Q2 2024 Wag! Group Co Earnings Call

Speaker Change: Good afternoon and welcome to the WEG second quarter 2024 earnings conference call. At this time all participants are in a listen-only mode. A brief question and answer will follow the formal presentation.

Operator: for earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer will follow the formal presentation.

Operator: 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.

Operator: 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'll now introduce your host, Greg Robles from Investor Relations. Thank you.

Operator: 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'll now introduce your host, Greg Robles from Investor Relations. Thank you.

Speaker Change: 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'll now introduce your host, Greg Robles with Investor Relations. Thank you. You may begin.

Greg Robles: I'll now introduce your host, Greg Robles, with Investor Relations. Thank you. You may begin.

Garrett Smallwood: Good afternoon, everyone. And thank you for joining WAG's conference call to discuss our second 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.

Greg Robles: Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our second 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.

Greg Robles: Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our second quarter 2024 financial results. 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.

Greg Robles: Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our second quarter 2024 financial results.

Speaker Change: 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.

Garrett Smallwood: 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 on this call. These statements should be considered estimates only and are not a guarantee of future performance.

Unknown Executive: 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.

Unknown Executive: Also, during the call, we present both GAAP and non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued today. 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.

Speaker Change: Before we get started, please note that today's comments include forward-looking statements. These forward-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements.

Speaker Change: A discussion of these risks and uncertainties are included in our filings with the SEC. 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.

Garrett Smallwood: Also, during the call, we present both GAP and non-GAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is available in our earnings release, which we issue today. The earnings release is available on the Investor Relations page of our website and is included in Exhibit and Form 8-K furnished to the SEC. These non-GAAP measures are not intended to be a substitute for our GAAP results.

Unknown Executive: Also, during the call, we present both GAAP and non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued today. The earnings release is available on the Investor Relations page of our website and is included in Exhibit A 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.

Speaker Change: Also, during the call, we present both GAAP and non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued today.

Speaker Change: 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.

Speaker Change: 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.

Garrett Smallwood: Lastly, you can find our earnings presentation posted on our IR website and with the SEC.

Garrett Smallwood: And with that, I'll now turn the call over to Garrett Smallwood. Good afternoon, and thank you for joining us today to discuss our financial performance for the second quarter of 2024. First, I will provide an overview of our financial results for the second quarter.

Garrett Smallwood: Good afternoon, and thank you for joining us today to discuss our financial performance for the second quarter of 2024. Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our second quarter results and discuss our capital allocation priorities. Our adjusted EBITDA margin is improving, as indicated by our 8.8% adjusted EBITDA margin in the second quarter, which is a significant improvement from the 0.5% a year ago and the 0.7% from the first quarter this year. In the second quarter, we delivered a quarterly record adjusted EBITDA of $1.6 million, which was driven by reduced and more efficient marketing spend and operational efficiency across all business.

Garrett Smallwood: Good afternoon, and thank you for joining us today to discuss our financial performance for the second quarter of 2024. First, I will provide an overview of our financial results for the second quarter. Following that, Adam, our president and chief product officer, will share brief updates on our strategic priorities for 2024 and beyond. Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our second quarter results and discuss our capital allocation priorities.

Garrett Smallwood: Good afternoon and thank you for joining us today to discuss our financial performance for the second quarter of 2024.

Garrett Smallwood: First, I will provide an overview of our financial results for the second quarter. Following that, Adam, our President and Chief Product Officer, will share brief updates on our strategic priorities for 2024 and beyond.

Garrett Smallwood: Following that, Adam, our president and chief financial officer, will share brief updates on our strategic priorities for 2024 and beyond. Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our second quarter results and discuss our capital allocation priorities. During the second quarter, our revenues decrease 6% to 18.7 million, while our adjusted EBITDA increased to 1.6 million, a quarterly record for WAG. As we have communicated, these results were highly intentional as we reduced marketing spend to increase profitability in the short term. As noted in our preliminary results released in July, our debt fee payment penalty expires this month, and our full debt becomes due a year from now.

Alec Davidian: Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our second quarter results and discuss our capital allocation priorities.

Garrett Smallwood: During the second quarter, our revenues decreased 6% to $18.7 million, while our adjusted EBITDA increased to $1.6 million, a quarterly record for WAG. As we have communicated, these results were highly intentional as we reduced marketing spend to increase profitability in the short term.

Speaker Change: During the second quarter, our revenues decreased 6% to $18.7 million, while our adjusted EBITDA increased to $1.6 million, a quarterly record for WAG.

Speaker Change: As we have communicated, these results were highly intentional as we reduced marketing spend to increase profitability in the short term.

Garrett Smallwood: As noted in our preliminary results released in July, our debt prepayment penalty expires this month, and our full debt becomes due a year from now. We are intensely focused on increasing adjusted EBITDA and free cash flow as we evaluate all options to refinance our debt. Strengthening our balance sheet and demonstrating consistent profitability is going to be utmost important. Additionally, we recently completed a 10 million registered public offering last month, and we will use the net proceeds to pay down a significant portion of our debt.

Alec Davidian: As noted in our preliminary results released in July , our debt prepayment penalty expires this month, and our full debt becomes due a year from now. We are intensely focused on increasing adjusted EBITDA and free cash flow as we evaluate all options to refinance our debt.

Garrett Smallwood: We are intensely focused on increasing adjusted EBITDA and free cash flow as we evaluate all options to refinance our debt. Strengthening our balance sheet and demonstrating consistent profitability is of the utmost importance. Additionally, we recently completed a 10 million registered public offering last month, and we will use the net proceeds to pay down a significant portion of our debt. We will refinance the remaining debt principle and strengthen our balance sheet, allowing us to generate substantial free cash flow. In fact, by lowering our debt principle and refinancing the remaining balance, we believe we will be in a position to deliver positive free cash flow going.

Alec Davidian: Strengthening our balance sheet and demonstrating consistent profitability is of the utmost importance.

Alec Davidian: Additionally, we recently completed a $10 million registered public offering last month, and we will use the net proceeds to pay down a significant portion of our debt. We will refinance the remaining debt principle and strengthen our balance sheet, allowing us to generate substantial free cash flow.

Garrett Smallwood: We will refinance the remaining debt principal and strengthen our balance sheet, allowing us to generate substantial free cash. In fact, by lowering our debt principle and refinancing the remaining balance, we believe we'll be in a position to deliver positive free cash flow going forward. Our adjusted EBITDA margin is improving, as indicated by our 8.8% adjusted EBITDA margin in the second quarter, which is a significant improvement from the 0.5% a year ago and the 0.7% from the first quarter this year.

Alec Davidian: In fact, by lowering our debt principle and refinancing the remaining balance, we believe we'll be in a position to deliver positive free cash flow going forward.

Garrett Smallwood: Our adjusted EVA de margin is improving, as indicated by our 8.8% adjusted EVA de margin in second quarter, which is a significant improvement from the 0.5% a year ago and the 0.7% from first quarter of this year. As we return to growth, we expect to maintain a healthy adjusted EVA de margin to balance profitability and growth going forward. In second quarter, we delivered a quarterly record adjusted EVA de 1.6 million, which was driven by reduced and more efficient marketing spend and operational efficiency across all business units. In turn, second quarter platform participants decreased 15% year-over-year to 467,000.

Alec Davidian: Our adjusted EBITDA margin is improving, as indicated by our 8.8% adjusted EBITDA margin in second quarter, which is a significant improvement from the 0.5% a year ago and the 0.7% from first quarter of this year.

Garrett Smallwood: As we return to growth, we expect to maintain a healthy adjusted EBITDA margin to balance profitability and growth going forward. In the second quarter, we delivered a quarterly record adjusted EBITDA of $1.6 million, which was driven by reduced and more efficient marketing spend and operational efficiency across all businesses. In turn, second quarter platform participants decreased 15% year over year to 467,000. We remain focused on acquiring the highest quality customers. On the operations side, we continue to benefit from AI and process automation, which we will lean into in order to increase the quality of our products while reducing overall. As we move into the back half of the year, we remain focused on reaching more U.S. households as the all-encompassing, trusted partner for premium wellness, service, and product.

Alec Davidian: As we return to growth, we expect to maintain a healthy adjusted EBITDA margin to balance profitability and growth going forward.

Alec Davidian: In second quarter, we delivered a quarterly record adjusted EBITDA of $1.6 million, which was driven by reduced and more efficient marketing spend and operational efficiency across all business units.

Alec Davidian: In turn, second quarter platform participants decreased 15% year-over-year to 467,000. We remain focused on acquiring the highest quality customers.

Garrett Smallwood: We remain focused on acquiring the highest quality customers. On the operation side, we continue to benefit from AI and process automation tools, which we will lean into in order to increase the quality of our products while reducing overall op-ex. As we move in the back half of the year, we remain focused on reaching more US households as the all-encompassing trusted partner for premium wellness, service, and products. We expect to generate free cash flow as we benefit from lower interest expense in our debt, which ultimately provides us with increased flexibility to award shareholders through opportunistic M&A, reinvesting in the business for further growth, and returning cash to shareholders through stock buybacks.

Alec Davidian: On the operations side, we continue to benefit from AI and process automation tools, which we will lean into in order to increase the quality of our products while reducing overall OPEX.

Alec Davidian: As we move in the back half of the year, we remain focused on reaching more U.S. households as the all-encompassing, trusted partner for premium wellness, service, and products.

Garrett Smallwood: We expect to generate free cash flow as we benefit from lower interest expense on our debt, which ultimately provides us with increased flexibility to reward shareholders through opportunistic M&A, reinvesting in the business for further growth, and returning cash to shareholders through stock buybacks. And with that, I will turn the call over to Adam to review our strategic priorities for 2020.

Alec Davidian: We expect to generate free cash flow as we benefit from lower interest expense in our debt, which ultimately provides us with increased flexibility to reward shareholders through opportunistic M&A, reinvesting in the business for further growth, and returning cash to shareholders through stock buybacks.

Adam Storm: And with that, I will turn the call over to Adam to review our strategic priorities for 2024. Thanks, Garrett. Our strategic priorities remain unchanged in our growth levels, building best-in-class software solutions for consumers and partners to core to what we do. We are focused on solving the needs of the premium pet household across wellness, insurance, prescription meds, and other solutions.

Alec Davidian: And with that, I will turn the call over to Adam to review our strategic priorities for 2024.

Adam Storm: Thanks Garrett. Our strategic priorities remain unchanged and are as follows. Building best-in-class software solutions for consumers and partners is core to what we do. We are focused on solving the needs of the premium pet household across wellness, insurance, prescription meds, and other solutions. Of note, we're very excited about the long-term growth prospects of our prescription B2B SAS platform and expect to share a more fulsome update on our next earnings call. We continue to believe in the power of the veterinary channel and the opportunity for digitally prescribing veterinarian medications to streamline the prescription process for pet parents and vets alike.

Adam Storm: Thanks Garrett. Our strategic priorities remain unchanged and are as follows.

Adam Storm: Building best-in-class software solutions for consumers and partners is core to what we do. We are focused on solving the needs of the premium pet household across wellness, insurance, prescription meds, and other solutions.

Adam Storm: Of note, we're very excited about the long-term growth prospects of our prescription B2D SaaS platform and expect to share a more fulsome update on our next earnings call. We continue to believe in the power of the veterinary channel and the opportunity in digitally prescribing vet medications to streamline the prescription process for pet parents and vets alike. Two, we're focused on growing our platform via product expansion for proprietary partnerships and opportunistic M&A. Our integrations of doggood advisor, maximum infirmacy were seamless, and we're always looking for new opportunities that delight the premium pet parents in our value add to the WAG platform.

Adam Storm: Of note, we're very excited about the long-term growth prospects of our prescription B2B SAS platform, and expect to share a more fulsome update on our next earnings call.

Adam Storm: We continue to believe in the power of the veterinary channel and the opportunity in digitally prescribing vet medications to streamline the prescription process for pet parents and vets alike.

Garrett Smallwood: Two, we're focused on growing our platform via product expansion, proprietary partnerships, and opportunistic M&A. As Garrett mentioned, we're intensely focused on driving free cash flow, increasing profitability, and therefore have been more measured with our marketing spend. We remain excited about our company's future growth prospects and believe a strengthened balance sheet will allow us to return to growth and scale our business profitably and sustainably for increased shareholder value creation.

Adam Storm: Two, we're focused on growing our platform via product expansion, proprietary partnerships, and opportunistic M&A. Our integrations of Dog Food Advisor, Maxstone, and Firmacy were seamless, and we're always looking for new opportunities that delight premium pet parents and are a value add to the WAG platform. On WeCompare, we remain confident in our ability to replicate our success with pet insurance and other insurance verticals, but we expect the majority of the growth contribution to come in 2025, when we have more marketing bandwidth to allocate to a more robust launch.

Adam Storm: Two, we're focused on growing our platform via product expansion, proprietary partnerships, and opportunistic M&A.

Adam Storm: Our integrations of Dog Food Advisor, MaxFoam, and Phirmacy were seamless, and we're always looking for new opportunities that delight the premium pet parents and are a value add to the WAG platform.

Adam Storm: On week and pair, we remain confident in our ability to replicate our success with pet insurance and other insurance verticals, but we expect the majority of the growth contribution to come in 2025 when we have more marketing bandwidth to allocate for a more robust launch. As Garrett mentioned, we're intensely focused on driving free cash flow, increasing profitability, and therefore have been more measured with our marketing spend. In short, the team at WAG is performing exceptionally well, and we continue to advance against our core strategic pillars.

Adam Storm: On We Compare, we remain confident in our ability to replicate our success with pet insurance and other insurance verticals, but we expect the majority of the growth contribution to come in 2025, when we have more marketing bandwidth to allocate for a more robust launch.

Adam Storm: As Garrett mentioned, we're intensely focused on driving free cash flow, increasing profitability, and therefore have been more measured with our marketing spend. In short, the team at WAG is performing exceptionally well, and we continue to advance against our core strategic pillars. We remain excited about our company's future growth prospects and believe a strengthened balance sheet will allow us to return to growth and scale our business profitably and sustainably for increased shareholder value creation. I will now turn the call over to Alec to discuss our second quarter financials and 2024 forecast in more detail.

Speaker Change: As Garrett mentioned, we're intensely focused on driving free cash flow, increasing profitability, and therefore have been more measured with our marketing spend.

Garrett Smallwood: In short, the team at WAG is performing exceptionally well, and we continue to advance against our core strategic pillars.

Adam Storm: We remain excited about our company's future growth prospects and believe a strength and balance sheet will allow us to return to growth and scale our business profitably and sustainably for increased shareholder value creation.

Speaker Change: We remain excited about our company's future growth prospects and believe a strengthened balance sheet will allow us to return to growth and scale our business profitably and sustainably for increased shareholder value creation.

Alec Davidian: I will now turn the call over to Alec to discuss our second quarter financials in 2024 forecast in more detail. This is the first year of the year, comprising of wellness of 11.5 million, services of 5.6 million, and pathogen treats of 1.5 million. Adjusted the EBITDA of 1.6 million, representing a 1.5 million improvement year over year, and adjusted EBITDA margin improvement from positive 0.5% to positive 8.8%. Platform participants of 467,000, a decline of 15% year over year; however, generating higher revenue per user statistics.

Adam Storm: I will now turn the call over to Alec to discuss our second quarter financials and 2024 forecast in more detail.

Alec Davidian: Thanks, Adam. Our Q2 results, which were highlighted by our highest adjusted EBITDA profitability on record, are a result of our commitment to strengthening our balance sheet. Our results were driven by prudent cost management. As a result, Q2 metrics were as follows: revenue of $18.7 million, down 6% year-over-year from pricing wellness of $11.5 million, services of $5.6 million, and pet food and treats of $1.5 million. Adjusted EBITDA of $1.6 million, representing a $1.5 million improvement year-over-year, and an adjusted EBITDA margin improvement from positive 0.5% to positive 8.8%.

Alec Davidian: Thanks, Adam. Our Q2 results, which were highlighted by our highest adjusted EBITDA profitability on record, are a result of our commitment to strengthening our balance sheet.

Alec Davidian: Our results were driven by prudent cost management initiatives.

Alec Davidian: As a result, Q2 metrics were as follows.

Alec Davidian: Revenue of $18.7 million, down 6% year-over-year, comprising wellness of $11.5 million, services of $5.6 million, and pet food and treats of $1.5 million. Sales and marketing expense totaled $11 million, representing 59% of revenue, up from 54% a year ago but down from 67% in Q1 this year. General and administrative expense totaled $3.8 million, representing 20% of revenue, down from 24% a year ago. From a balance sheet perspective, we ended the quarter with $17 million in cash, cash equivalents, and accounts receivable.

Alec Davidian: Revenue of $18.7 million, down 6% year-over-year, comprising of wellness of $11.5 million, services of $5.6 million, and pet food and treats of $1.5 million.

Adam Storm: Adjusted EBITDA of $1.6 million, representing a $1.5 million improvement year-over-year, and an adjusted EBITDA margin improvement from positive 0.5% to positive 8.8%.

Alec Davidian: Platform participants of 467,000, a decline of 15% year over year, but higher revenue per user statistics. Our expenses, when analyzed as a percentage of revenue, were as follows. Plus revenue, excluding depreciation and amortization, totaled $1.2 million, representing 6% of revenue staying flat to 6% a year ago. Platform operations and support expenses totaled $2.7 million, representing 15% of revenue, less than 18% a year ago. The decrease year-over-year was achieved through optimized technology benefits and headcount costs.

Adam Storm: Platform participants of 467,000, a decline of 15% year-over-year, however, generating higher revenue per user statistic.

Alec Davidian: Our expenses, when analyzed as a percentage of revenue, were as follows. Social revenue, excluding depreciation and amortization, totaled 1.2 million, representing 6% of revenue, staying flat to 6% a year ago. Platform operations and support expenses totaled 2.7 million, representing 15% of revenue, versus 18% a year ago. The decreased year of year was achieved through optimized technology benefits and headcount costs. Delta marketing expense totaled 11 million, representing 59% of revenue, up from 54% a year ago, but down from 67% in 2.1 this year. As mentioned earlier, we reduced marketing spend in the quarters to increase profitability in the near term, but expect to increase this investment once we refinance our debt.

Alec Davidian: Sales and marketing expense totaled $11 million, representing 59% of revenue, up from 54% a year ago but down from 67% in Q1 this year. As mentioned earlier, we reduce marketing spend in the quarters to increase profitability in the near term but expect to increase this investment once we refinance our debt. G&A expense totaled $3.8 million, representing 20% of revenue, down from 24% a year ago. The reduction was driven by technology and headcount cost optimization and lower public company costs.

Adam Storm: Our expenses, when analyzed as a percentage of revenue, were as follows.

Speaker Change: Cost of revenue, excluding depreciation and amortization, totaled $1.2 million, representing 6% of revenue staying flat to 6% a year ago.

Adam Storm: Platform operations and support expenses totaled $2.7 million, representing 15% of revenue, less than 18% a year ago.

Speaker Change: The decrease year-over-year was achieved through optimized technology benefits and headcount costs.

Speaker Change: Delta marketing expense totals $11 million, representing 59% of revenue, up from 54% a year ago, but down from 67% in Q1 this year.

Speaker Change: As mentioned earlier, we reduce marketing spend in the quarters to increase profitability in the near term, but expect to increase this investment once we refinance our debt.

Alec Davidian: G&E expense totaled 3.8 million, representing 20% of revenue, down from 24% a year ago. The reduction was driven by technology and headcount cost optimization, and lower public company costs.

Adam Storm: G&A expense totaled $3.8 million, representing 20% of revenue, down from 24% a year ago.

Adam Storm: The reduction was driven by technology and headcount cost optimization and lower public company costs.

Alec Davidian: From a balance sheet perspective, we ended the quarter with 17 million in cash, cash equivalents, and accounts receivable. As we mentioned in July, we completed a 10 million capital raise that added approximately 8.5 million of cash to the balance sheet after expenses. We planned to use the process to pay down high interest debt. This will generate approximately 340,000 of quarterly interest cost savings starting in 2.3. With a lower debt balance, a better cash to debt ratio, we are positioning ourselves for a debt refinancing that has the potential to generate further interest cost savings.

Alec Davidian: From a balance sheet perspective, we ended the quarter with $17 million in cash, cash equivalents, and accounts receivable. As we mentioned, in July, we completed a $10 million capital raise that added approximately $8.5 million of cash to the balance sheet after expenses. We plan to use the proceeds to pay down high-interest debt. This will generate approximately $340,000 of quarterly interest cost savings starting in Q3. With a lower debt balance and a better cash to debt ratio, we are positioning ourselves for a debt refinancing that has the potential to generate further interest cost savings. We are actively exploring options and will provide an update at the appropriate time.

Adam Storm: From a balance sheet perspective, we ended the quarter with $17 million in cash, cash equivalents, and accounts receivable.

Adam Storm: As we mentioned, in July we completed a $10 million capital raise that added approximately $8.5 million of cash to the balance sheet after expenses.

Adam Storm: We plan to use the proceeds to pay down high-interest debt.

Adam Storm: This will generate approximately $340,000 of quarterly interest cost savings starting in Q3.

Alec Davidian: With a lower debt balance and a better cash to debt ratio, we are positioning ourselves for a debt refinancing that has the potential to generate further interest cost savings. Moving on to our guidance for 2024. Taking into consideration our results year-to-date, we reiterate our guidance provided on July 10th, in addition to our expected positive free cash flow in the second half of 2024 and Adjusted EBITDA in the range of $1.5 million to $2.5 million.

Adam Storm: With a lower debt balance and better cash-to-debt ratio, we are positioning ourselves for a debt refinancing that has the potential to generate further interest cost savings.

Alec Davidian: We are actively exploring options and will provide an update at the appropriate time. Moving to our guidance for 2024, taking into consideration our results yet to date, we retraced our guidance provided on July 10th of revenue of 92 million to 102 million, which represents growth of 10% to 22% over 2023. Adjusted EBITDA in the range of 4 million to 8 million, representing drastic growth over 2023. This guide anticipates a 4% to 8% adjusted EBITDA margin. In addition to our expected positive free cash flow in the second half of 2020. for our third quarter 2020 guidance, we expect revenue in the range of 20 million to 24 million and adjusted EBITDA in the range of 1.5 million to 2.5 million.

Adam Storm: We are actively exploring options and will provide an update at the appropriate time.

Alec Davidian: Moving to our guidance for 2024, taking into consideration our results year-to-date, we reiterate our guidance provided on July 10th of revenue of $92 million to $102 million, which represents growth of 10% to 22% over 2023. Adjusted EBITDA in the range of $4 million to $8 million, representing drastic growth over 2023. This guide anticipates a 4% to 8% adjusted EBITDA margin, in addition to our expected positive free cash flow in the second half of 2024.

Adam Storm: Moving to our guidance for 2024. Taking into consideration our results year-to-date, we reiterate our guidance provided on July 10th of revenue of $92 million to $102 million, which represents growth of 10% to 22% over 2023.

Adam Storm: Adjusted EBITDA in the range of $4 million to $8 million, representing drastic growth over 2023. This guide anticipates a 4% to 8% adjusted EBITDA margin.

Adam Storm: In addition to our expected positive free cash flow in the second half of 2024. For our third quarter 2024 guidance, we expect revenue in the range of $20 million to $24 million, and adjusted EBITDA in the range of $1.5 million to $2.5 million.

Alec Davidian: For our third quarter 2024 guidance, we expect revenue in the range of $20 million to $24 million and Adjusted EBITDA in the range of $1.5 million to $2.5 million. We are approaching Q3 from a position of strength, and we are seeing healthy competition in the PEC category alongside an improved consumer environment for the premium household compared to last quarter. In summary, a second quote to illustrate.

Alec Davidian: We are approaching Q3 from a position of strength, and we are seeing healthy competition in the pet category alongside an improved consumer environment for the premium household compared to last quarter.

Alec Davidian: We are approaching Q3 from a position of strength, and we are seeing healthy competition in the PEC category alongside an improved consumer environment for the premium household compared to last quarter. Our operational discipline on headcount and automation will allow us to continue lowering OPEX and increasing profit for sustainable, profitable growth.

Adam Storm: We are approaching Q3 from a position of strength and we are seeing healthy competition in the PEC category alongside an improved consumer environment for the premium household compared to last quarter.

Alec Davidian: In summary, our second quarter illustrates a commitment to strengthening the balance sheet, our ability to balance growth versus profit, and finally confidence in the next age of wax journey as a profitable growth company beyond 2024. Our operational discipline on headcount and automation will allow us to continue lowering our packs and increasing profit for sustainable, profitable growth.

Alec Davidian: Commitment to Strengthening the Balance Sheet, our ability to balance growth versus profit. And finally, confidence in the next stage of your WAG's journey as a profitable growth company beyond 2024. Our operational discipline on headcount and automation will allow us to continue lowering OPEX and increasing profit for sustainable, profitable growth. And with that, we now welcome Q&A. Operator, can you kindly open it up for Q&A?

Adam Storm: In summary, our second quarter illustrates a commitment to strengthening the balance sheet.

Adam Storm: Our ability to balance growth versus profit.

Speaker Change: And finally, confidence in the next stage of WAG's journey as a profitable growth company beyond 2024. Our operational discipline on headcount and automation will allow us to continue lowering OPEX and increasing profit for sustainable, profitable growth.

Operator: And with that, we now welcome Q&A operator. Can you kindly open it up for Q&A? Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star, followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys.

Speaker Change: And with that, we now welcome Q&A. Operator, can you kindly open it up for Q&A?

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any. Your first question comes from Jason Helfstein with Oppenheimer. Your line is now open.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any. Your first question comes from Jason Helfstein with Oppenheimer. Your line is now open.

Speaker Change: that

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone.

unknown: Thank you.

Speaker Change: You may hear a prompt that your hand has been raised.

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Jason Helfstein: Your first question comes from Jason Helfstein with Oppenheimer. Your line is now open.

Speaker Change: Your first question comes from Jason Helfstein with Oppenheimer. Your line is now open.

Jason Helfstein: Hey everybody, so now that you guys got that financing done, the equity financing, how are you thinking about leaning back into marketing? Obviously, you didn't change the full-year guide, but you know, do we think about you leaning back into marketing potentially in the fourth quarter, or do we think more about that next year? And then I guess as we're just thinking about next year, how do you think about, I don't know, the priorities for growth? Is it the same? Thank you.

Jason Helfstein: Hi everybody. So now that you guys got that financing done, the equity financing, how are you thinking about leaning back into marketing? Obviously, you didn't change the full-year guide.

Jason Helfstein: Hey, everybody. So now that you guys got that financing done, the equity financing,

Speaker Change: Do you, how are you thinking about leaning back into marketing? Obviously you didn't change the full year guide.

Jason Helfstein: But do we think about you leaning into marketing potentially in the fourth quarter, or do we more think about that next year? And then I guess, as we're just thinking about next year, how do you think about the priorities for growth? Is it the same view as you came into this year, just with more money to spend?

Speaker Change: But, you know, do we think about you leaning into marketing potentially in the fourth quarter or we more think about that next year? And then, I guess, as we're just thinking about next year, like, how do you think about, I don't know, like, the priorities for growth? Is it like the same...

Speaker Change: kind of view as you came into this year, just with, you know, more money to spend. Thank you.

Jason Helfstein: Thank you.

Garrett Smallwood: Hey Jason, thanks for the question. As it pertains to growth, I really think that our first priority is debt. So the financing was really about paying down debt and putting us, the remaining debt balance, you know, this is after the prepayment penalty expires, putting the remaining balance in a place that we can refinance. As it pertains to growth, I think that we're first going to refinance the remainder of the debt. And then once that's behind us and we're really, you know, in a position where we're generating real cash, then we'll lean back into growth. And that'll happen in the second half of this year.

Garrett Smallwood: Hey Jason, thanks for the question. As it pertains to growth, I really think that our first priority is debt. So the financing was really about paying down debt and putting the remaining debt balance, you know, this is after the prepayment penalty expires, putting the remaining balance in a place that we can refinance. So as it relates to growth, I think that we're first going to refinance the remainder of the debt. And then once that's behind us, and we're really, you know, in a position where we're generating real cash, then we'll lean back into growth. And that'll, that'll happen in the back half of this year.

Garrett Smallwood: Hey Jason, thanks for the question. So, as it pertains to growth, I really think our first priority is the debt. So the financing was really about paying down debt and putting the remaining debt balance, this is after the procurement penalty expires, putting the remaining balance in a place that we can refile. So, as it pertains to growth, I think that we're first going to refile the remainder of the debt. And then once that's behind us and we're really in a position we're generating real cash, then we'll lean back into growth.

Speaker Change: Hey Jason, thanks for the question.

Speaker Change: As it pertains to growth, I really think that our first priority is the debt, so the financing was really about paying down debt and putting us, putting the remaining debt balance, you know, this is after the

Speaker Change: The prepayment penalty expires, putting the remaining balance in a place that we can refi.

Speaker Change: So, as it pertains to growth, I think that we're first going to refi the remainder of the debt. And then once that's behind us and we're really in a position where we're generating real cash, then we'll lean back into growth. And that'll happen in the back half of this year.

Garrett Smallwood: And that will happen in the back half of this year. As it pertains to 2025, yes, we want to return to being a growth company, but probably a little bit more balance between growth and profitability than we came into this year. Our initial thoughts of this year was to kind of be very growth heavy and something like three or four percent evital margins. Next year, I think that we want to be more on the order of eight, ten, twelve percent evital margins somewhere in that range and then kind of balance growth on top of that.

Garrett Smallwood: As it pertains to 2025, yes, we want to return to being a growth company, but probably a little bit more balanced between growth and profitability than we came into this year. Our, you know, initial thoughts for this year were to kind of be very growth heavy and something like 3 or 4% EBITDA margins. Next year, I think that we want to be, you know, more on the order of, you know, 8, 10, 12% EBITDA margins, somewhere in that range, and then kind of balanced growth on top of that. I hope that answers your question.

Speaker Change: As it pertains to 2025, yes, we want to return to being a growth company, but probably a little bit more balanced between growth and profitability than we came into this year. Our initial initial thoughts for this year was to kind of be very growth heavy in something like 3 or 4% EBITDA margins.

Garrett Smallwood: As it pertains to 2025, yes, we want to return to being a growth company, but probably a little bit more balanced between growth and profitability than we came into this year. Our, you know, initial thoughts for this year were to kind of be very growth heavy and something like three or 4% EBITDA margins. Next year, I think that we want to be, you know, more on the order of, you know, 8, 10, 12% EBITDA margin somewhere in that range, and then kind of balanced growth on top of that. Hopefully, that answers your question. Yeah, it's super helpful.

Speaker Change: Next year, I think that we want to be more on the order of 8%, 10%, 12% EBITDA margin, somewhere in that range, and then kind of balance growth on top of that. I hope that answers your question. Yeah, super helpful. Thanks.

Garrett Smallwood: I hope that answers your question.

Jason Helfstein: Yeah, super helpful. Thanks.

Jason Helfstein: Yeah, super helpful. Thank you.

Jeremy Hamblin: Your next question comes from Jeremy Hamblin with Craig Hallum. Your line is now open.

Jeremy Hamblin: Your next question comes from Jeremy Hamblin, with Craig Hallam. Your line is now open.

Speaker Change: Your next question comes from Jeremy Hamblin with Craig Hallam. Your line is now open.

Jeremy Hamblin: Thanks and congrats on the improvements and profitability. I wanted to hone in actually on the point that Alec was making.

Jeremy Hamblin: Thanks and congrats on the improvements and profitability. I wanted to hone in actually on the point that Alec was making.

Jeremy Hamblin: Thanks and congrats on the improvements and profitability.

Speaker Change: I wanted to hone in actually on the point that Alec was making. You know, there's been a lot of noise.

Jeremy Hamblin: There's been a lot of noise, and frankly, a bit of softening and consumer spend. I think I caught an avid comment that in Q3 you've seen increased demand for premium pet care services, but wanted to see if you could explore that. You know, you're obviously guiding to sequential improvement; pretty nice sequential improvement here in Q3 versus Q2.

Jeremy Hamblin: You know, there's been a lot of noise and, frankly, a bit of a softening in consumer spend. I think I caught in Alec's comments that in Q3, you saw increased demand for premium pet care services, but I wanted to see if you could explore that. You know, you're obviously guiding to sequential improvement, pretty nice sequential improvement here in Q3 versus Q2. So I wanted to get a sense for how things are starting out and how you're seeing kind of competitive balance.

Jeremy Hamblin: And frankly, a bit of softening in consumer spend. I think I caught in Alec's comments that in Q3 you've seen increased demand for premium pet care services, but wanted to see if you could explore that.

Speaker Change: You know, you're obviously guiding to sequential improvement, pretty nice sequential improvement here in Q3 versus Q2, so I wanted to get a sense for how things are starting out and how you're seeing kind of competitive balance.

Jeremy Hamblin: So I want to get a sense for how things are starting out and how you're seeing kind of competitive balance.

Garrett Smallwood: Sure. So thanks for the question, Jeremy. I don't think it's a surprise to anyone to say that the macro backdrop is a little bit shaky right now, like literally right now this week. But broadly within the pet ecosystem, premium pet care, so that's all of the wellness categories, have been pretty durable. I don't think, you know, individual trading off has a big impact on whether or not you're going to get a pet insurance policy.

Garrett Smallwood: Sure. So thanks for the question, Jeremy.

unknown: Sure. So thanks for the question, Jeremy.

Speaker Change: Sure. So thanks for the question, Jeremy. I don't think it's a surprise to anyone to say that the macro backdrop is a little bit shaky right now, like literally right now, this week.

Garrett Smallwood: I don't think it's a surprise to anyone to say that the macro backdrop is a little bit shaky right now, like literally right now this week. But you know, broadly within the pet ecosystem, premium pet care, so that's kind of like all of the wellness categories have been pretty durable. I don't think, you know, Nvidia trading off has a big impact on whether or not you're going to get a pet insurance policy.

Garrett Smallwood: I don't think it's a surprise to anyone to say that the macro backdrop is a little bit shaky right now, like literally right now this week. But, you know, broadly within the pet ecosystem, premium pet care, so that's kind of like all of the wellness categories have been pretty durable. I don't think, you know, Nvidia trading off has a big impact on whether or not you're going to get a pet insurance policy.

Speaker Change: But, you know, broadly within the pet ecosystem, premium pet care, so that's kind of like all of the wellness categories have been pretty durable. I don't think, you know, Nvidia trading off has a big impact on whether or not you're going to get a pet insurance policy.

Garrett Smallwood: So, you know, I don't think it's a shock to you or kind of anybody listening to this call to say that wellness and our kind of health-related businesses have been kind of the bright spot over the last 12 months. And I don't see that changing. I think that's a pretty durable, secular trend, and we're going to kind of continue to play in that space.

Garrett Smallwood: So, you know, I don't think it's a shock to you or anybody listening to this call to say that wellness and our kind of health-related businesses have been kind of the bright spot over the last 12 months. And I don't see that changing. I think that's a pretty durable secular trend, and we're going to kind of continue to play in that space.

Garrett Smallwood: So you know, I don't think it's a shock to you or anybody listening to this call to say that wellness and our kind of health-related businesses have been kind of the bright spot over the last 12 months. And I don't I don't see that changing. I think that's a pretty durable secular trend. And we're going to kind of continue to play in that space.

Speaker Change: So, you know...

Speaker Change: I don't think it's a shock to you or kind of anybody listening to this call to say that wellness and our kind of health-related businesses have been kind of the bright spot over the last 12 months.

Speaker Change: And I don't see that changing. I think that's a pretty durable secular trend and we're going to kind of continue to play in that space.

Jeremy Hamblin: Great. And then one of the things, it looks to me like you saw pretty significant improvement in your ARPU given the platform participants here in Q2, you know, double-digit increase.

Jeremy Hamblin: Great And then, it looks to me like you saw a pretty significant improvement in your ARPU, given the platform participants here in Q2, a double-digit increase, I think, year-over-year in ARPU. And just wanted to get a sense for, you know, what you're learning as you've kind of gone through this process of getting more disciplined, you know, getting more profitable, and squeezing a bit more out of the platform itself, you know, as you reignite the growth engines here post-debt refinancing. How, from a strategic standpoint, what learnings have you had that you're going to apply Yeah, that's right.

Speaker Change: Great. And then, honestly, it looks to me like you saw pretty significant improvement in your ARPU given the platform participants here in Q2, you know, double-digit increase I think year-over-year in ARPU. And just wanted to get a sense for, you know, what you're learning as you've kind of gone through this process of getting more disciplined, you know, being more profitable and squeezing a bit more out of the platform itself.

Garrett Smallwood: I think you're over here at ARPU and just wanted to get a sense for, you know, what you're learning as you've kind of gone through this process of getting more disciplined, you know, getting more profitable and squeezing a bit more out of the platform itself, you know, as you reignite the growth engines here post that refinancing. You know, how from a strategic standpoint, you know, what learnings have you had that you're going to apply so that you're moving into 2025 as you invest dollars in sales and marketing, you know, to continue to get that good improvement in ARPU.

Speaker Change: You know, as you reignite the growth engines here post-debt refinancing,

Speaker Change: How, from a strategic standpoint, what learnings have you had that you're going to apply so that moving into 2025, as you invest dollars in sales and marketing, to continue to get that good improvement in ARPU?

Garrett Smallwood: Yeah, that's a good question, a good observation, frankly. So any quarter where we pull back on marketing sequentially, the customer mix is going to change a little bit, so there's more returning customers relative to new customers as a function of that spend. Those returning customers are going to have higher ARPU, as you've noticed, but it's also kind of actions that we're taking internally. So cross-sell and upsell become really, really important when we're, you know, looking for growth outside of just deploying marketing dollars. So you're going to see more of that. I think that the road map and the customer acquisition landscape is going to push us a little bit harder on the upsell, cross-sell that you kind of observed.

Garrett Smallwood: Yeah, that's a good question, and a good observation, frankly. So any quarter where we pull back on marketing sequentially, the customer mix is going to change a little bit. So there are more returning customers relative to new customers as a function of that spend. And those returning customers are going to have higher ARPU, as you've noticed.

Garrett Smallwood: Yeah, that's a good question, and a good observation, frankly. So any quarter where we pull back on marketing sequentially, the customer mix is going to change a little bit. So there are more returning customers relative to new customers as a function of that spend. And those returning customers are going to have higher ARPU, as you've noticed.

Speaker Change: Yeah, that's a good question, a good observation, frankly. So, any quarter where we pull back on marketing sequentially, the customer mix is going to change a little bit. So, there's more returning customers relative to new customers as a function of that spend. Those returning customers are going to have higher ARPU, as you've noticed. But it's also kind of actions that we're taking internally. So, cross-sell and up-sell becomes really, really important when we're looking for growth outside of just deploying marketing dollars.

Garrett Smallwood: But it's also kind of actions that we're taking internally. So cross-sell and up-sell become really, really important when we're looking for growth outside of just deploying marketing dollars. So you're going to see more of that. I think that the roadmap and the customer acquisition landscape are going to push us a little bit harder on the up-sell and cross-sell that you kind of observed.

Garrett Smallwood: But it's also kind of actions that we're taking internally. So cross-sell and up-sell become really, really important when we're looking for growth outside of just deploying marketing dollars. So you're going to see more of that. I think that the roadmap and the customer acquisition landscape are going to push us a little bit harder on the up-sell and cross-sell that you kind of observed.

Speaker Change: So you're going to see more of that. I think that the roadmap and the customer acquisition landscape is going to push us a little bit harder on the upsell, cross-sell that you kind of observed in Q2.

Jeremy Hamblin: Thank you too.

Jeremy Hamblin: Got it.

Jeremy Hamblin: got it. And then, you know, with the focus clearly on debt refinancing here, as you start to think about the timing for that, I think the prepayment penalty expires here, you know, in the coming few days. What's the timing that you think that that can get done? And then, you know, how much improvement do you think that you can get out there in the market in terms of some kind of annualized interest rate reduction? I mean, are we looking at, you know, 400, 500 basis points or something more than that, based kind of on the engagements you've had thus far?

Jeremy Hamblin: And then, you know, with the clearly focuses on debt refinancing here, as you start to think about the timing for that, I think the prepayment penalty expires here, you know, in the coming few days. What's the timing that you think that can get done. And then, you know, how much improvement do you think that you can get out there in the market. In terms of kind of annualized interest rate reduction, I mean, are we looking at, you know, 400, 500 basis points or something more than that, you know, based kind of on the engagement you've had thus far.

Speaker Change: Got it.

Speaker Change: And then...

Speaker Change: You know, with the, clearly the focus is on debt refinancing here.

Speaker Change: As you start to think about the timing for that, I think the prepayment penalty expires here in the coming few days.

Speaker Change: What's the timing that you think that that can get done? And then, you know, how much improvement do you think that you can get out there in the market? In terms of kind of annualized interest rate reduction? I mean, are we looking at, you know,

unknown: 400, 500 basis points or something more than that, you know, based kind of on the engagements you've had thus far.

Speaker Change: 400, 500 basis points or something more than that, you know, based kind of on the engagements you've had thus far.

Garrett Smallwood: Good question, Jeremy. So... Definitely in the back half of this year. We're actively working on it at the moment and having a lot of good conversations with a lot of different parties. Some of this is outside of our control, like paperwork and working through a process with parties, and a typical timeline is not days; it's weeks to potentially months. But ultimately, we feel confident that we'll be able to close it in the second half of the year.

Garrett Smallwood: Your question, Jeremy, is definitely in the back half of this year. We're actively working on it at the moment and having a lot of good conversations with a lot of different parties. Some of this is outside of our control on paperwork and working through a process with parties, and, you know, typical timeline is not days. It's weeks to potentially months, but ultimately, we feel confident that we'll be able to close it in the second half of the year.

Garrett Smallwood: Definitely in the back half of this year; we're actively working on it at the moment and having a lot of good conversations with a lot of different parties. Some of this is outside of our control, such as paperwork and working through a process with parties, and a typical timeline is not days; it's weeks to potentially months.

Speaker Change: Good question, Jeremy. So...

Speaker Change: I'm definitely in the back half of this year. We're actively working on it at the moment.

Speaker Change: and having a lot of good conversations with a lot of different parties.

Speaker Change: Some of this is outside of our control on paperwork and working through a process with parties and a typical timeline is not days, it's weeks.

Garrett Smallwood: But ultimately, we feel confident that we'll be able to close it in the second half of the year. And from an interest rate perspective, we're currently at 15.8%, and we think that, and expect that we can get to a rate closer to 10, which would have a significant impact from an interest expense perspective together with or compounded with a lower outstanding principal amount.

Speaker Change: But ultimately, we feel confident that we'll be able to close it in the second half of the year.

Garrett Smallwood: And from an interest rate perspective, we're currently at 15.8%, and we think that and expect that we can get to a rate closer to 10, which would have a significant impact from an interest expense perspective together with or compounded with a lower outstanding principal amount.

Garrett Smallwood: From an interest rate perspective, we're currently at 15.8%. We think that an expect that we can get to a rate closer to 10, which would be a significant impact from an interest expense perspective, together with or compounded with a lower outstanding principal note. Got it.

Speaker Change: From an interest rate perspective, we're currently at 15.8%.

Speaker Change: We think that and expect that we can get to a rate closer to 10, which would be a significant impact from an interest expense perspective, together with or compounded with a lower outstanding principal amount.

Jeremy Hamblin: got it. And then in conjunction, maybe with that question, You know, you saw a reduction in your G&A costs. We know that you've made some tough decisions in terms of staffing levels. How should we be thinking about, you know, as you get into kind of Q3 and really more into Q4 and looking to kind of reignite revenue growth, how should we be thinking about, you know, that GNA line item, you know, as you, you know, I think based on, you know, what you have in your guidance, you know, you're looking at, you know, somewhere in the, you know, 27 million plus revenue in Q4, you know, how much does your GNA grow in getting to those types of revenue levels?

Jeremy Hamblin: And then, in conjunction, maybe with that question, you know that you've seen a reduction in your DNA costs. We know that you've made some tough decisions in terms of staffing levels. How should we be thinking about, you know, as you get into kind of Q3 and really more into Q4 and looking to kind of reignite revenue growth, how should we be thinking about, you know, that DNA line item, you know, as you, you know, I think based on, you know, what you have in your guidance, you know, you're looking at, you know, somewhere in the, you know, 27 million plus revenue in Q4.

Speaker Change: Got it. And then in conjunction, maybe with that question,

Speaker Change: You know, you saw a reduction in your GNA costs. We know that you've made some tough decisions in terms of staffing levels.

Alec Davidian: How should we be thinking about, you know, as you get into kind of Q3 and really more into Q4 and looking to kind of reignite revenue growth, how should we be thinking about, you know, that GNA line item, you know, as you, you know, I think based on, you know, what you have in your guidance, you know, you're looking at, you know, somewhere in the, you know, 27 million plus revenue in Q4, you know, how much does your GNA grow in getting to those types of revenue levels?

Speaker Change: How should we be thinking about, you know, as you get into kind of Q3 and really more into Q4 and looking to kind of reignite...

Speaker Change: revenue growth

Speaker Change: How should we be thinking about, you know, that GNA line item, you know, as you...

Speaker Change: You know, I think based on, you know, what you have in your guidance, you know, you're looking at, you know, somewhere in the, you know, 27 million plus revenue in Q4, you know, how much does your GNA grow in getting to those types of revenue levels?

Alec Davidian: You know, how much does your DNA grow in getting to those types of revenue levels? So, DNA for the quarter was 20%. I think revenue scale than Q3, Q4. DNA will not scale with revenue. I think it's scalable. We're seeing efficiencies with headcount with technology. And so I would expect that to increase a little bit, but it will scale nicely as revenue scales.

Alec Davidian: So, G&A for the quarter was 20%. I think as revenue scales in Q3, Q4, G&A will not scale with revenue. I think it's scalable. We're seeing efficiencies with headcount, and with technology. And so, I would expect that to increase a little bit, but it will scale nicely as revenue scales.

Alec Davidian: So, GNA for the quarter was 20%. I think as revenue scales in Q3, Q4, GNA will not scale with revenue. I think it's scalable. We're seeing efficiencies with headcount, and with technology. And so, I would expect that to increase a little bit, but it will scale nicely as revenue scales.

Speaker Change: So, GNA4, the quota was 20%.

Speaker Change: I think it's revenue scales in Q3, Q4.

Speaker Change: G&A will not scale with revenue. I think it's scalable. We're seeing efficiencies with headcount, with technology. And so I would expect that to increase a little bit, but it will scale nicely as revenue scales.

Alec Davidian: Got it. And then just lastly, in terms of, you know, looking ahead in the success you've had with the wellness platform and marketplace. As you get into launching, we compare next year in earnest; you know, what type of support do you need in terms of infrastructure, you know, to manage that.

Jeremy Hamblin: Got it. And then just lastly, in terms of looking ahead to the success you've had with the wellness platform and marketplace, as you get into launching We Compare next year in earnest, you know, what type of support do you need in terms of infrastructure to manage that? In other words, you know, the kind of bodies and team versus, you know, the kind of sales and marketing support costs in getting that launched?

Garrett Smallwood: Got it. And then just lastly, in terms of looking ahead to the success you've had with the wellness platform and marketplace, as you get into launching We Compare next year in earnest, you know, what type of support do you need in terms of infrastructure to manage that? In other words, you know, the kind of bodies and team versus, you know, the kind of sales and marketing support costs in getting that launched?

Speaker Change: Got it.

Speaker Change: And then just lastly, in terms of, you know, looking ahead in the success you've had with the wellness platform and marketplace.

Speaker Change: As we get into launching We Compare next year in earnest,

Speaker Change: You know, what type of support do you need in terms of...

Alec Davidian: In other words, you know, kind of bodies and team versus, you know, kind of the sales and marketing support costs and getting that launched. You know, is there more infrastructure, significant, significantly more infrastructure that you need in launching that? Or how do you feel about your staffing levels related to that?

Speaker Change: Infrastructure, you know, to manage that, in other words, you know, kind of bodies and team versus, you know, kind of the sales and marketing support costs and getting that launched, you know, is there more infrastructure significant, significantly more infrastructure that you need and launching that?

Garrett Smallwood: You know, is there more infrastructure, significantly more infrastructure that you need to launch that? Or how do you feel about your staffing levels related to that? And then the second part is, you know, sales and marketing costs related to launching that.

Jeremy Hamblin: You know, is there more infrastructure, significantly more infrastructure that you need to launch that? Or how do you feel about your staffing levels related to that? And then the second part is, you know, sales and marketing costs related to launching that.

Alec Davidian: And then the second part is, you know, sales and marketing costs related to launching that. So we've done a lot of the heavy and hard work for we compare. There's still a little bit to do to Adam's point. We have most of the tech ready to go, and it's the final fine tuning. As we've always done without a head count, where there's a good ROI, and so as we compare launches and scales, and we'll likely add head count there as well. And there will be some marketing to deploy it, but we have what we believe is our playbook with the pet insurance business and our mode with providers from the supply side and on the demand side with the insurance providers that we will be applying to we compact.

Speaker Change: Or how do you feel about your staffing levels related to that? And then the second part is, you know, sales and marketing costs related to launching that.

Adam Storm: So we've done a lot of the heavy and hard work for WeCompare. But there's still a little bit to do, to Adam's point.

Speaker Change: So we've done a lot of the heavy and hard work for We Compare. There's still a little bit to do, to Adam's point.

Adam Storm: We have most of the tech ready to go, and it's a final fine-tuning, as we've always done with added headcount where there's a good ROI. And so, as we compare launches and scales, we'll likely add headcount there as well. And there will be some marketing to deploy it. But we have what we believe is... the playbook with the pet insurance business, and I'm in touch with providers from the supply side and on the demand side with the... insurance providers that we will be applying to to we compact. So while there'll be some investment, it will not be a significant investment to get that up and running.

Adam Storm: We have

Adam Storm: Most of the tech ready to go and it's a final fine-tuning.

Speaker Change: As we've always done, we've added headcount where there's a good ROI, and so as we compare launches and scales.

Speaker Change: and we'll likely add Headcount there as well.

Speaker Change: And there will be some...

Speaker Change: Marketing to deploy it, but we we have

Garrett Smallwood: playbook with the pet insurance business, and I'm out with providers from the supply side and on the demand side with the insurance providers that we will be applying to to get that up and running. So while there'll be some investment, it will not be a significant investment to get that up and running.

Speaker Change: What we believe is our playbook with the pet insurance business and our MOOC with providers on the supply side and on the demand side with the...

Speaker Change: insurance provided that we will be applying to WeCompact. So while there'll be some investment, it will not be a significant investment to get that up and running.

Alec Davidian: So, while there'll be some investment, it will not be a significant investment to get that up and running.

Jeremy Hamblin: Great. Thanks.

Jeremy Hamblin: Great. Thanks. Congratulations and best wishes.

Jeremy Hamblin: Congratulations and that's wishes. Thanks, Jeremy.

Banks: Great. Thanks, congratulations, and best wishes.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one.

Matthew Koranda: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Matthew Koranda with Roth Capital. Your line is now open.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Matthew Koranda with Roth Capital. Your line is now open.

Sharving: Thanks, Jeremy.

Speaker Change: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Matthew Koranda with Roth Capital. Your line is now open.

unknown: Got it. And I assume that gives you a sufficient working capital cushion and gets you to sustain profitability in 25. Is that the right way to think about it?

Matthew Koranda: Your next question comes from Matthew Koranda with Roth Capital. Your line is now open.

Matthew Koranda: Can you just do the math on the refi for us? Just want to make sure I understood the working pieces.

Matthew Koranda: Can you just do the math on the refi for us? Wanted to make sure I understood the working pieces, so I think $9 million in cash in the second quarter, $8.5 million added from the recent raise, and then going to repay all of the debt. Remind us of the total principal out, and then what that means for the size of the new facility.

Matthew Coranda: Good afternoon. Can you just do the math on the refi for us?

Alec Davidian: So I think 9 million cash in the second quarter, eight and a half added from the recent raise, and then going to repay all of the debt. Remind us the total principal out. And then what that means for the size of the new facility that you're looking for. Yeah, absolutely. We have 9 million cash. The outstanding principal is 25.7. After the raise, we have added around 9 million cash. So, and then what the clearing of the AR were 18 million. So there's essentially a 7 million delta. Between a current cash and debt. So that puts us in a position to pay down the debt, refinance the delta.

matthew coranda: I wanted to make sure I understood the working pieces, so I think $9 million in cash in the second quarter, $8.5 million added from the recent raise, and then you're going to repay all of the debt, remind us the total principal out, and then what that means for the size of the new facility that you're looking for.

Alec Davidian: Yeah, absolutely. Alex, do you want to take this one? We have 9 million in cash, and the outstanding principal is 25.7. After the raise, we have added around 9 million in cash. So, and then with a clearing of AR, we're at 18 million. So there's essentially a 7 million delta between Current Cash and Debt. So that puts us in a position to pay down the debt and refinance the delta, looking at a refinance of somewhere in the range of $12 to $14 million, maybe $15 million as the new debt amount versus the $25.7 we have today.

Matthew Koranda: Got it. And I assume that that gives you a sufficient working capital cushion and gets you to sustain profitability in 25. Is that the right way to think about it?

Sharving: Yeah, absolutely. Alex, do you want to take this one?

Alec Davidian: We have 9 million in cash. The outstanding principal is 25.7.

Speaker Change: After the raise, we have added

Speaker Change: around $9 million in cash. And then with the clearing of AR, we're at $18 million. So there's essentially a $7 million delta between

Speaker Change: Akart Cash

Sharving: and Debt.

Sharving: And so that puts us in a position.

Sharving: to

Alec Davidian: Looking at a refinance at someone in a range of 12 to 14 million, maybe 15 million, as the new death amount. That's the 25 points that we have today. Got it.

Sharving: pay down the debt and refinance the Delta, looking at a refinance at somewhere in the range of $12 to $14 million, maybe $15 million as the new debt amount versus the $25.7 we have today.

unknown: Got it. Okay.

Alec Davidian: And I assume that that gives you sufficient working capital cushion and and get to to sustain profitability in 25. Is that the right way to think about it? Absolutely.

Speaker Change: Got it. And I assume that gives you a sufficient working capital cushion and gets you to sustain profitability in 25. Is that the right way to think about it?

Alec Davidian: Absolutely. We've never been a heavy working, like a heavy capex company or a heavy working capital company. So it will give us sufficient coverage there, combined with our expectations of adjusted EBITDA generation and future quarters to add incremental cash to the balance sheet.

Alec Davidian: We've never been a heavy working by heavy capex company or heavy working capital company. So it will give us sufficient coverage there, combined with our expectations of adjusted EBITDA generation and future quarters, to add incremental cash to the balance sheet. Got it.

Speaker Change: Absolutely. We've never been a heavy working, like heavy capex company or heavy working capital company. So it would give us sufficient coverage there combined with our expectations of adjusted EBITDA generation and future quarters to add incremental cash to the balance sheet.

Garrett Smallwood: And then just in terms of the third quarter outlook and the rest of the year, maybe could you speak a little bit to what you're assuming in terms of return on ad spend? Because I know you mentioned pulling back on marketing and focusing on profitability, which obviously hits the top line. But what are we assuming in terms of efficiency on the marketing spend in terms of returns?

Matthew Koranda: Got it. Okay.

Matthew Koranda: Okay.

Alec Davidian: And then just in terms of the third quarter outlook and the rest of the year. Maybe could you speak a little bit to what you're assuming in terms of return on ad spend? Because I know you mentioned pulling back on marketing, focus on profitability that obviously hits the top line. But what are we assuming in terms of efficiency on the marketing spend in terms of return?

Speaker Change: Got it. Okay. And then just in terms of the third quarter outlook and the rest of the year.

Garrett Smallwood: And then just in terms of the third quarter outlook and the rest of the year, maybe could you speak a little bit to what you're assuming in terms of return on ad spend? Because I know you mentioned pulling back on marketing and focusing on profitability, which obviously hits the top line. But what are we assuming in terms of efficiency on the marketing spend in terms of returns?

Speaker Change: Maybe, could you speak a little bit to what you're assuming in terms of return on ad spend? Because I know you mentioned pulling back on marketing, focus on profitability. That obviously hits the top line, but what are we assuming in terms of efficiency on the marketing spend in terms of returns?

Alec Davidian: I'm happy to jump into this one. Kind of a similar profile to Q2, frankly, but with a little bit more scale hopefully coming from the seasonality of these different businesses. We're all also leaning into partnerships and different distribution channels that are not necessarily Google, Facebook, what have you, that kind of give us more bang for your buck.

Garrett Smallwood: I'm happy to jump into this one. It's kind of a similar profile to Q2, frankly, but with a little bit more scale, hopefully coming from the seasonality of these different businesses. We're all also leaning into partnerships and different distribution channels that are not necessarily Google, Facebook, what have you, that kind of give us more bang for our buck, kind of changing gears from focusing on growth as the primary metric like we came into the year with, and kind of having shorter payback windows, and higher ROI bar for, you know, future growth.

Speaker Change: I'm happy to jump into this one.

Speaker Change: kind of a similar profile to Q2, frankly, but with a little bit more scale, hopefully coming from the seasonality of these different businesses. We're all also leaning into partnerships and different distribution channels that are not necessarily Google, Facebook, what have you, that kind of give us

Alec Davidian: It's kind of the change in gears from focusing on growth as the primary metrics we came into the year with and kind of having shorter payback windows, higher ROI bar for future growth. And then finally, it's important to note that the debt refi is really our top priority right now and balance sheet health.

Speaker Change: more bang for your buck so it's

Garrett Smallwood: Kind of the change in gears from focusing on growth as the primary metric like we came into the year with, and kind of having shorter payback windows, and a higher ROI bar for, you know, future growth. And then finally, it's important to note that, you know, the debt refi is really our top priority right now, along with balance sheet health. And I don't think that we're going to kind of really push the levers on growth until we have that refi kind of locked down or in its final stages.

Speaker Change: Kind of the change in gears from focusing on growth as the primary metric, like we came into the year with, and kind of having shorter payback windows, higher ROI bar for, you know,

Garrett Smallwood: And then finally, it's important to note that, you know, the debt refi is really our top priority right now, and balance sheet health. And I don't think that we're going to kind of really push the levers on growth until we have that refi kind of locked down or in its final stages.

Speaker Change: Future Growth.

Speaker Change: And then finally, it's important to note that the debt refi is really our top priority right now and balance sheet health.

Alec Davidian: And I don't think that we're going to kind of really push the levers on growth until we have that refi kind of locked down or in its final stages. Okay, fair enough.

Speaker Change: And I don't think that we're going to really push the levers on growth until we have that refi kind of lockdown or in its final stages.

Matthew Koranda: Okay, fair enough. And then moving, I guess, the move out of social and search and the traditional performance channels, is that in reaction to anything that you guys have seen in terms of just erosion of performance, or is that just we're moving into a broader set of channels to try to find new customers? Like, maybe just put that in context for us.

Garrett Smallwood: Okay, fair enough. And then moving, I guess, the move out of social and search and the traditional performance channels, is that in reaction to anything that you guys have seen in terms of just erosion of performance, or is that just we're moving into a broader set of channels to try to find new customers? Like, maybe just put that in context for us.

Alec Davidian: And then moving out, I guess, the move out of social and search and the traditional performance channels, is that in reaction to anything that you guys have seen in terms of just erosion of performance, or is that just removing into a broader set of channels to try to find new customers, like maybe just put that in context for us? Yeah, I think that over the longer term, durable partnerships and ways of acquiring customers that look more like organic acquisition, as opposed to giving margin to Google or Facebook, I think that's just more scalable and has a better return profile.

Speaker Change: Okay, fair enough. And then moving out, I guess.

Speaker Change: The move out of social and search and the traditional performance channels, is that in reaction to anything that you guys have seen in terms of just erosion of performance? Or is that just we're moving into a broader set of channels to try to find new customers? Maybe just put that in context for us.

Garrett Smallwood: Yeah, I think that in the longer term, durable partnerships and ways of acquiring customers that look more like organic acquisition as opposed to, you know, giving margin to Google or Facebook, I think that's just more scalable and has a better return profile. So that has been a big focus for us, kind of in Q2 and going forward. As it pertains to ROI on marketing generally, it is an election year, and it's, you know, looking to be a contentious one at that.

Speaker Change: Yeah, I think that over the longer term, durable partnerships and ways of acquiring customers that look more like organic acquisition as opposed to, you know, giving margin to Google or Facebook, I think that's just more scalable and has a better return profile. So that has been a big focus for us, kind of Q2 and going forward.

Alec Davidian: So that has been a big focus for us, kind of Q2 and going forward.

Alec Davidian: As it pertains to ROI on marketing generally, it is an election year and it's looking to be a contentious one at that. So I do think that the marketing landscape is going to be more challenging in Q4, Q3, and Q4 this year than otherwise, but not in a super dramatic way, just on the margin. Okay, very helpful.

Garrett Smallwood: So I do think that the marketing landscape is going to be, you know, more challenging in Q4, Q3 and Q4 this year than otherwise. But, you know, not in really a super dramatic way, just on marketing.

Speaker Change: As it pertains to ROI on marketing generally, it is an election year and it's, you know, looking to be a contentious one at that. So I do think that the marketing landscape is going to be, you know, more challenging in Q4, Q3 and Q4 this year than otherwise. But, you know, not in really a super dramatic way, just on the margin.

Matthew Koranda: Okay, very helpful. I appreciate it, guys. Thanks, Matt.

Matthew Koranda: Appreciate it, I guess. Thanks, Pat.

Speaker Change: Okay, very helpful. Appreciate it, guys.

unknown: Thanks, Matt.

Operator: Thanks, Matt. This concludes our question and answer session. I'll now turn the call over to Garrett Smallwood for closing remarks. I'm sorry, Garrett Smallwood.

Operator: I'm just concluding our question and answer session.

Greg Robles: I'll now turn the call over to Garrett Howard for closing remarks.

Speaker Change: At this time, this concludes our question and answer session. I'll now turn the call over to Garrett Smallwood for closing remarks.

Unknown Executive: I'm sorry, Garrett. I'm sure Garrett means to give closing remarks here, but thank you, everybody, for joining the call. Garrett has two young children at home, so I'm sure he's chasing somebody doing something right now. But thanks, everybody, for joining the call. Looking forward to connecting to him.

Unknown Executive: I'm sure Garrett means to give closing remarks here, but thank you, everybody, for joining the call. Garrett has two young children at home, so I'm sure he's chasing somebody doing something right now. But thanks, everybody, for joining the call. Looking forward to connecting soon.

Unknown Executive: I'm sure Garrett means to give closing remarks here, but thank you, everybody, for joining the call. Garrett has two young children at home, so I'm sure he's chasing somebody doing something right now. But thanks, everybody, for joining the call. Looking forward to connecting soon.

Speaker Change: i'm sorry gari all would

Garrett Smallwood: i'm sure guar means to give up closing remarks here but thank you everybody for for joining the call i getararedit has two young children at home some msurety's trasing somebody atinging something right now but thanks everybody for joining the call looking forward to connecting said

Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time.

Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.