• Wag! Reports Third Quarter 2024 Results

    Source: Nasdaq GlobeNewswire / 13 Nov 2024 07:00:01   America/New_York

    SAN FRANCISCO, Nov. 13, 2024 (GLOBE NEWSWIRE) -- Wag! Group Co. (the “Company” or “Wag!”; Nasdaq: PET), which strives to be the number one platform to solve the service, product, and wellness needs of the modern U.S. pet household, today announced financial results for the third quarter ended September 30, 2024.

    Third Quarter 2024 Highlights:

    • Revenues decreased 39% to $13.2 million, compared to $21.8 million in the third quarter of 2023 – comprised of $5.4 million of Services revenue, $6.5 million of Wellness revenue, and $1.3 million of Pet Food & Treats revenue.
    • Net loss was $6.3 million, compared to $2.2 million in the third quarter of 2023.
    • Adjusted EBITDA loss was $1.9 million, compared to positive Adjusted EBITDA of $1.0 million in the third quarter of 2023.

    “Our third quarter results were impacted by a highly dynamic marketing environment resulting in less efficient marketing spend in our Wellness and Pet Food & Treats businesses,” said Garrett Smallwood, CEO and Chairman of Wag!. “While we are disappointed with these results, we expect these challenges to be transitory, and believe we are positioned for a strong rebound in Q4 and into 2025. In fact, we saw growth in our Wellness revenue stream of 79% month over month in October, and the first couple weeks of November are continuing this trend.”

    “In the third quarter, we paid down $5 million of our debt balance, and we continue to have ongoing discussions with banks and private lenders to address our debt. We will also consider strategic asset sales for select products with a longer duration payback, and would expect to use such proceeds to further pay down our debt. We remain focused on strengthening our balance sheet, delivering strong fourth quarter results and returning to growth and profitability in 2025.”

    Guidance

    For the fourth quarter 2024, we expect:

    • Revenue in the range of $15 million to $18 million.
    • Adjusted EBITDA1 in the range of $(0.5) million to $0.5 million.

    For the full year 2024, we expect:

    • Revenue in the range of $70 million to $73 million.
    • Adjusted EBITDA1 in the range of $(0.5) million to $0.5 million.

    Our financial guidance includes the following outlook:

    • We expect holidays to drive incremental overnight vs. daytime service demand, but also expect that severe weather will impact Services demand. Pet adoption during the holidays also positively impacts pet insurance penetration and demand for wellness plans.
    • We anticipate that continued growth in the pet industry, driven by factors such as higher rates of pet ownership, pet insurance penetration, and increasing demand for premium pet products and services, will have a positive impact on our full year 2024 results.
    • We have factored in potential risks and opportunities related to macroeconomic trends related to the state of the economy, interest rates, and consumer confidence in order to forecast our financial performance.
    • We expect Sales & Marketing efficiency within the Pet category, our ability to manage CPCs and CPMs across key partners and advertising platforms, and our ability to manage search engine results and search engine optimization (SEO) within competitive keywords.
    • We recognize that there may be potential risks to our financial performance in 2024, such as disruptions to global supply chains, changes in consumer behavior due to unexpected events such as a delayed or imbalanced return-to-office, digital and performance marketing trends, the potential impact of AI, and our ability to expand through partnerships.

    Wag!’s Third Quarter Results Conference Call

    Wag! will host a conference call and live webcast today, November 13, 2024, at 8:30am ET to discuss financial results. Investors and analysts interested in participating in the call are invited to dial 1-800-717-1738 (international callers please dial 1-646-307-1865) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at https://investors.wag.co.

    A recorded replay of the conference call will be available approximately three hours after the conclusion of the call and can be accessed online at https://investors.wag.co for 90 days.

    Wag! also provides announcements regarding financial performance and other matters, including SEC filings, investor events, press and earnings releases, on our investor relations website (https://investors.wag.co), and/or social media outlets, as a means of disclosing material information and complying with disclosure obligations under Regulation FD. The list of social media channels that Wag! uses may be updated on the investor relations website from time to time. In addition, you may automatically receive email alerts and other information about Wag! when you enroll your email address by visiting the “Email Alerts” section at (https://investors.wag.co/ir-resources/email-alerts).

    About Wag! Group Co.

    Wag! Group Co. strives to be the number one platform to solve the service, product, and wellness needs of the modern U.S. pet household. Wag! pioneered on-demand dog walking in 2015 with the Wag! app, which offers access to 5-star dog walking, sitting, and one-on-one training from a community of over 500,000 Pet Caregivers nationwide. In addition, Wag! Group Co. operates Petted, one of the nation’s largest pet insurance comparison marketplaces; Dog Food Advisor, one of the most visited and trusted pet food review platforms; WoofWoofTV, a multi-media company bringing delightful pet content to over 18 million followers across social media; maxbone, a digital platform for modern pet essentials; and Furmacy, software to simplify pet prescriptions. For more information, visit Wag.co.

    Non-GAAP Financial Measures and Other Operating Metrics

    Adjusted EBITDA is a non-GAAP financial measure defined as net income (loss) adjusted for interest expense, net; income taxes; depreciation and amortization; and stock-based compensation, as well as other items to be consistent with definitions typically used by lenders, including transaction costs. Additionally, we exclude the impact of certain non-recurring items which are not indicative of our operating performance as well as other transaction-specific costs that do not represent an ongoing operating expense of the business, including but not limited to, integration and transaction costs associated with acquired businesses, severance costs, loss on extinguishment of debt, and legal settlements. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. Adjusted EBITDA and Adjusted EBITDA margin provide a basis for comparison of our business operations between current, past, and future periods by excluding items from net income (loss) that we do not believe are indicative of our core operating performance.

    Platform Participant is defined as a Pet Parent or Pet Caregiver who transacted on the Wag! platform for a service in the quarter. Services include dog walking, sitting, boarding, drop-ins, training, premium telehealth services, wellness plans, and pet insurance plan comparison.

    Information reconciling forward-looking Adjusted EBITDA to the most directly comparable GAAP financial measure is unavailable to the Company without unreasonable effort. The Company is not able to provide a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure because certain items required for such reconciliation are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such a reconciliation would require a forward-looking statement of income, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the company without unreasonable effort. The Company provides a range for its Adjusted EBITDA forecast that it believes will be achieved; however, it cannot accurately predict all the components of the Adjusted EBITDA calculation. The Company provides an Adjusted EBITDA forecast because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted above. However, Adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income (loss) or cash flow from operating activities as an indicator of operating performance.

    Forward-Looking Statements

    This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking words. Statements that are not historical in nature, including the words “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast” and other similar expressions are intended to identify forward-looking statements. These statements include those related to the Company’s ability to further develop and advance its pet service, product and wellness offerings and achieve scale; ability to attract and retain personnel; market opportunity, anticipated growth, ability to achieve and maintain profitability; intended use of proceeds from the Company’s underwritten public offering, and future financial performance, including management’s financial outlook for the future. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this press release, including but not limited to: management’s financial outlook for the future; market adoption of the Company’s pet service, product and wellness offerings and solutions; failure to realize the financial benefits of acquisitions; the ability of the Company to protect its intellectual property; changes in the competitive industries in which the Company operates; changes in laws and regulations affecting the Company’s business; the Company’s ability to implement its business plans, forecasts and other expectations, and identify and realize additional partnerships and opportunities; and the risk of downturns in the market and the technology industry. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of the Company’s filings with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. The Company does not give any assurance that it will achieve its expectations.

    Contact Us

    Media: Media@wagwalking.com

    Investor Relations

    Wag!: IR@wagwalking.com

    Gateway for Wag!: PET@gateway-grp.com

    Wag! Group Co.
    Condensed Consolidated Balance Sheets
    (unaudited)
        
     September 30, December 31,
     2024 2023
     (in thousands)
    ASSETS
    Current assets:   
    Cash and cash equivalents$8,445  $18,323 
    Accounts receivable, net 6,548   10,023 
    Prepaid expenses and other current assets 3,258   3,428 
    Total current assets 18,251   31,774 
    Property and equipment, net 1,515   347 
    Operating lease right-of-use assets 816   1,045 
    Intangible assets, net 7,312   8,828 
    Goodwill 4,646   4,646 
    Other assets 52   57 
    Total assets$32,592  $46,697 
    LIABILITIES AND STOCKHOLDERS’ EQUITY
    Current liabilities:   
    Accounts payable$5,252  $9,919 
    Accrued expenses and other current liabilities 3,184   4,015 
    Deferred revenue 1,778   1,781 
    Deferred purchase consideration – current portion —   547 
    Operating lease liabilities – current portion 401   386 
    Notes payable – current portion, net of debt discount and warrant allocation of $1,730 as of September 30, 2024 19,015   1,751 
    Total current liabilities 29,630   18,399 
    Operating lease liabilities – non-current portion 556   816 
    Notes payable – non-current portion, net of debt discount and warrant allocation of $4,563 as of December 31, 2023 —   25,664 
    Other non-current liabilities 31   172 
    Total liabilities 30,217   45,051 
    Commitments and contingencies   
    Stockholders’ equity:   
    Common stock 4   4 
    Additional paid-in capital 176,859   163,376 
    Accumulated deficit (174,488)  (161,734)
    Total stockholders’ equity 2,375   1,646 
    Total liabilities and stockholders’ equity$32,592  $46,697 


    Wag! Group Co.
    Condensed Consolidated Statements of Operations
    (unaudited)
        
     Three Months Ended Nine Months Ended
     September 30, September 30, September 30, September 30,
     2024 2023 2024 2023
     (in thousands, except per share amounts)
    Revenues$13,204  $21,800  $55,074  $62,243 
    Costs and expenses:       
    Cost of revenues (exclusive of depreciation and amortization shown separately below) 1,146   1,441   3,874   3,710 
    Platform operations and support 2,798   2,968   8,472   9,630 
    Sales and marketing 8,862   12,755   35,554   36,788 
    Royalty —   —   —   1,791 
    General and administrative 4,231   4,682   12,279   14,487 
    Depreciation and amortization 583   414   1,741   1,170 
    Total costs and expenses 17,620   22,260   61,920   67,576 
    Interest expense 1,497   1,915   4,979   5,686 
    Interest income (105)  (232)  (332)  (714)
    Loss on extinguishment of debt 454   —   1,180   — 
    Other expense, net —   12   —   21 
    Loss before income taxes (6,262)  (2,155)  (12,673)  (10,326)
    Income taxes —   41   81   79 
    Equity in net earnings of equity method investments —   —   —   553 
    Net loss$(6,262) $(2,196) $(12,754) $(9,852)
    Loss per share, basic and diluted$(0.13) $(0.06) $(0.30) $(0.26)
    Weighted-average common shares outstanding used in computing loss per share, basic and diluted 47,780   38,987   42,941   38,061 


    Wag! Group Co.
    Condensed Consolidated Statements of Cash Flows
    (unaudited)
      
     Nine Months Ended
     September 30, September 30,
     2024 2023
     (in thousands)
    Cash flow from operating activities:   
    Net loss$(12,754) $(9,852)
    Adjustments to reconcile net loss to net cash used in operating activities:   
    Stock-based compensation 4,799   3,528 
    Non-cash interest expense 1,768   2,021 
    Depreciation and amortization 1,741   1,170 
    Reduction in carrying amount of operating lease right-of-use assets 229   256 
    Equity in net earnings of equity method investments —   (553)
    Loss on extinguishment of debt 1,180   — 
    Other —   12 
    Changes in operating assets and liabilities, net of effect of acquired business:   
     Accounts receivable 3,475   (2,573)
     Prepaid expenses and other current assets 170   (463)
     Other assets 5   1 
     Accounts payable (4,667)  2,762 
     Accrued expenses and other current liabilities (831)  (452)
     Deferred revenue (3)  (491)
     Operating lease liabilities (245)  (208)
     Other non-current liabilities (141)  218 
    Net cash used in operating activities (5,274)  (4,624)
    Cash flows from investing activities:   
    Cash paid for acquisitions, net of cash acquired (128)  (9,152)
    Cash paid for equity method investment —   (1,470)
    Purchase of property and equipment (1,265)  (40)
    Net cash used in investing activities (1,393)  (10,662)
    Cash flows from financing activities:   
    Repayment of debt (11,233)  (907)
    Debt prepayment penalty (100)  — 
    Proceeds from exercises of stock options 114   100 
    Proceeds from registered public offering of common stock, net of issuance costs 8,570   — 
    Other (562)  (569)
    Net cash used in financing activities (3,211)  (1,376)
    Net change in cash and cash equivalents (9,878)  (16,662)
    Cash and cash equivalents, beginning of period 18,323   38,966 
    Cash and cash equivalents, end of period$8,445  $22,304 


    Wag! Group Co.
    Adjusted EBITDA (Loss) Reconciliation
    (unaudited)
        
     Three Months Ended Nine Months Ended
     September 30, September 30, September 30, September 30,
     2024 2023 2024 2023
     (in thousands, except percentages)
    Net loss$(6,262) $(2,196) $(12,754) $(9,852)
    Interest expense, net 1,392   1,683   4,647   4,972 
    Income taxes —   41   81   79 
    Depreciation and amortization 583   414   1,741   1,170 
    Stock-based compensation 1,847   1,065   4,799   3,528 
    Integration and transaction costs associated with acquired business —   —   —   189 
    Severance costs 33   —   160   131 
    Loss on extinguishment of debt 454   —   1,180   — 
    Legal settlement 10   —   10   500 
    Adjusted EBITDA (loss)$(1,943) $1,007  $(136) $717 
    Revenues$13,204  $21,800  $55,074  $62,243 
    Adjusted EBITDA (loss) margin (14.7)%  4.6%  (0.2)%  1.2%


    Wag! Group Co.
    Key Operating and Financial Metrics
    (unaudited)
        
     Three Months Ended Nine Months Ended
     September 30, September 30, September 30, September 30,
     2024 2023 2024 2023
     (in thousands, except percentages)
    Platform Participants (as of period end) 367   632   367   632 
    Revenues$13,204  $21,800  $55,074  $62,243 
    Net loss$(6,262) $(2,196) $(12,754) $(9,852)
    Net loss margin (47.4)%  (10.1)%  (23.2)%  (15.8)%
    Net cash used in operating activities$(3,253) $(2,297) $(5,274) $(4,624)
    Adjusted EBITDA (loss)$(1,943) $1,007  $(136) $717 
    Adjusted EBITDA (loss) margin (14.7)%  4.6%  (0.2)%  1.2%


    1 Information reconciling forward-looking Adjusted EBITDA to the most directly comparable GAAP financial measure is unavailable to the company without unreasonable effort, as discussed in our Non-GAAP Financial Measures and Other Operating Metrics section below.


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