Wag! Group Q1 2025 Earnings Call Transcript

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May 12, 2025

There are 5 speakers on the call.

Operator

Good morning. Welcome to the Wab Q1 twenty twenty five Earnings Conference Call. At this time, all lines 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 WAG's conference call to discuss our first quarter twenty twenty five financial results. On the call today are Garrett Smallwood, Chief Executive Officer and Chairman Adam Storm, President and Chief Product Officer and Alex 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 ks 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 first quarter of twenty twenty five. First, I'll 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 first quarter twenty twenty five results and discuss our guidance for 2025. We began the year in line with and slightly ahead of our expectations from a profitability standpoint despite a year over year decline in revenue.

Speaker 2

Through disciplined cost management and operational efficiencies, we delivered improved adjusted EBITDA demonstrating our continued ability to adapt and execute in the current environment. Sales and marketing expenses declined slightly sequentially and 34% year over year reflecting disciplined cost control and a more efficient customer acquisition strategy through channel diversification. We're continuing to see the benefits from the operational improvements we implemented throughout last year including the streamlining of headcount, automation and the deeper integration of AI into our core workflows. At the same time, we also made progress on the strategic partnership front. As previewed last quarter, all three of our major distribution partners we secured went live at the end of Q1 and are expected to drive meaningful impact within our insurance comparison business beginning in Q2.

Speaker 2

We're excited about the value these partners bring, especially in an environment where we are consciously reducing marketing spend. Looking ahead, we're well positioned to accelerate growth through the second quarter supported by strong business trends through April and early May. 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. As we continue to operate with discipline and focus, the underlying fundamentals of our business remain strong. In the services ecosystem, we're seeing steady demand as more pet parents return to the office, and we remain focused on driving additional value to customers through product innovation and cross sell opportunities. Within wellness, the three major distribution partners that Garrett mentioned will enhance our marketing positioning and allow us to scale more efficiently, which is especially important as we maintain reduced marketing spend. At the same time, as more users engage with our platform, we're constantly exploring new ways to deliver more value and deepen engagement across our portfolio.

Speaker 3

We're optimistic about the momentum that we've seen in early Q2 and remain focused on disciplined execution while growing efficiently. I will now turn the call over to Alec to discuss our financial performance in more detail.

Speaker 4

Thanks, Adam. As Garrett mentioned, our Q1 results reflect our focus on operating efficiency and the initial innings of scaling new opportunities and partners to achieve improved profitability and growth in 2025. In the first quarter, we had 472,000 platform participants in the WAG ecosystem, a sequential quarter over quarter growth of 6%. Revenue and adjusted EBITDA loss was $15,200,000 and $1,200,000 respectively, both declining slightly versus Q4. From a revenue category results perspective, first quarter services was 4,900,000.0 wellness was $9,200,000 and pet food and treats was $1,100,000 Total costs and expenses for the first quarter were down 25% year over year by over $6,000,000 Specifically, cost of revenue was $1,400,000 in Q1, which came in at 10% of revenue just outside of our historic seven to nine percent range.

Speaker 4

Platform operations and support expenses were $2,500,000 in Q1 or 17% of revenue, which is modestly above our historic 13% to 15% range. We continue to thoughtfully invest in AI and other technologies to optimize our processes and systems and are seeing increased efficiencies with every passing quarter. Sales and marketing expense was $10,400,000 in Q1, which is within our historic 60% to 70% range. We are continuing to thoughtfully approach customer acquisition and taking steps to expand scale in a strategic manner. G and A expense was $4,000,000 in Q1, which is within our historic 20% to 26% range, driven by the fixed cost nature of G and A.

Speaker 4

From a balance sheet perspective, we ended the first quarter with $11,700,000 in cash and cash equivalents and accounts receivable. As the Board continues its strategic review, the Board is evaluating potential options that could be accretive to our balance sheet and allow us to reduce our debt balance. Looking ahead to our 2025 guidance, we continue to 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 In closing, I want to reiterate that we remain focused on executing our strategy, while continuing to assess opportunities that drive shareholder value. We will continue to provide updates when appropriate and will continue to act in the best interest of our shareholders. And with that, I will now turn the call back to the operator.

Operator

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To withdraw your question, please press 2. 1 moment, for your first question. And we have no further questions at this time.

Operator

I would like to turn it back to Mr. Garrett Smallwood for closing remarks.

Speaker 2

Thank you, everyone, and thank you so much to our wonderful WAG employees who are working so hard each and every day to deliver to our shareholders, our customers and our end users. And with that, we'll let you go. Thanks so much.

Operator

Thank you presenters. And ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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Earnings Conference Call
Wag! Group Q1 2025
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