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spk04: Good morning, ladies and gentlemen. Thank you for standing by and welcome to WAC's second quarter 2022 financial results conference call. At this time, all participants are on a listen-only mode. After this week's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker host, Dawn Frankfurt. Please go ahead.
spk03: Thank you for joining WAG's conference call about their second quarter 2022 financial results. On the call today are Garrett Smallwood, Chief Executive Officer, Adam Storm, President and Chief Product Officer, and Alec Davidian, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements. These forward-looking statements are subject to risk and uncertainty and involve factors that could cause actual results to occur materially from those expressed or implied by such statements. A discussion of these risks and uncertainties contained in our final prospectus filed with the SEC on July 12, 2022, and our quarterly report on Form 8K for the three months ended June 30, 2022, which was filed with the SEC on August 15, 2022. Also, during this call, we may present both GAAP and non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures are available in our earnings release, which we issued a short time ago. The earnings release is available on the investor relations page of our website and is included as an exhibit in the form 8K furnished to the SEC. Lastly, you can find our earnings presentation posted on our IR website and with the SEC. And with that, let me turn the call over to Garrett.
spk10: Thank you, Dawn, and good morning, everyone. I would like to thank you all for joining our first earnings call as a public company. This is an incredible milestone in WAG's journey. We would like to thank our dedicated team for their hard work to make this possible. We're extremely proud of how far we've come since WAG launched in 2015, and we look forward to building on our success in the years ahead. For those new to our story, we are excited to introduce you to WAG. where we believe that being busy shouldn't stop you from owning or taking care of your furry family members. We solve the guilt and stress of owning a pet. And as such, our mission is simple. We exist to make pet ownership possible and to bring joy to pets and those who love them. We're building a strong consumer-branded premium pet care platform that is transforming the pet industry by simplifying caring for the pets you love. The $44 billion pet wellness and service industries are fragmented, and largely offline. We are consolidating those industries online and through our mobile app as we rapidly evolve into the number one pet wellbeing platform. We recently completed our business combination with our partners at CHW Acquisition Corporation. The transaction gave us funding that we expect to be sufficient to fully fund WEG's current business plan over the next two years until it is projected to be cashflow positive, positioning the company to expand its product offerings, achieve its exceptional growth plan, and opportunistically acquire select company. On today's call, we will be discussing our strong financial results for the second quarter, as well as detailing our compelling growth strategy that positions us to deliver strong and sustainable financial performance through 2022 and beyond. Let me now cover a high-level overview of our second quarter performance before turning it over to Adam, President and Chief Product Officer, who will give an update on our strategy and key 2022 initiatives. And then Alec, Chief Financial Officer, will then discuss our second quarter results in more detail, our capital allocation, and our guidance for 2022, which we raised today. We are pleased with our performance this quarter, with revenue increasing over 256% to $12.8 million, compared to $3.6 million in the second quarter of 2021. Net loss improved to 1.1 million from 2.4 million in the second quarter of 2021, ahead of expectations. Adjusted EBITDA improved to a loss of 900,000 from a loss of 2.3 million in the second quarter of 2021, also exceeding expectations. And take rate improved to 58% compared to 36% in the same period last year, driven by increased WAG premium penetration, and continued diversification of the platform, including significant growth in the wellness category. Driving these results, we saw WAG premium penetration increased from 34% in Q2 of 2021 to 50% in Q2 this year. Growing the premium offering is one of our key growth drivers. As pet parents who subscribe to WAG premium are paying an additional $9.99 per month and use the WAG services seven to eight times monthly. During the quarter, we also saw platform participants grow to 387,000, an increase from 19% from the first quarter of 2022. We continue to see the business accelerating coming out of COVID as our pet parents return to normal, demonstrated by WAG's LTV to CAC, which increased to eight to one. We intend to pursue significant awareness growth for our platform and plan to meet new pet parents via strategic partnerships and performance marketing initiatives. Recently, we announced a promotion with Tractor Supply, America's largest rural retailer, and PetSense to provide a range of pet service options to their customers. This partnership follows our announcement with Kempton Hotels and Restaurants to provide access to on-property and at-home pet services for guests staying in any of their properties in the U.S. These promotions are examples of the innovative ways WAG works with leading national brands to help make pet ownership easier for pet parents. Before turning the call over to Adam to discuss our growth initiatives, I'd like to provide a background on what differentiates WAG in the pet wellness category. WAG is not just an app for finding a dog walker. We are a mobile-first subscription-based pet platform, consolidating the fastest secular growth areas within the industry. Through our vertically integrated technology platform, We offer access to dog walking, pet sitting, conversations with licensed pet experts, training services, subscription, and insurance comparison options, and much, much more across more than 5,300 cities in all 50 states. We're a trusted, on-demand digital marketplace, and our goal is to be the leading platform for premium pet care, leveraging our strong consumer brand and proven business model to drive long-term growth. It is important to note that the single most important element to the success of our business is trust. as 75% of WAG pet parents are not home while services are being delivered. It is imperative to build a trusting relationship with each and every pet parent. In order to provide best-in-class experiences, we require each of the more than 400,000 pet caregivers on the WAG platform to undergo background checks, screening, knowledge tests, and we provide property damage insurance and 24-7 customer support. The deep-rooted trust we have created in our business model leads to high-frequency utilization as the average WAC pet parent uses WAC four to five times a month. We believe pet caregivers have an innate love for pets and are building their business with WAC because they love taking care of every animal, from people's dogs and cats to their pigs and ferrets. These factors combined allow us to build a compelling and trusted consumer brand with a high level of engagement, effectively creating a dynamic platform to leverage our initiatives as we rapidly expand our business to new product lines. There are over 12 million reviews in our platform with an average rating of 4.9 out of 5 stars, a testament to the strong foundation we have built and the high bar we have set in terms of experiential quality. WAG's high quality standard is demonstrated in our Q2 organic user acquisition rate of 70%, showing that great experiences drive word of mouth. The same is true on the supply side of the business, where pet caregivers pay on average $29.95 to join the platform. We've created a sizable and dependable community of caregivers, which results in a negative supply side cap. Simply put, we actually make money with the onboarding of the supply. To sum it all up, WAG is the clear leader of on-demand services and wellness platforms as we participate in a broader, convenient economy. As a mobile-first company, we are not taking share from the existing dog walking or sitting or boarding market. We are democratizing access to all pet care. With that, go ahead, Adam.
spk02: Thanks, Garrett. To frame our discussion today, we'll focus on the five top-level elements of our strategy to create sustainable shareholder value while consolidating the pet industry online. One, accelerate growth in existing markets. Two, expand premium subscription offerings. Three, platform expansion.
spk12: Four, opportunistic M&A. And five, operating scale.
spk02: First, accelerate growth in existing markets. As Garrett mentioned, we see significant opportunity to accelerate our growth in existing markets as people resume to more normal activities out of the pandemic and utilize our expanded offerings. We've seen a slow and steady return to office, which is the primary WAG use case, with 44% of people back in office per CASEL data. We expect this return to office trend to continue through the end of the year and into 2023. This return to work tailwind, paired with our hyper-local network effect, of pet parents and caregivers allows us to rapidly grow within existing markets and capture additional share of wallet through a best-in-class experience. Second, expand premium subscription offerings. Our WAG premium subscription penetration increased from 34% in Q2 of 2021 to 50% in Q2 of this year, demonstrating our ability to successfully upsell pet parents to a sticky recurring revenue stream. As a reminder, WAG Premium subscribers receive a 10% discount on all services, VIP customer support, and unlimited 24-7 expert pet advice, which drives customer satisfaction and retention. We're focused on maintaining WAG Premium subscription in the coming quarters, as well as launching new product lines to drive long-term engagement and retention. To that effect, We're also in the middle of testing the WAG Premium Benefit Center, which gives pet parents exclusive best-in-class discounts and curated recommendations for dog food, treats, and more. Our third growth driver is platform expansion. We continue to diversify the products and services within the platform, including Wellness, which is by default a high-margin product line, as well as Instant Pay, which enables pet caregivers to cash out their earnings same day for a small fee. These high-margin products and services will continue to provide upward pressure to take rate. We'll continue to focus our engineering and technology teams on innovative new offerings that resonate with our community and deliver long-term margin expansion and revenue growth. Fourth, we intend to grow our business through opportunistic M&A. We're excited to announce that we have recently entered an agreement to acquire Pharmacy Inc., allowing us to expand our reach in the pet wellness category. Led by co-founder and CEO, Dr. Georgia Jeremiah, Pharmacy's mission is to deliver pet health directly to your front door. Pharmacy does this by empowering veterinary clinics with easy-to-use pharmacy software, giving them the ability to prescribe pet medication instantly and have it delivered to a pet parent's door the same day, usually in less than a few hours from a local warehouse. We expect this acquisition to close in Q3 of this year, pending regulatory approval and customary closing conditions. The fifth element of our strategy is operating scale. We have a proven and scalable online platform that connects pet parents with the highest quality pet caregivers. Our attractive unit economics and fixed cost operating leverage underpin our long-term EBITDA target of 30%. This is demonstrated by our net loss percentage improving from 68.2% in Q2 of last year to 8.5% in Q2 of this year, a period in which we grew revenues 256%. The competitive moats we've built over the past few years in infrastructure, brand strength, and data capabilities leave us attractively positioned for accelerated growth as we become the number one platform for pet well-being.
spk12: With that, let me turn the call over to Alec.
spk09: Thanks, Adam, and thank you, everyone, for joining us on our first learning tour as a public company. As Garrett mentioned, we just completed our business combination with CHW Acquisition Corp. And we are extremely excited about the future of the company. I'll start with the review of our second quarter results, and then I'll move on to our upward revised full year 22 outlook before turning it back to Garrett. For the second quarter, we achieved record revenue of 12.8 million ahead of our expectations and generated year on year growth of 256% compared to 3.6 million in Q2 2021. This meaningful growth in revenue was primarily attributable to the consistent return to normal in a post-pandemic world alongside the growth in wellness and WAG premiums. The platform recognized 22 million in gross bookings during the quarter compared to 9.8 million during Q2 last year, resulting in a platform take rate of 58% up from 36% from the same period last year. The improvement in take rate was primarily driven by growth in WAC premium penetration and continued diversification of the platform, including significant expansion in the wellness category, as Garrett mentioned earlier. Turning to expenses during the second quarter, cost of revenue, excluding depreciation and amortization, were 1.2 million, up from 0.7 million a year ago. driven primarily by an increase in new caregiver applicant volume and payment processing costs from the higher transaction volume. Platform operations and support expenses remain stable year over year at 2.8 million compared to 2.7 million a year ago. This is the result of operational efficiency offsetting new talent joining the team. Sales and marketing expenses were 7.3 million compared to 1.2 million a year ago. The increase was primarily attributed to a 4.5 million rise in advertising expenses as we invest in brand awareness, as well as a 1.5 million increase in personal related compensation and agency costs for our marketing team, consultants and advertising agency partners. G&A expenses were 2.4 million compared to 1.3 million a year ago. or 1.9 million a year ago, adjusting out a 0.5 million one-time lease termination credit. The increase is primarily driven by an increase in personal related costs for our corporate functions and professional services costs as we geared up our public readiness and governance activities. Second quarter net loss improved to 1.1 million as compared to 2.4 million in the same period last year. In addition to the gap measures I've discussed, Adjusted EBITDA is an important profitability measure that we use internally to manage the business. For our second quarter of 22, adjusted EBITDA improved to a loss of 900,000 or 6.9% adjusted EBITDA loss margin. From a loss of 2.3 million or 64.7% adjusted EBITDA loss margin a year ago. Adjusted EBITDA improvement is a direct result operational efficiencies as recognized in operations and support expenses, accelerating revenue, and continued marketing efficiency. Now briefly, touching on our balance sheet for the second quarter of 22, our Q2 balance sheet remains strong in the context of our operating burn with over $9.4 million in cash, cash equivalents, and investments. Now turning to our 22 financial guidance, the June quarter generated robust growth and industry demand trends remain strong. As a result, we are raising the prior guidance we provided in our Q1 earnings release. Our revised guidance assumes a continued trend in return to office, as measured by the Castle Back to Work barometer, in addition to a normalized travel season, and finally, continued acceleration of wellness and stickiness in wide premium, as a result of marketing efficiency alongside our ability to continue to innovate in product and services. Taking into account the macro environment, we are assuming a modest impact to existing consumer demand as a result of inflationary concerns specific to considered purchases and services, as well as a modest impact to caregiver engagement as a function of gas prices. For the full year 22, we now expect total revenues in the range of 47.5 million to 49 million, an increase of 136% to 144% year-over-year, and a 15% improvement versus our prior forecast at the midpoint of the range. Adjusted EBITDA loss in the range of 8 to 10 million, a 42% improvement versus our prior forecast at the midpoint of the range. In summary, we are very pleased with the strong operating performance in the quarter and remain energized about our business for the balance of the year and beyond.
spk08: With that, let me turn it back to Garrett.
spk10: Thanks, Alec. Before we take your questions, let me summarize. We believe we have a tremendous opportunity to continue the momentum in our business and are extremely proud of what we have accomplished in our first quarter as a public company. We're the one-stop shop for premium pet care and are simplifying access to the pet services industry through our vertically integrated technology platform. We believe we are just getting started in an industry that has no signs of slowing down. We remain laser-focused on expansion, delivering attractive margins, a path to profitability, and providing an unparalleled user experience.
spk04: Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press the star 1-1 on your touch-tone telephone. Again, to ask a question, you will need to press star 1-1. Please stand by while we compile the Q&A roster.
spk08: And our first question coming from the line of Tom White from DA Davidson.
spk04: Your line is open.
spk05: Great. Good morning, everyone. Thanks for taking my questions. Realness and momentum here as it relates to revenues. Just curious, Garrett, you know, given the results in the quarter and kind of the third quarter results to date, can you maybe just give a little bit more color about, you know, how you're expecting third quarter to play out in terms of revenues and maybe just talk through a little bit the puts and takes that get you to the new revenue range for the year. And then just secondly on the, you know, kind of you touched on factoring a little bit of headwind potentially from kind of macro pressure and inflation. Just curious, like, the extent to which you're actually seeing that, you know, and particularly maybe for some of the, you know, the more premium priced products in the marketplace. You know, maybe just talk a little bit about whether you're seeing any impact on your kind of core pet parent demographic spending-wise. Thanks.
spk10: Thanks, Tom. Good to see you. I guess good to hear from you. Okay, two questions here. First on how we're thinking about the rest of the year. So historically, I would say our business had some level of seasonality, just as a function of holidays and holiday demand. It's unclear to us kind of how consumer demand will spread this year. And that's a function of two things. One is going to be, does travel kind of mean revert faster than anticipated as a function of the macro? That's kind of our first big question. And the second is, how quickly do people return to what I'm going to call normal, what we're going to call normal? That return is going to be return to office, return to movies, return to dinner, return to normal day-to-day life, kind of post-summer as kids return to school. I think this is a year that's very different than the years prior, as I'm sure you can imagine. And so for that reason, we're still thinking through and managing how Q3 and Q4 were spread and how that'll be different than the years prior in kind of a normal environment. So, and they want more to come there soon. So your second question around how consumer behavior might be changing in this kind of macro environment. So first things first, I think we saw a couple interesting trends in Q2. One is we saw an abundance of people looking to become and build a business as a pet caregiver on the WAG platform. It was very surprising level of demand, a very surprising amount of virality. interest and engagement across social and indirectly in the app. So that was number one. And then we just kind of were very surprised by the level of engagement from caregivers. And obviously we don't know why, maybe it's people looking for side income, side cash, whatever else there might be. But it was incredible. Two is we are certainly are seeing a slight trend in consumers being more sensitive when they are traveling. So let me expand on that. Normally in a travel period, consumers opt for our overnight services that are offered on the platform. Those would be things like sitting and boarding. We're seeing a slight change in the way consumers use sitting and boarding, and many are now opting toward what we call multi-day services. So instead of, for example, booking one boarding for three days, you might book three to five drop-ins and walks every day for three days. And that might be a function of price. That might be a function of time with pets. That might be a function of you have other people helping you out. We are still looking into why that trend is changing. I can just generally say that people are more sensitive to these higher purchase tickets. We have not seen a step down in consumer demand, meaning we haven't seen people move from 60 minute dog walks to 30 minute dog walks. But we're just generally anticipating some level of change as a function of the macro. Most likely, you know, probably more correlated to the way they travel or the way they do these kind of weekend episodic services. And happy to expand anything else, Tom.
spk05: Yeah, that's great. That's very helpful and makes sense. I guess maybe just one follow-up if I could. On the pharmacy deal, could you maybe just tell us a little bit more about the business and how it fits into kind of your broader ambitions around RX and Just curious, you know, how many markets are they in today? You know, how quickly can this get kind of rolled out more broadly?
spk10: Yeah. So, again, thanks, Tom, for the time. Look, taking a step back, I think hopefully people understand management decently well at this point. But you know we like to move fast. You know we like to build amazing products and services that delight millions of people. We're really excited about the opportunity to partner with Pharmacy.com, which is expected to close this quarter, assuming regulatory and all the other needed approvals. We have more to share in that business soon. I don't want to get ahead of our skis, but I can just generally say we're very excited about the opportunity to partner with vet clinics. We think there's a massive opportunity to continue to simplify the life of veterinary clinics, technicians, assistants who operate every day in these busy, fast-paced environments. Some of you all have been to the vet recently, but there's just an intense demand and the supply needs help. So that's number one. And number two is we're excited to partner with pet parents in simplifying how they get access to these RX compound and other over-the-counter and prescribed meds. So more to come on how we think about that business expanding and growing. I could say they're in a really great position. We think they're going to be a really successful business, and we can't wait to have them under the WAG umbrella.
spk08: Great. Thank you.
spk04: Thank you. And our next question, coming from the lineup, Jason Helstens with Oppenheimer. Your line is open.
spk01: Thanks. So congrats on the milestone. A few questions. So just talk about how mix impacted take rate. Was it all shift to premium or do we have to think about other factors? And then kind of digging into take rate, 58% does seem high for kind of a walking and sitting business. But maybe talk about how you plan to reinvest this into more services such as permanency. And then I guess then just a follow-up on marketing. 8 to 1 CAC also suggests you should be leaning more into marketing because that's a super efficient ratio. Maybe just talk about the constraints to marketing, specifically capital, and if there's any other kind of supply constraints to growing, such as walkers. So just any color. Thank you.
spk10: Yeah. Hey, Jason, appreciate the time. So taking a step back as a reminder, we have our services line of the business, which is things like dog walking, sitting, boarding, training, et cetera. The wellness line of the business, which is by default, higher margin. The services take rate has been a steady 40% on services completed through the platform since the business started in 2015. We've since managed what we call the contra, the discounts on the services take rate. And now it's kind of at a max threshold. We think of where it's going to be long-term. Where you're really seeing upward pressure on take rate is not necessarily on the earnings from the caregivers, meaning we're not taking more dollars from their pockets. What you're seeing us do is find more high margin products and services that we can introduce into the ecosystem of WAG and capitalize on in a more efficient way. So for example, we operate one of the largest pet insurance marketplaces in the US. We help people find pet insurance and we partner with the best pet insurance companies to do that. We offer 24-7 expert pet advice. We offer WAG premium subscription, which we noted was 50% of active pet parents in the quarter, and obviously applies up for pressure as well because of that subscription fee revenue. So I think what you're going to see, Jason, is us continuing to diversify to other high-margin products and services, which when you blend into gross bookings applies additional upward pressure to take rate. I'll add one more thing, which you'll see in our release. is instant pay we release instant pay which enables caregivers to get their dollars earned immediately so instead of having to wait every week for the dollars you earn to be deposited to your bank account you can cash out same day for a small fee and again that small fee is a transaction fee that wag capitalizes on and again applies upper pressure take rate uh jason there's a bunch of other questions here i think the second one was lte to cac if my notes are right uh so i think we're being really mindful about the dollars we're deploying and frankly put i think we just saw really clear tailwinds in Q2. And I think we're very bullish on those tailwinds. I think to be really honest, I mentioned the caregiver part, that some of that was surprising to us, just the virality. And we're now really spending time managing the marketplace response, meaning supply and demand on a market level basis. I think you can continue to see us get very aggressive in brand and marketing in the go forward quarters. Don't view 8 to 1 as a long-term kind of consensus target for us. view eight to one as a, you know, wow, we need to spend more and we're going to, but with the, with the mindset of we're going to continue to monitor EBITDA. And I think you saw adjusted EBITDA was $900,000 loss in Q2, which was, you know, significantly ahead of our own expectations. So we'll just be mindful of both levers. Jason, remind me of the third question, please. Was it kind of how we think about the services?
spk01: Yeah, I mean, I think you, I guess you covered it unless you want to just talk about kind of roadmap services roadmap a bit more because to that point, um, you know, the, you can, you can clearly draft off those premium, uh, members to launch more services.
spk10: Yeah. I mean, I think you said it best Jason, we're very bullish on the ability to continue to keep pet parents engaged with premium and then upsell them to other products and services. I think that's truly what differentiates wag as a premium pet platform. I don't want to give too much away on how we think about the future. I can just generally say any high growth secular opportunity that exists in pets that we think has room for significant margin or for our ability to take margin from our competitors, we will invest in. And I think there's really no signs of us slowing down on that.
spk09: Thank you.
spk04: Thank you. And our next question coming from the line of Rohit Kulkarni from MKM Partners, Yolanda Salton.
spk06: Hey, thank you. Hey, congrats, guys, on the D-SPAC IPO and really solid results. A few questions. I'll just go one at a time. On big picture, Garrett, I guess you kind of mentioned that you just don't view yourself as a dog-walking-only company. Maybe talk about where are you with kind of diversifying your revenue base from where – you're exclusively only dog walking versus, um, uh, non dog walking revenues coming through the door. Where are you today? And where do you see that evolve over the next, uh, call it 12 to 24 months. And another kind of big picture for, uh, Adam, um, is, um, love the five strategic, uh, uh, elements that you walked, uh, walked us through, um, zoning into just existing markets. Um, uh, maybe give us some color around, uh, Where do you see kind of your penetration from existing markets? Maybe give anecdotal kind of data points around the range of penetration that gives you more confidence that if you just keep doing more of the same in existing markets, there is a pretty long runway of growth. And then I have a couple for Alex. But again, congrats, guys.
spk10: Well, I'll start, Adam, and I'll pass it to you if that works. So... Rohit, good to hear from you. I appreciate the time. I generally think that we're really well positioned, this is me speaking here, for whatever is going to happen in the macro. Meaning if tons of people go back to work, to office faster than we anticipated, you're obviously going to see that in the daytime services business. You're going to see that with walking and drop-ins and training as people get their better behaved. If travel doesn't slow, which again is not what we're anticipating, but if for some reason it doesn't slow, You know, nighttime services, overnights will continue to grow nicely. If generally people continue to adopt pets and take care of their pets like members of the family, what they seem to be doing, there seems to be a general trend of what we call furry family members. You know, we think the insurance, the vet, all these other opportunities are continuing to grow. So I would say that long term, none of our businesses should be the majority in terms of the services business. You know, walking should be an interesting kind of double-digit percent of our business, low double-digit. I think sitting and boarding, same kind of thing overnight. We really look at the diversification of services as comfort around what's going to happen with the macro. And with that, Adam, I want to pass it to you to talk about existing market penetration and where we think we're going to be.
spk02: Sure. So thanks for the question. The first place I would want to go with this is just the fact that there's close to 100 million pets in the U.S., And this is not a business that, you know, only exists in tier one markets. We have a pretty healthy distribution of our revenues across all of our service lines, across all city sizes. So tier one, tier two, tier three, tier four markets. Basically anywhere where there's a pet and a premium pet parent who, you know, that dog spends time in a sweater on the couch, we're doing business. So the question effectively is, to what degree is there differences between cities in this return to normal, return to travel environment that Garrett alluded to? So there is some difference. You might call it like red versus blue states in terms of where are these different cities on their paths back to normal. But, you know, we have a pretty established brand and established foothold in all of these different geotypes. So it really is just how the macro unfolds to Garrett's point.
spk06: Okay. Thanks, guys. And a couple for Alec. Maybe talk about second half expense outlook that you can control, particularly sales and marketing. Any step up in... kind of the dollar amounts that you're planning to spend on advertising. How are you thinking about that? At least from the second half guidance, it does feel that the margins are going to be significantly lower in Q3, Q4. Perhaps that's voluntary in terms of how you're planning to spend on advertising in Q3 and Q4.
spk09: Yeah, of course. So looking to the second quarter, as Garrett mentioned, we're definitely going to lean into sitting in March sales and marketing, as long as it's efficient, targeting down to three-to-one CAC to LTV. So if the opportunity is there, we will spend. But as we mentioned previously, we're very mindful of the dollars that we spend and spending it in a responsible manner.
spk06: Okay. And I guess in the longer term, to the extent you can provide color kind of 30% EBITDA margins over what period over what scale do you feel comfortable reaching that that goal is that is are there a specific is there a specific point in time in the model where you feel that there is there is going to be significant network effects that that lead to the the operating scale to start accelerating that leverage in the model. Just would love to see how you're thinking through the longer term kind of margin profile, time, scale, scope over which you can get there.
spk09: Yeah, we're in early innings right now. And there's an amazing opportunity in front of us. To your question, I think three to five years, 30% EBITDA margin seems reasonable. But again, it depends on the macro post-pandemic world. introducing new products that will adapt that time scale and how soon we get there.
spk08: Okay. Thanks, Garrett. Thanks, Adam. Thanks, Alex.
spk04: And now, ladies and gentlemen, if you'd like to ask a question, please press star 1-1. One moment for our next question. The next question coming from the lineup, Jeremy Hamlin from CraigHell. Your line is open.
spk07: Thanks for taking the questions. Congrats on the milestone here. So I wanted to understand your view of kind of the return to work scenario and whether or not are you looking for more of your kind of premium households to be back on a full-time basis you know five days a week in the office are is it more advantageous in some ways that You may be a hybrid model where people are in the office, you know two to three or four days a week You know from a kind of a longer-term stability of the model That's part one and then you know wanted to piggyback here as we think about longer-term and You know, it's a terrific goal, 30% margin, three to five years. But on a nearer term basis, I wanted to understand as the business models evolved to your cash burn, you know, I think that you were looking for a break even in the five to six million of REVs per month. Wanted to understand, you know, where you are with that today. And then kind of the last item is in terms of the supply of pet care givers, right? You've built a really nice platform here, basically about 400,000. You know, how is that pipeline? How are you looking to grow that here over the next year or so?
spk11: Oh, great questions, Jeremy. And thank you for the time.
spk10: So I'll go in order of questions asked, hopefully. So hybrid work. Look, I think. personally and as a management team, we're not anticipating the world to revert to 100% back to office, probably ever. I think long-term, if we can get to 70-ish percent back a few days a week, that would be great. I think that's a pretty aspirational normal state in the next 18 to 24 months. And as a reminder, look, the average WAG pet parent is using WAG once a week, assuming they're not on premium. And so, you know, if you're in the office a couple days a week, that's all we need. We need you in a couple days a week. And leaving your pet home alone, I think in a hybrid environment, it's actually even more stressful because your pet isn't aware that you're gone. It isn't used to you being gone. So probably the use case is more relevant. So really, it's just more like going back a few days a week, and that's going to be the catalyst for the WAG services business and probably the largest tailwind we'll see that's organic. In terms of revenue and how we think about breakeven, I mean, I certainly think the guidance we provided before is not off, kind of that revenue range being break-even. What this is really going to come down to is our willingness to grow the business by reinvesting that capital. We think Q2 is a pretty good indicator of how efficient we can be with capital. Think about it. We did, you know, 12.8, and we burned, and I think it adjusted to come down to is our willingness to grow the business by reinvesting that capital. We think Q2 is a pretty good indicator of how efficient we can be with capital. Think about it. We did, you know, 12, eight, and we burned, I think adjusted EBITDA was 900,000. I think we'd take that all day. We think there's, you know, really great growth to be had, 256% year over year at what we would assume EBITDA. So as long as that trade-off is there, we'll take that, meaning burn. But certainly not to say that we can't show profit earlier if we so wanted. I just think that's going to be really a question of a trade-off. I don't know if we're going to take that trade-off today, knowing where we are in this cycle of return to normal. and where we are in the cycle of pet parents kind of rediscovering and covering their pet's needs. And then finally, and Adam, feel free to jump in here, when we think about pet caregivers, we've been extremely fortunate to have such engagement and satisfaction from the caregiver base that participates on the WAG platform today. You can Google it yourself. There's just an unbelievable amount of people who want to participate in this gig and really enjoy it and have a great time. I think our job going forward is going to be finding new ways for the caregivers to participate in the lives of pets, meaning more product and service innovation. And two is going to be keeping them very busy. I think the number one request we get from new caregivers who participate in the platform is, how do I get more gigs? I want to take care of more of my neighbor's pets. And so finding more innovative ways to meet new pet parents, take care of pets, is probably top of our list. So really, we're spending a lot of time on keeping them busier and introducing more pets. Adam, anything to add?
spk12: No, I thought that was great. I think that's exactly it.
spk07: Great. And then just as another follow-up here, your premium subscription penetration, that seems like pretty extraordinary growth in a relatively short period of time. I wanted to get a sense for whether or not that's building or accelerating on a kind of cadence basis. In other words, were you seeing more momentum in kind of the May-June timeframe as opposed to earlier this year with that adoption to premium subscription? And then the second part of that is how you're thinking about the pricing on that. It may be too soon to make any change, but wanted to get a sense for whether or not you're evaluating pricing to either move up or down to drive even faster penetration.
spk11: Adam, why don't you take this one?
spk12: Sure.
spk02: So the first question, just about the increased penetration year over year to 50% of active customers in Q2. The way to really read through that is as customers emerge from the pandemic and their kind of use case and habits, daily routine becomes more predictable. It's easier to subscribe to WAC premium and say, yes, I want to fold this into how I take care of my pet on a daily basis. So that's going to be the main increased penetration driver. Your second question was about pricing. So our philosophy here is really kind of akin to Amazon Prime, where we're not necessarily trying to primarily monetize the customer through the cost of the subscription. In fact, we like the subscription to feel like an absolute no-brainer at the price. It's really about folding you into our ecosystem. And that really plays to what is our larger aspirations. It's to build a platform where we have a dozen really, really amazing services for the premium pet parent. And they're all tied together by the premium subscription. So when any of those need states arise, you wouldn't try to go to another brand. You do it within our ecosystem because of all the benefits it provides to you. The final question was kind of around penetration over time and how we're thinking about growing Wag Wag Premium generally. So it's really about just improving the subscription, making it kind of more native to all of the products and services and having just really, really great marketing and product tie-ins. At 50% penetration, that was the target we set for ourselves when we launched the premium subscription in the first place. I think that there is opportunity for continued upside there, but the 50% premium penetration level, we're pretty happy about it in terms of the percentage. We will, of course, be trying to grow the absolute count of subscribers kind of through the different strategies I just mentioned.
spk08: Got it. All right. Thanks, guys. Best wishes.
spk04: Now I'm showing no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.
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