to lean into and then other is that the right way to think about the outlook right now.
Adam Storm: I couldn't have said it any better myself. It was a great summary, The only other thing I'd add in terms of the pet category generally is that we certainly think there is a trend of a year-over-year decline in pet adoptions, maybe, and more people are leaning in to spend to manage their business. So you're just seeing a little bit more competition, and generally not in categories that we're super dependent on, but I generally think you're seeing that in pet land. So it was a great summary.
Speaker Change: I couldn't say it any better myself, that's a great summary.
Speaker Change: The only other thing I'd add in terms of the pet category. Generally is we certainly think there is a trend of a year over year decline maybe in pet adoptions and more people are leaning in to spend to manage you know.
Speaker Change: Their business and so you're just seeing a little bit more competition generally not in categories that were super dependent on but generally you think youre seeing that in pathway and so it was a great summary.
Adam Storm: And then just to follow up, I mean, you guys originally got started with the sitting and boarding and walking, whatever, walking, sitting, boarding, and then you've kind of expanded on that, you know, like using that as like a top of the funnel to kind of sell a whole lot of other things. Like, are you thinking, has the strategy shifted as we think about, like, what the business is going to look like, you know, I don't know, 12 to 24 months from now? Obviously, you know, it's going to be a higher mix of wellness, but just broadly, like, how has that strategy evolved since you guys went public?
Speaker Change: And then just a follow up I mean, you guys. Originally got started is that with the you know sitting in sitting in boarding and walking whatever walking Sydney morning.
Speaker Change: And then you've kind of more expanded on like using a.
Speaker Change: Top of funnel.
Speaker Change: So a whole lot of other things.
Speaker Change: I guess are you thinking has the strategy shifted as we think about like what the business is going to look like.
Speaker Change: On a 12 to 24 months from now and the mix, obviously, it's going to be a higher mix of wellness.
Speaker Change: Broadly like how that strategy has evolved since you guys came public.
Adam Storm: Yeah, I mean, look, when we took over this business in 2019, it was primarily, almost exclusively an on-demand dog walking business. And every year, we've kind of jumped into the fast-moving water of where we think consumer demand is, frankly, and what matters to the audience that we're serving, which is a premium household. And every year, we make a couple of new bets, which we've been working on, frankly, for the year before.
Speaker Change: Yeah, I mean look if you think about when we took over this business in 2019. It was primarily almost exclusively in on demand dog walking business.
Speaker Change: Every year, we kind of jumped into the fast moving water of where we think consumer demand is frankly, and what matters to the audience that we're serving which is a premium household.
Speaker Change: And every year, we make a couple of new bets, which we've been working on frankly for the year before.
Adam Storm: And so really, it's about expanding the set of problems we're tackling. And right now, that's e-prescribing for vets. That's We Compare, which is comparing other products for insurance. I think we'll continue to do that. Our plan is really just to address the chief household officer's needs and do that in a way we think we have a proprietary advantage, whether that's distribution or technology.
Jason Stuart Helfstein: Got it. I appreciate the call.
Operator: And our next question comes from Tom White from D.A. Davidson. Please go ahead, Tom.
Thomas Cauthorn White: Hey, this is Wyatt on behalf of Tom. Thanks for taking the question. I had one on platform participants. You know, you achieved record numbers this quarter. Could you talk a little bit about what drove that? And then maybe some of your expectations for the balance of the year?
Adam Storm: Yeah, I mean, 671,000 is a good number, we think. I mean, certainly every quarter, we're looking for it to grow. There are two things that are working particularly well in terms of profit-producement growth. One is the breadth of products and services that we offer allows us to be very nimble in how we think about acquiring customers efficiently. Two is that we have a really unique, we call it a spider web of products and services at this point, right?
Speaker Change: Breath of products and services that we offer philosophy very nimble and how we think about acquiring the customers efficiently to is we have a really unique we called a spider web of products and services at this point right between Wolfe with T V and.
Adam Storm: Between Woof Woof TV and Headed and Dog Food Advisor, they kind of cross-sell and upsell really well to each other. And we're getting better and better, I think, at the cross-sell and upsell. So I think, A, our ability to kind of lean into any given product or category, depending on what the tailwinds are, and the second is our ability to kind of cross-sell and upsell. And we'll continue to do both those things.
Speaker Change: Headed and dog food adviser and they kind of cross sell an up sell really well to each other and we're getting better and better I think at the cross selling up so and so you know I think a as our ability to kind of lean into any given product or category, depending on what the the the the the.
Speaker Change: Tailwinds R and a second is our ability to kinda crosstown up so we'll get you need to do both those things.
Adam Storm: Got it. Okay, that's helpful. And then just to follow up on prescription, could you just kind of give some color on why you decided to launch it now? And how you expect it to contribute over the next year, 18 months?
Speaker Change: Got it Okay. That's helpful. And then just to follow up on first Scripture could you just kind of give some color on like why you decided to launch it now and how you're expected to contribute over the next you're 18 months.
Adam Storm: Yeah, well, first, let me just take a step back. We have been talking about the veterinary clinic as if it were like the Holy Grail for pet parents. For what it's worth, in our research and everything we understand, pet parents trust the veterinarian office and specifically their individual veterinarian above anybody else. Like, if you think about the advice they get from the vet, that is the advice they will take 70 percent of the time.
Speaker Change: Yeah, well, let me first let me take a step back we had been talking about the veterinary clinic as like the Holy Grail for.
Speaker Change: Errands for what it's worth and our research and everything we understand pet parents trusted that office, specifically their individual veterinarian above anybody else like if you. If you think about the advice they get from the that that is the advice. They will take 70 plus percent of the time.
Adam Storm: And so, for us, this is not like a new thing. We've been thinking about the vet office for years, frankly. We bought a really small business called Pharmacy, I think. Alec can correct me.
Speaker Change: So for US this is not like a new thing we've been thinking about that that office for years, frankly, we bought us really small business called <unk> pharmacy, how can correctly I think he's something like 18 months ago, and our whole plan with that business was to figure out that office would really sticky and beautiful software that simplified you know the the <unk>.
Adam Storm: I think it was something like 18 months ago. And our whole plan with that business was to figure out the vet office with really sticky and beautiful software that simplified, you know, the pet parent's life. And so, as you all know, SaaS revenue is the best. It's sticky. It's recurring.
Speaker Change: That parents life.
Adam Storm: That's going to be the structure of that product, and if we can figure out how to acquire these customers through the vet office, the cross-sell should be pretty incredible. And so the reason we launched it, to answer your question, is that it's ready. If you go to the pharmacy, our prescription software is ready to rock. It's going to be in the hands of vet clinics pretty quickly, as Adam mentioned, and it's actually a really awesome product.
Speaker Change: So as you all know SAS revenues the best it's sticky it's recurring that's gonna be the the structure of that product and if we can figure out how to acquire these customers through the vet office, the cross-sell should be pretty incredible.
Speaker Change: So the reason we launched it to answer your question is it right.
Speaker Change: Go to a pharmacy or a prescription software is ready to rock, it's going to be in the hands of that clinics, you know pretty quickly.
Speaker Change: As Adam mentioned, and it's actually really awesome product. We believe it's the first of its kind kind of be prescribing software for the <unk> for the vet clinic I'm thinking like sure scripts, almost and yeah, we couldn't be more excited to kind of enter this channels. So just another fast moving water with a really sticky durable revenue with a we're excited to kind of surprising blood.
Adam Storm: We believe it's the first of its kind kind of e-prescribing software for the vet clinic. I think of it like SureScripts almost, and yeah, we couldn't be more excited to kind of enter this channel. So just another fast-moving water with a really sticky, durable revenue that we're excited to kind of surprise and delight.
Adam Storm: Got it. Okay. That's really helpful. Thank you.
Speaker Change: Got it okay. That's really helpful. Thank you.
Operator: And our next question comes from Greg Pendy from Chardin. Please go ahead, Greg.
Speaker Change: And our next question comes from Greg N D from short and please go ahead Greg.
Gregory R. Pendy: Thanks for taking my question. Can you share any metrics that you might be seeing in terms of monthly engagement as you're adding more services to the platform? Has that been changing at all? I think you had, you know, people are engaging maybe seven times per month on average.
Speaker Change: Alright. Thanks for taking my question can you share any metric that you might be seeing in terms of monthly engagement add you're adding more services to the platform has that been changing at all I think yeah. You know people are engaging maybe seven times per month on that on average.
Speaker Change: With the App.
Adam Storm: Yeah, hey, I mean, look, I'll go ahead and volume up.
Speaker Change: Yeah, Uhm any luck.
Speaker Change: Oh go ahead I'm all Ya okay.
Adam Storm: Okay, I can take this one. Broadly speaking, yes, cross-sell tends to get better as we add more products to our, you know, product suite. I think that's kind of how these incremental deals are, you know, the incremental deal is seeing how, you know, premium membership has driven additional usage of our wellness products or additional usage of our pet food and treat products. And I think that, you know, with the announcement of we compare and the announcement of prescription, this spider web of products where you might not need any given product at any given time, but you need something we offer that has, you know, all the internal So, yes, I think that the platform approach is working.
Speaker Change: Okay I can take this one.
Speaker Change: Broadly speaking E S. The cross sell tends to get better as we add more products to our product Sweet I think that's what's kind of.
Speaker Change: How to do these incremental the incremental deal is seeing how you know premium membership has driven additional usage of our wellness products or additional use usage of our pet food and treat products and I think that you know with the announcement, if we compare the announced.
Speaker Change: A prescription this spider web those products, where you might not need any given product at any given time, but you need something we offer that has.
Speaker Change: All the internal Netflix we looked at it it's like the more we offer the the stickier the entire platform becomes so yes, I think that the the platform approach is is this working.
Gregory R. Pendy: Great. And then just one more follow-up.
Speaker Change: Okay, Great and then just one more fob have you seen any changes. It seems like you know things are stalled macro wise and returned to office just for the services side add that impacted your view or has it stayed the same for a moment when we last heard in the fourth quarter.
Adam Storm: Have you seen any changes? It seems like, you know, things have stalled macro-wise on the return to office, just for the services side. Has that impacted your view, or has it stayed the same from when we last heard in the fourth quarter?
Adam Storm: I'm going to jump in first because I have such strong opinions here.
Speaker Change: Yeah <unk> okay.
Speaker Change: Okay sure Adam would jump at first I, just have such strong opinions here I think dark move or even said he'd love for more people to go back to the office and left for people to be taken <unk> to and from we I'm sorry, I didn't get the beginning this year even early last year, we don't really expect much change if if there's change at all upset and so certainly we think kind of castle back to work with a <unk>.
Adam Storm: I think Dara Ruvver even said he'd love for more people to go back to the office; he'd love for people to be taking Ubers to and from work. We said, I think at the beginning of this year, even early last year, we didn't really expect much change. If there's change, that's all upside. Certainly, we think Castle Back to Work Renovator is stalled out, frankly. That's okay. We have other fast-moving water we're in and out of.
Speaker Change: Castle back to work on numbers kind of stalled out frankly, that's okay. Like you know we have other fast moving water were in and out of but if it does accelerate that would certainly be a great tailwind for the services business otherwise like services is great. We liked that business, we're gonna wait for the time and place to lean back into it. It just won't be until kind of more people are mobile and frankly more people in the office.
Adam Storm: But if it does accelerate, that would certainly be a great tailwind for the services business. Otherwise, services are great. We like that business. We're going to wait for the time and place to lean back into it. It just won't be until more people are mobile and, frankly, more people are in the office. And you can add anything you want. No, I think that's a good idea.
Speaker Change: And you can add anything you want.
Adam Storm: No, I think that's a good summary.
Speaker Change: No I think that's a good somewhere.
Speaker Change: Thanks, a lot.
Operator: As a reminder, if you would like to ask a question, please press star 1 on your phone now. And our next question comes from C.J. DiPolito on Craig Hallam. Please go ahead, C.J.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your phone now.
Speaker Change: And our next question comes from C. J Dippolito from Craig Hallum. Please go ahead T J.
C.J. DiPolito: Good morning, everyone. Monford, Jeremy Hamblin here this morning.
Speaker Change: Good morning, everyone Mont for Jeremy handling. This morning, Thanks for taking the question I wanted to call out the severe weather that you you highlighted in your guidance. We know you know severe liver weather kind of lingered in Q1 curious you know what you're kind of calling out moving forward, maybe it's a tornadoes in the.
C.J. DiPolito: Thanks for taking the question. Wanted to call out the severe weather that you highlighted in your guidance. We know, you know, severe weather kind of lingered in Q1. Curious, you know, what you're kind of calling out moving forward. Maybe it's the tornadoes in the Midwest or sort of what?
Speaker Change: You know in the Midwest or.
Speaker Change: What you're seeing there.
Adam Storm: Yeah, I mean... Yeah, the nice thing about having significant geo diversification is that any given, you know, weather event does not, you know, materially move the whole, whole business. That said, there, you know, there was, the West Coast got kind of like Miami weather in Q1, and there are a number of important cities on the West Coast. So it can affect the overall numbers, but, you know, I wouldn't, you know, read too much into kind of just like normal seasonal weather patterns. They're going to affect the cities that they hit, as you might expect, but it's not, you know, something that we're overly concerned about.
Speaker Change: Yeah.
Adam Storm: Okay, got it. The only thing I'd add there is, like, if, you know, I'll make an example, but like in Q3, if a bunch of important cities are seeing, or even Q2, really awkward or incremental weather, you might see a little bit of a difference in services. But to Adam's point, you're talking, you know, a few percentage points, not 20%. Right? And so it sounds like you're not really seeing any lingering effects.
Speaker Change: Yeah, that's the nice thing about having significant G. O diversification is that any given you know weather events does not materially the whole the whole business <unk> you know there is there is.
Speaker Change: You know the west the West Coast, Scott kind of like Miami weather in Q1, and there's a number of important cities on the west coast. So it can affect the overall numbers, but you know I I wouldn't read too much into kind of just like normal seasonal weather patterns, they're they're gonna affects the cities that they it like you might expect.
Speaker Change: But it's not you know something that were overly concerned about it I think it I think about it more as like a risk factor then you know something that needs to be baked into guidance.
Speaker Change: Okay got it the only thing that out there is that there is like if you know make an example, but like a Q3, if a bunch of important cities are saying, we're going to Q2 yoga really awkward or incremental leather you might see a little bit of a difference in services, but Tom's point, you're talking you know a few percentage points not 20 per cent points.
Speaker Change: Right and so it sounds like you're not really seeing any lingering effects and and Q2.
C.J. DiPolito: No, I mean, the start of the quarter, you know, it's a small part overall, nothing crazy yet. But look, I don't want to jinx the weather. I seem to have bad luck there. I've been in California. It's been raining a ton. So yeah, but nothing so far.
Speaker Change: No I mean it started it started the quarter you know not <unk>, it's a small part overall nothing crazy, yet, but look I don't Wanna Jinx, whether it's I seem to have good luck there I've been in California, it's been raining a ton so yeah, but nothing so far.
C.J. DiPolito: Okay, cool, understood. And then one more, if you don't mind, I know you said we could pair is not really baked into 2024 guidance. Just kind of curious when that's going to start showing up on the P&L.
Speaker Change: Okay cool understood.
Speaker Change: And then one more if you don't mind I know you said.
Speaker Change: We could pay is not really baked into 2024 guidance just kind of curious when that's gonna start showing up on the on the piano.
Adam Storm: Yeah, it really depends on how quickly we want to, frankly, put dollars to work in terms of growing that business. There's a bunch of ways we plan on growing it, whether it's through partnerships, whether it's our own demand channels, whether it's cross-sell and up-sell. But I think we made a, you know, I made a comment earlier, this quarter is really going to be all about profitability, just a function of August being when our prepayment penalty expires for our debt repayment.
Speaker Change: Yeah, It really depends on how quickly we Wanna frankly put dollars to work in terms of growing that business is a bunch of ways. We plan on growing it whether it's through partnerships literature on demand channels order through its crosstown up so uhm I think we made it you know I mean.
Speaker Change: Comment earlier this quarter is really going to be all about profitability. Just a function of August being are a prepayment penalty expires for debt repayment and I think he's getting up in his death can be a really big enabler for the company and accelerate our past catastrophe cashless. So we're experimenting with it it's important to me like it we're having fun learning.
Adam Storm: And I think just getting out of debt can be a really big enabler for the company and accelerate our path to free cash flow. So we're experimenting with it. It's important. We like it. We're having fun learning. But, you know, I think we really want to put our pedal to the metal in that business as soon as we feel really good about profitability. So. More to come, I think, in the next quarter.
Speaker Change: But you know we I think we really want to put our cuddle them and all that business <unk> as soon as we feel really good about profitability. So.
Speaker Change: More to come I think in the next quarter.
C.J. DiPolito: Okay. All right. Thanks, guys. That's all for me. Good luck.
Speaker Change: Okay, Alright, thanks, guys. That's all from me good luck.
Garrett Smallwood: At this time, this concludes our question and answer session. I'll now turn it back over to Garrett Smallwood for closing remarks.
Speaker Change: At this time this concludes our question and answer session.
Speaker Change: Now turn it back over to Garrett small word for closing remarks.
Garrett Smallwood: Thanks, everyone, for your time today. I know you all have very busy schedules. You'll find the most recent management presentation, which we updated to reflect the new services and products we've launched, as well as our additional portfolio products on WAC.co, on the management presentation. Thanks so much.
Garrett Smallwood: Thanks, everyone for the time cause I know you all very busy schedules, you'll find the most recent mansion presentation, which we updated to reflect the new service and products, we've launched as well as our digital portfolio products on wacko <unk>. Thanks, so much.
Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. The host has ended this call. Goodbye.
Garrett Smallwood: Ladies and gentlemen, this concludes today's teleconference.
Speaker Change: You may disconnect your lines at at this time, thank you for your participation.
Garrett Smallwood: Okay.
Speaker Change: The House has ended this call goodbye.