Wag! Group Q4 2024 Earnings Call Transcript

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March 24, 2025

There are 7 speakers on the call.

Operator

Good morning, and welcome to the WAG Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

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

Speaker 1

Good morning, everyone, and thank you for joining WACC conference call to discuss our fourth quarter and full year twenty twenty four 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 with the SEC.

Speaker 1

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 eight K furnished to the SEC.

Speaker 1

These non GAAP measures are not intended to be a substitute for our GAAP results. And with that, I'll now turn the call over to Garrett Smallwood.

Speaker 2

Good morning and thank you for joining us today to discuss our financial performance for the fourth quarter and full year of 2024. First, I will provide business updates and an overview of our results. Following that, Adam, our President and Chief Product Officer will share brief updates on our strategic priorities. Then Alec, our Chief Financial Officer will provide a more detailed analysis of our fourth quarter and full year '20 '20 '4 results and discuss our capital allocation priorities. Before discussing our financial results, I'd like to provide an update on the strategic review process.

Speaker 2

This Board led initiative remains focused on identifying opportunities to enhance shareholder value and position the company for long term success. Our Board and management team remain confident in the strength of our business and our ability to execute our strategic plan. That said, we continue to evaluate a range of options and will maintain a disciplined and deliberate approach throughout this process. There is no set timeline for its conclusion and we will provide updates as appropriate. Now moving to our results, we are encouraged by the forward momentum in our business.

Speaker 2

Wellness has normalized since Q3 and we have signed three new major distribution partners that we believe will accelerate demand within our insurance comparison business. These partnerships are expected to drive meaningful impact as they go live through Q1 and begin materializing in Q2. Additionally, we are realizing multiple positive tailwinds in our services marketplace, which is benefiting from increasing demand as more office workers return to in person work. Operationally, we remain focused on managing the business efficiently. We continue to maintain strong gross margins and are integrating AI to automate roles and optimize headcount.

Speaker 2

Our intentional use of AI includes high quality content creation and partnerships that enhance our ability to reach and convert customers. Additionally, we have seen stability in Google search trends, which is a positive indicator for our long term customer acquisition efforts and a significant improvement from where we were in Q3. We remain committed to evaluating all strategic options and We'll continue to provide updates as appropriate. With that, I will turn the call over to Adam to review our strategic priorities for 2025.

Speaker 3

Thanks, Garrett. Despite a dynamic operating environment, the underlying fundamentals of our business remain strong. Within the services ecosystem and as Garrett mentioned,

Speaker 2

more

Speaker 3

and more workers continue to go back to the office, which provides a tailwind for us. With increasing demand, we're focused on enhancing our product offerings to deliver more customer value and drive cross sell across our portfolio. Within the wellness ecosystem, we are excited about the addition of three major new distribution partners, which will enhance our market positioning and improve our ability to scale within a competitive marketing environment. While we are sensitive to the competitive nature of these partnerships and announcing them publicly, we can share that they are incredibly strong brands that have retained or grown in distribution advantage through the Google search changes. We've continued to integrate AI into our business using high quality content and strategic partnerships to strengthen our marketing efforts.

Speaker 3

Stability in Google search trends has further reinforced our confidence in our ability to drive customer acquisition efficiently. Overall, we are optimistic about the forward traction in our business and remain committed to disciplined execution. I will now turn the call over to Alec to discuss our financial performance in more detail.

Speaker 4

Thanks, Adam. Q4 results demonstrate the initial rebound from Q3 with all key metrics of platform participants revenue and adjusted EBITDA upgraded in 17% sequentially quarter over quarter. This translates to Q4 platform participants of $445,000 revenues of $15,400,000 and adjusted EBITDA loss of $963,000 dollars Combining the Q4 with the results from the rest of 2024, we finished the full year 2024 with revenues of $70,500,000 down 16% from $83,900,000 a year ago and within our expected guidance range. Full year adjusted EBITDA loss was $1,100,000 down from $700,000 profit a year ago, which is driven primarily by the factors that we experienced in Q3 and discussed previously. Diving deeper into the financial results, revenue category results were as follows: full year services was $21,600,000 wellness was $42,700,000 and pet food and treats was $6,200,000 dollars The revenue amounts particularly in wellness were impacted by the Q3 Google search trends we discussed last quarter, which stabilized in Q4 together with our ability to adapt.

Speaker 4

As revenues came down in the second half of twenty twenty four, we diligently managed spend to balance financial discipline and investments into the future. Accordingly, total costs and expenses for the full year were down 11% year over year by over $10,000,000 Loss of revenue was $1,400,000 in Q4 and $5,300,000 for the full year, which is within our historical 7% to 9% range. Platform operations and support expense was 2,200,000 in Q4 and $10,700,000 for the full year, which is within our historic 13% to 15% range. In Q4 and twenty twenty four, we have continued to thoughtfully invest in AI and other technologies to optimize our processes and systems and are seeing increased efficiencies. Sales and marketing expense was $10,400,000 in Q4 and $46,000,000 for the full year, which is within our historical 60% to 70% range.

Speaker 4

As we experienced a stabilizing marketing environment, we experienced a lower ratio in Q4. However, we increased spend in December to capitalize on the typical holiday demand. This resulted in an aggregate 67% ratio spend in Q4 given some of the revenue will be realized in Q1. G and A expense was $4,300,000 in Q4 and $16,600,000 for the full year, which is slightly above our historic 20% to 26% range driven by the fixed cost nature of G and A. From a balance sheet perspective, we ended the year with $12,200,000 in cash, cash equivalents and accounts receivable.

Speaker 4

As part of the Board's strategic review, the Board is evaluating potential options that could be accretive to our balance sheet and allow us to reduce our debt balance further. As the Board's review progresses and materializes, we will continue to evaluate any gaps that remain. Now looking ahead to our 2025 guidance, we expect to generate the following: revenue in the range of $84,000,000 to $88,000,000 and adjusted EBITDA in the range of $2,000,000 to $4,000,000 dollars In closing, I want to reiterate that we remain focused on executing our strategy while continuing to assess opportunities that drive shareholder value. As Garrett mentioned, this board led strategic review process is ongoing and we are committed to a disciplined approach in evaluating all potential paths forward. We will provide updates when appropriate and will continue to act in the best interest of our shareholders.

Speaker 4

And with that, we now welcome Q and A. Operator, can you kindly open it up for Q and A?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You. Your first question comes from Jeremy Hamblin with Craig Hallum. Your line is now open.

Speaker 5

Thanks. And I want to start with the $25,000,000 guidance here with the revenue guidance. So just in terms of understanding the cadence of how we're getting from kind of current run rates in Q4, which would imply kind of low 60s millions in revenues to $84,000,000 to $88,000,000 Can you help me understand in terms of your business segments, whether it's service revenues, food and treats, wellness, kind of that jump in revenue growth, where do you expect that to primarily come from as we look at $25,000,000 and kind of what's the cadence of how you're thinking about that kind of $84,000,000 plus year as we look at '25

Speaker 3

Hey, Jeremy. Thanks for the question. The primary driver of the revenue growth in 2025 will be wellness, with some participation from services. There's an implication that we're going to resolve some of our balance sheet stress and constraints in order to kind of hit those targets. But we're integrating with these wellness partners right now and we're really excited about what that pipeline looks like.

Speaker 3

And we expect kind of Q1 through Q4 to grow revenues pretty much sequentially as these partners roll out in scale.

Speaker 5

Well, as a follow-up then, since we're basically at the end of Q1, can you give us a sense of where Q1 is tracking? I mean, is it kind of $16,000,000 17 million dollars or something higher than that? Can you give us a sense for what the near term has been tracking given that there hasn't been any change in the balance sheet at this point in time that might free up the capital constraint you discussed?

Speaker 3

Yes. Q1 is trending well. I would say that we're kind of coming off of Q4 looking to grow a little bit sequentially. But the rest of the year outlook kind of Q2 through Q4 is really about the launch and scale of these additional partners. And it's really about just getting wellness back to the scale that it was kind of in the Q1, Q2 of '20 '20 '4 timeframe via these new partnerships.

Speaker 5

Okay. So some sequential improvement that's primarily coming from wellness. Now historically Q2, there's a little bit of a seasonal shift that would indicate Q2 is down from Q1. Do you expect that to be the case again this year?

Speaker 3

Yes, I would say that Q1 this year and Q4 are going to be relatively similar. The quarter hasn't closed yet, but the scaling through the rest of the year is really about the new partnerships. As it pertains to Q2, yes, we're expecting the normal seasonality will play in, but we think that the larger driver will be the new partnerships rolling out in the wellness category and scaling those.

Speaker 5

Got it. And then from a cost perspective, you've kind of settled in here in terms of your G and A cost structure. Do you feel like there's anything additional that you need to do on that front? Do you feel like as you scale these new partnerships, are there going to be embedded costs associated with that? Any color you can share there?

Speaker 3

I think that there's room to additionally optimize that's both on the direct revenue drivers and kind of how those revenue dollars flow through the P and L. And then as Garrett mentioned earlier, the use of AI to kind of relentlessly go after the cost buckets in the business.

Speaker 5

Got it. Okay. I think that's it for me. Best wishes.

Speaker 3

Thanks, Jeremy. Thank you for the thoughtful questions.

Operator

There are no further questions at this time. I will now turn the call over to Garrett for closing remarks.

Speaker 2

Thanks, everyone. I want to give

Speaker 6

a huge thanks to our employees for all of their hard work and dedication through 2024 and for this upcoming year.

Speaker 2

We have exciting pipeline of products and services

Speaker 6

that they are working tirelessly on and we can't wait to deliver them to our customers and shareholders. Thanks so much.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your

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Wag! Group Q4 2024
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