Wag! Group Co. (PET) on Q1 2025 Results - Earnings Call Transcript
Operator: Good morning. Welcome to the Wag! Q1 2025 Earnings Conference Call [Operator Instructions]. As a reminder, this conference is being recorded. I'll now introduce your host Greg Robles with Investor Relations. Thank you. You may begin. Greg Robles: Good morning, everyone. And thank you for joining Wag!'s conference call to discuss our first quarter 2025 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. 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 Web site and is included in Exhibit and Form 8-K furnished to the SEC. 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. Garrett Smallwood: Good morning. And thank you for joining us today to discuss our financial performance for the first quarter of 2025. 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 2025 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. 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. 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. Adam Storm: 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. 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. Alec Davidian: 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 $15.2 million and $1.2 million respectively, both declining slightly versus Q4. From a revenue category results perspective, first quarter services was $4.9 million, wellness was $9.2 million and pet food and treats was $1.1 million. Total cost and expenses for the first quarter were down 25% year-over-year by over $6 million. Specifically, cost of revenue was $1.4 million in Q1, which came in at 10% of revenue just outside of our historic 7% to 9% range. Platform operations and support expenses dropped to $2.5 million 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 $10.4 million 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&A expense was $4 million in Q1, which is within our historic 20% to 26% range, driven by the fixed cost nature of G&A. From a balance sheet perspective, we ended the first quarter with $11.7 million 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 million to $88 million and adjusted EBITDA in the range of $2 million to $4 million. 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 we'll continue to act in the best interest of our shareholders. And with that, I will now turn the call back to the operator. Operator: Garrett Smallwood: 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, I'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.
Efficiency Analysis of Wag! Group Co. and Peers in the Pet Services Market
- Wag! Group Co. (NASDAQ:PET) has a ROIC of -77.36% and a WACC of 24.86%, indicating it is not generating returns above its cost of capital.
- Nogin, Inc. (NOGN) shows the lowest efficiency with a ROIC to WACC ratio of -39.52, highlighting significant challenges in generating returns.
- Akili, Inc. (AKLI) has the highest ROIC to WACC ratio of -2.72 among the peers, suggesting it is the closest to breaking even.
Wag! Group Co. (NASDAQ:PET) is a company that provides pet services, including dog walking and pet sitting, through its online platform. The company operates in a competitive market with other pet service providers. In evaluating Wag! Group Co. and its peers, the focus is on the Return on Invested Capital (ROIC) compared to the Weighted Average Cost of Capital (WACC) to determine how efficiently these companies generate returns relative to their cost of capital.
Wag! Group Co. has a ROIC of -77.36% and a WACC of 24.86%, resulting in a ROIC to WACC ratio of -3.11. This indicates that the company is not generating returns above its cost of capital. Despite this, Wag! Group Co. performs better than Nogin, Inc. and Nauticus Robotics, Inc. in terms of efficiency relative to their cost of capital.
Nogin, Inc. (NOGN) has a ROIC of -154.44% and a WACC of 3.91%, leading to a ROIC to WACC ratio of -39.52. This is the lowest among the peers, showing significant challenges in generating returns. In contrast, Akili, Inc. (AKLI) has the highest ROIC to WACC ratio of -2.72, with a ROIC of -36.10% and a WACC of 13.27%, indicating it is the closest to breaking even.
Semantix, Inc. (STIX) and Nauticus Robotics, Inc. (KITT) also face challenges, with ROIC to WACC ratios of -3.48 and -3.38, respectively. Semantix has a ROIC of -61.78% and a WACC of 17.76%, while Nauticus Robotics has a ROIC of -53.16% and a WACC of 15.74%. These figures highlight the difficulties these companies face in generating returns above their cost of capital.
Financial Analysis of Wag! Group Co. and Competitors
- Wag! Group Co. (NASDAQ:PET) has a ROIC of -77.36% and a WACC of 25.28%, indicating inefficiency in capital utilization.
- Nogin, Inc. (NOGN) faces more severe financial challenges with a ROIC of -154.44% and a WACC of 3.91%.
- Nauticus Robotics, Inc. (KITT) shows the least negative ROIC to WACC ratio among peers, suggesting slightly better capital management efficiency.
Wag! Group Co. (NASDAQ:PET) is a company that provides pet services, including dog walking and pet sitting, through its online platform. The company aims to connect pet owners with trusted pet care providers. In the competitive landscape, Wag! faces competition from other pet service platforms and companies offering similar services.
In evaluating Wag! Group Co.'s financial performance, the Return on Invested Capital (ROIC) is a key metric. With a ROIC of -77.36% and a Weighted Average Cost of Capital (WACC) of 25.28%, Wag! is not generating sufficient returns to cover its cost of capital. This results in a ROIC to WACC ratio of -3.06, indicating inefficiency in capital utilization.
Comparatively, Nogin, Inc. (NOGN) has a more severe situation with a ROIC of -154.44% against a WACC of 3.91%, leading to a ROIC to WACC ratio of -39.52. This suggests Nogin is even less efficient in generating returns relative to its cost of capital, highlighting significant financial challenges.
Semantix, Inc. (STIX) and Akili, Inc. (AKLI) also show negative ROIC to WACC ratios of -3.86 and -7.20, respectively. Both companies, like Wag!, are unable to generate returns that meet or exceed their cost of capital, indicating potential issues in capital management and profitability.
Nauticus Robotics, Inc. (KITT) stands out with the least negative ROIC to WACC ratio of -3.39 among the peers. Although still negative, it suggests Nauticus is slightly more efficient in managing its capital compared to others in the group. However, all companies in this analysis are currently operating at a loss relative to their cost of capital, which is concerning for investors.
Wag! Group Co. (NASDAQ:PET) Earnings Report Highlights
- Earnings per Share (EPS) matched the estimated -$0.08, with revenue aligning with the forecast at $15.8 million.
- PET's price-to-sales ratio of 0.13 suggests the stock might be undervalued, indicating potential for growth.
- Challenges in generating cash flow and a high debt-to-equity ratio of 8.41 highlight areas for improvement.
Wag! Group Co. (NASDAQ:PET) is a prominent platform catering to the service, product, and wellness needs of modern U.S. pet households. On March 24, 2025, PET reported its earnings before the market opened, revealing an earnings per share (EPS) of -$0.08, which matched the estimated EPS. The company's revenue also aligned perfectly with the estimated $15.8 million.
During the Q4 2024 earnings conference call, key figures such as CEO Garrett Smallwood and CFO Alec Davidian discussed the company's performance. Despite a negative price-to-earnings (P/E) ratio of -0.59, PET's price-to-sales ratio of 0.13 suggests the stock is undervalued compared to its sales. This indicates potential for growth if the company can improve its financial health.
PET's enterprise value to sales ratio is 0.28, further pointing to a potentially undervalued position. However, the enterprise value to operating cash flow ratio of -3.02 highlights challenges in generating cash flow from operations. This is a critical area for the company to address to improve its financial standing.
The company's earnings yield is negative at -1.69%, emphasizing current financial difficulties. Additionally, PET's debt-to-equity ratio is high at 8.41, indicating a significant reliance on debt financing. This could pose risks if the company cannot manage its debt effectively.
Lastly, PET's current ratio of 0.62 suggests potential liquidity issues, as it may struggle to cover short-term liabilities with current assets. CEO Garrett Smallwood has expressed confidence in the company's strategic plan, focusing on strengthening the balance sheet and reducing debt to enhance shareholder value.
Wag! Group Co. (NASDAQ:PET) Earnings Report Highlights
- Earnings per Share (EPS) matched the estimated -$0.08, with revenue aligning with the forecast at $15.8 million.
- PET's price-to-sales ratio of 0.13 suggests the stock might be undervalued, indicating potential for growth.
- Challenges in generating cash flow and a high debt-to-equity ratio of 8.41 highlight areas for improvement.
Wag! Group Co. (NASDAQ:PET) is a prominent platform catering to the service, product, and wellness needs of modern U.S. pet households. On March 24, 2025, PET reported its earnings before the market opened, revealing an earnings per share (EPS) of -$0.08, which matched the estimated EPS. The company's revenue also aligned perfectly with the estimated $15.8 million.
During the Q4 2024 earnings conference call, key figures such as CEO Garrett Smallwood and CFO Alec Davidian discussed the company's performance. Despite a negative price-to-earnings (P/E) ratio of -0.59, PET's price-to-sales ratio of 0.13 suggests the stock is undervalued compared to its sales. This indicates potential for growth if the company can improve its financial health.
PET's enterprise value to sales ratio is 0.28, further pointing to a potentially undervalued position. However, the enterprise value to operating cash flow ratio of -3.02 highlights challenges in generating cash flow from operations. This is a critical area for the company to address to improve its financial standing.
The company's earnings yield is negative at -1.69%, emphasizing current financial difficulties. Additionally, PET's debt-to-equity ratio is high at 8.41, indicating a significant reliance on debt financing. This could pose risks if the company cannot manage its debt effectively.
Lastly, PET's current ratio of 0.62 suggests potential liquidity issues, as it may struggle to cover short-term liabilities with current assets. CEO Garrett Smallwood has expressed confidence in the company's strategic plan, focusing on strengthening the balance sheet and reducing debt to enhance shareholder value.
Wag! Group Co. (NASDAQ:PET) Financial Analysis
- Wag! Group Co. (NASDAQ:PET) has a ROIC of -40.08% and a WACC of 21.77%, indicating value destruction due to not covering its cost of capital.
- Peers Semantix, Inc. (STIX) and Akili, Inc. (AKLI) also show negative ROICs and high WACCs, suggesting similar capital inefficiencies.
Wag! Group Co. (NASDAQ:PET) is a company that provides pet services, including dog walking and pet sitting, through its online platform. The company aims to connect pet owners with trusted pet care providers. In the competitive landscape, Wag! faces competition from other pet service platforms and companies offering similar services.
In evaluating Wag! Group Co., the focus is on its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). Wag! has a ROIC of -40.08% and a WACC of 21.77%, resulting in a ROIC to WACC ratio of -1.84. This indicates that Wag! is not generating enough returns to cover its cost of capital, leading to value destruction.
Comparing Wag! to its peers, Semantix, Inc. (STIX) and Akili, Inc. (AKLI) also show negative ROICs of -68.61% and -95.52%, respectively. Their WACCs are 17.76% and 13.27%, leading to ROIC to WACC ratios of -3.86 and -7.20. Like Wag!, these companies are not covering their cost of capital, indicating inefficiencies in capital utilization.
Wag! Group Co. (NASDAQ:PET) Financial Analysis
- Wag! Group Co. (NASDAQ:PET) has a ROIC of -40.08% and a WACC of 21.77%, indicating value destruction due to not covering its cost of capital.
- Peers Semantix, Inc. (STIX) and Akili, Inc. (AKLI) also show negative ROICs and high WACCs, suggesting similar capital inefficiencies.
Wag! Group Co. (NASDAQ:PET) is a company that provides pet services, including dog walking and pet sitting, through its online platform. The company aims to connect pet owners with trusted pet care providers. In the competitive landscape, Wag! faces competition from other pet service platforms and companies offering similar services.
In evaluating Wag! Group Co., the focus is on its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). Wag! has a ROIC of -40.08% and a WACC of 21.77%, resulting in a ROIC to WACC ratio of -1.84. This indicates that Wag! is not generating enough returns to cover its cost of capital, leading to value destruction.
Comparing Wag! to its peers, Semantix, Inc. (STIX) and Akili, Inc. (AKLI) also show negative ROICs of -68.61% and -95.52%, respectively. Their WACCs are 17.76% and 13.27%, leading to ROIC to WACC ratios of -3.86 and -7.20. Like Wag!, these companies are not covering their cost of capital, indicating inefficiencies in capital utilization.
