Wag! Group Co.

Ladies and gentlemen, thank you for standing by and welcome to the WAG third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. I would now like to turn the call over to your host, Dawn Frankfort. You may begin.

Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our third quarter 2022 financial results. On the call today, are Garrett Smallwood, Chief Executive Officer and Chairman, Adam Storm, President and Chief Product Officer, and Alec Davidian, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements. These forward-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements. A discussion of these risks and uncertainties are included in our SEC filings. Also, during the call, we may present both GAAP and non-GAAP financial measure. 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 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.

Thanks, Don. Good afternoon, everyone. And thank you for joining us to discuss our third quarter 2022 performance. We had another record quarter with revenue up approximately 161% to 15.4 million from the prior year and adjusted EBITDA loss improving to 461,000 from the last quarter, which was only possible with the hard work of our team at WAG. Our performance this quarter is a testament to our value proposition and the non-discretionary pet care industry and our ability to build upon our growth in the years ahead. Today, we'll be discussing our financial results for the third quarter, as well as reiterating our compelling growth strategy that positions us to deliver predictable and sustainable financial performance for the remainder of 2022 and beyond. After another exceptional quarter, we are raising our 2022 guidance for both revenue and adjusted EBITDA. I want to reiterate our mission here at WAG. We believe that being busy shouldn't stop you from owning or taking care of your furry family members. Our mission is simple. We solve the guilt and stress of owning a pet. We exist to make pet ownership possible and to bring joy to pets and those who love them. We're building a strong, non-discretionary, 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, and we are consolidating these industries online and through our mobile app, as we rapidly evolve into the number one pet well-being platform in the U.S. Our business is diversified and has proven to be a return to normal post-pandemic need. A fundamental and imperative part of our business model is trust, as 75% of pet parents are not home while a service is being delivered. And we will continue to build on this trust to drive high-frequency utilization of our non-discretionary services. I will now cover a high-level overview of our third 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. Then Alec, Chief Financial Officer, will discuss our third quarter results in more detail, our capital allocation, and our guidance for 2022, which again, we raised today. Our momentum continued this quarter with record revenue increasing over 160% to $15.4 million compared to $5.9 million in the third quarter of 2021. We achieved an impressive adjusted EBITDA loss of 461,000 from 2.6 million loss in the same period last year. We're keenly aware this is not the time or place for growth at all costs and are instead striking a balance of growth, margin, and profit. Additionally, take rate improved to 61% compared to 43% in the third quarter of 2021, which is driven by the continued diversification of the platform, including instant pay, Walker revenue, and wellness that apply upward pressure to take rate. These were notable accomplishments and underscore the resiliency and diversification of our business model. During the quarter, we saw platform participants grow to 473,000, an increase of 22% from last quarter. WAG premium penetration for the quarter was 53% versus 50% last quarter, achieving the long-term target penetration rate we set out at the launch of the program two and a half years ahead of schedule. WAG premium penetration is key to the platform resiliency as pet parents who subscribe to WAG premium are paying an additional $9.99 per month and use WAG services seven to eight times per month versus four to five times a month for non-subscribers. On this note, we are actively testing WAG premium pricing, benefits, and possible other value adds to maintain the long-term target and provide value to pet parents who rely on WAG each and every week. Continued WAG premium penetration demonstrates the compounding nature of our business and propels the predictability and sustainability of our revenue. The deep-rooted trust we have created in our business model leads to high-frequency utilization. Our LTV to CAC for the third quarter increased to 8 to 1, demonstrating our sustained return to normal trend coming out of COVID and a testament to our strong view that WAG is a non-discretionary post-pandemic need. This quarter, we saw over 70% organic user acquisition rate and significant growth in awareness for our platform via strategic partnerships and performance marketing initiatives. During this quarter, we also recognized significant interest in the pet caregiver gig. And as a result, the average price that pet caregivers are paying to join the platform rose from around $29.95 in Q2 to around $41.50 in Q3. We continue to believe we have the best gig in America. which is why there are more than 400,000 pre-approved pet caregivers who are delivering value to the community each and every day. At the current economics, we continue to have negative supply side cash. We will continue to manage supply and demand on a market-by-market basis, and as the world returns to normal, we expect the pet caregiver pricing to adjust to reflect not only the delightful nature of the gig, but also the availability of gigs and local network effects. Before turning the call over to Adam to discuss our growth initiatives, I will summarize WAG's differentiated position in the pet care industry. One, we are a trusted, on-demand digital marketplace, and our goal is to be the leading platform for premium pet care, leveraging a strong consumer brand and efficient business model to drive long-term growth and shareholder value. Two, WAG is a multifaceted platform that's consolidating the fastest-growing secular growth areas within the pet industry. This includes our mobile-first subscription-based pet platform, the largest pet insurance marketplace in the U.S., and what we believe is the best gig in America. Three, with more than 75% of pet parents away while service is being delivered, we found that the ability to access on-demand and recurring dog walks, pet sitting, training services, and much more across 5,300 cities in all 50 states is a way in the door with premium pet parents across the U.S. We are becoming the button on the phone for the paw, a place for pet parents' trust with their pet's health and well-being. We are extremely excited about the growth in our business including the wellness category, which is a major catalyst as pet parents are finding the ability to chat with licensed pet experts 24-7, pet wellness plans, and the ability to shop pet insurance an obvious value add in a world full of options. With that update, Adam will provide more color on our strategy. Thanks, Garrett.