Wag! Group Co.

Greetings and welcome to the WAG Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Robles with Investor Relations. Thank you, sir. You may begin.

Good afternoon, everyone, and thank you for joining WAG's conference call to discuss our third quarter 2023 financial results. On the call today are Garrett Smallwood, Chief Executive Officer and Chairman, Adam Storm, President and Chief Product Officer, and Alec Davidian, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements These forward-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements. A discussion of these risks and uncertainties are included in our filings within 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. 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 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 will now turn the call over to Garrett Smallwood.

Good afternoon, and thank you for joining us today to discuss our financial performance for the third quarter of 2023. We are excited to announce another successful quarter for the WAG team, exceeding our own expectations for both revenue and adjusted EBITDA. This quarter further demonstrates that we are transforming the pet industry by becoming an all-inclusive, trusted partner for the premium pet parent and capitalizing on the secular growth of pet ownership. We continue to build lasting, high-frequency relationships with households across the U.S. by becoming their go-to destination for premium services, health, and wellness. While we remain laser-focused on profitability for the remainder of 2023, we continue to invest in our platform and technology, building proprietary solutions to the most important needs. In 2024 and beyond, we will continue to use our proprietary technology, scalable platform, and deep and trusted relationships with premium households to strike the right balance of growth and profitability. With that, I will provide a brief overview of our financial results for the third quarter. Following that, Adam, our President and Chief Product Officer, will share updates on our strategic plans and key initiatives for the remainder of 2023 and beyond. Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our third quarter results, discuss our capital allocation priorities, and reiterate our 2023 guidance. During the quarter, revenue grew by 42% year-over-year to $21.8 million. This growth was driven by the success of our wellness business, fueled by demand for pet insurance and wellness products. In addition to the success of PawProtect, the only pet insurance product in the U.S. with Instant Pay. We're seeing early signs of success with Cat Food Advisor, which validates our longer-term growth initiatives by expanding our reach within the pet food and treats category. Our adjusted EBITDA was $1 million, an increase from a loss of $0.5 million in the same period last year. As we navigate the dynamic macroeconomic landscape, our primary objective remains centered around achieving a sustainable equilibrium between growth, profit, and margin. In the third quarter, platform participants increased to 632,000, an increase of 34% year-over-year, and WAG Premium maintained strong penetration at 52%. Our third quarter organic acquisition rate was more than 70%, which is a result of our focus on dynamic partnerships, a best-in-class experience, and our referral programs. We continue to be thoughtful and deliberate around capital allocation and brand building. And as a result, our LTV to CAC ratio was a deliberate 9 to 1. On the supply side of the business, we maintained a supply and demand equilibrium through a variable platform fee. which averaged $50.26 in Q3, 2023. In summary, the team at WAG continues to execute against our goals and deliver strong and sustainable results. Our third quarter results demonstrate our ability to scale the platform faster and more profitably than anticipated and show the effectiveness of our strategy and business model to become the number one platform for premium pet parents. Simply put, we have out-executed on the strategy we set forth almost two years ago for the seventh consecutive quarter. And with that, I will turn the call over to Adam Storm to review our strategy for the remainder of 2023. Thanks, Garrett. I'll once again walk through the five top-level elements of our strategy to drive long-term shareholder value and profitable growth. One, accelerate growth in existing markets. As Garrett mentioned, the third quarter was another record revenue quarter driven by the demand for pet insurance and wellness products across the U.S., as well as a post-summer return to normal daytime service habits. We will continue to leverage our technology and best-in-class user experience to innovate on comparison tools and matchmaking services for highly fragmented experiences with the largest total addressable markets, such as pet food and treats and pet insurance. 2. Expand premium subscription offerings.