Wag! Group Co (PET) 2022 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Wag!'s second-quarter 2022 financial results conference call. (Operator Instructions) Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker host, Dawn Francfort. Please go ahead.

Thank you for joining Wag!'s conference call (technical difficulty) second-quarter 2022 financial results. On the call today are Garrett Smallwood, Chief Executive Officer; 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 contained in our final prospectus filed with the SEC on July 12, 2022, and our quarterly report on Form 8-K for the three months ended June 30, 2022, which was filed with the SEC on August 15th, 2022.

Also, during this call, we may 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 a short time ago. The earnings release is available on the Investor Relations page of our website and is included as an exhibit in the Form 8-K furnished to the SEC. Lastly, you can find our earnings presentation posted on our IR website and with the SEC.

And with that, let me turn the call over to Garrett.

Thank you, Dawn, and good morning, everyone. I would like to thank you all for joining our first earnings call as a public company. This is an incredible milestone in Wag!'s journey. We would like to thank our dedicated team for their hard work to make this possible. We're extremely proud of how far we've come since Wag! launched in 2015. We look forward to building on our success in the years ahead.

For those new to our story, we are excited to introduce you to Wag!, where we believe that being busy shouldn't stop you from owning or taking care of your furry family members. We saw the guilt and stress of owning a pet. And as such, our mission is simple.

We exist to make pet ownership possible and to bring joy to pets and those who love them. We're building a strong consumer-branded premium pet care platform that is transforming the pet industry by simplifying caring for the pets you love. The $44 billion pet-wellness and service industries are fragmented and largely offline. We are consolidating those industries online into our mobile app as we rapidly evolve into the number-one pet well-being platform.

We recently completed our business combination with our partners at CHW Acquisition Corporation. The transaction gave us funding that we expect to be sufficient to fully fund Wag!'s current business plan over the next two years until [there's] projected to be cash flow positive, positioning the company to expand its product offerings, achieve its exceptional growth plan and opportunistically acquire [select] company.

On today's call, we will be discussing our strong financial results for the second quarter as well as detailing our compelling growth strategy that positions us to deliver strong and sustainable financial performance through 2022 and beyond.

Let me now cover a high-level overview of our second quarter performance before turning it over to Adam, President and Chief Product Officer, who will give an update on our strategy and key 2022 initiatives. And then, Alec, Chief Financial Officer, will then discuss our second-quarter results in more detail, our capital allocation and our guidance for 2022, which we raised today.

We are pleased with our performance this quarter with revenue increasing over 256% to $12.8 million compared to $3.6 million in the second quarter of 2021. Net loss improved to $1.1 million from $2.4 million in the second quarter of 2021, ahead of expectations.

Adjusted EBITDA improved to a loss of $900,000 from a loss of $2.3 million in the second quarter of 2021, also exceeding expectations. And take rate improved to 58% compared to 36% in the same period last year, driven by increased Wag! Premium penetration and continued diversification of the platform, including significant growth in the wellness category.

Driving these results, we saw Wag! Premium penetration increased from 34% in Q2 of 2021 to 50% in Q2 this year. Growing the Premium offering is one of our key growth drivers as pet parents who subscribe to Wag! Premium are paying an additional $9.99 per month and use the Wag! services seven to eight times monthly. During the quarter, we also saw platform participants grow to 387,000, an increase of 19% from the first quarter of 2022.

We continue to see the business accelerating, coming out of COVID as our pet parents returned to normal demonstrated by Wag! 's LTV to CAC, which increased to 8 to 1. We intend to pursue significant awareness growth for our platform and plan to meet new pet parents via strategic partnerships and performance marketing initiatives.

Recently we announced a promotion with Tractor Supply, America's largest rural retailer, and Petsense to provide a range of pet service options to their customers. This partnership follows our announcement with Kimpton hotels and restaurants to provide access to on-property and at-home pet services for guests who stay in any of their properties in the US. These promotions are examples of the innovative ways Wag! works with leading national brands to help make pet ownership easier for pet parents.

Before turning the call over to Adam to discuss our growth initiatives, I'd like to provide a background on what differentiates Wag! in the pet-wellness category. Wag! is not just an app for finding a dog walker. We are a mobile-first, subscription-based pet platform, consolidating the fastest secular growth areas within the industry. Through our vertically integrated technology platform, we offer access to dog walking, pet sitting, consultations with licensed pet experts, training services, subscription, and insurance comparison options and much, much more across more than 5,300 cities in all 50 states.

We're a trusted on-demand digital marketplace. And our goal is to be the leading platform for premium pet care, leveraging our strong consumer brand and proven business model to drive long-term growth. It's important to note that the single most important element to the success of our business is trust as 75% of Wag! pet parents are not home while services are being delivered. It's imperative to build a trusting relationship with each and every pet parent.

In order to provide best-in-class experiences, we require each of the more than 400,000 pet caregivers on the Wag! platform to undergo background checks, screening, knowledge tests, and we provide property damage insurance and 24/7 customer support. The deep-rooted trust we have created in our business model leads to high-frequency utilization as the average Wag! pet parent uses Wag! four to five times a month. We believe pet caregivers have an innate love for pets and are building their business with Wag! because they love taking care of every animal, from people's dogs and cats to their pigs and ferrets.

These factors combined allow us to build a compelling and trusted consumer brand with a high level of engagement, effectively creating a dynamic platform to leverage our initiatives as we rapidly expand our business to new product lines. There are over 12 million reviews in our platform with an average rating of 4.9 out of 5 stars, a testament to the strong foundation we have built and the high bar we have set in terms of experiential quality. Wag!'s high-quality standard is demonstrating our Q2 organic user acquisition rate of 70%, showing that great experiences drive word-of-mouth.

The same is true on the supply side of the business where pet caregivers pay on average $29.95 to join the platform. We've created a sizable and dependable community of caregivers, which resulted in negative supply [size gap]. Simply put, we actually make money with the onboarding of the supply.

To sum it all up, Wag! is the clear leader of on-demand services and wellness platforms as we participate in a broader, convenience economy. As a mobile-first company, we are not taking share from the existing dog walking or sitting or boarding market. We are democratizing access to all pet care.

With that, go ahead, Adam.

Thanks, Garrett. To frame our discussion today, we'll focus on the five top-level elements of our strategy to create sustainable shareholder value while consolidating the pet industry online. One, accelerate growth in existing markets; two, expand premium subscription offerings; three, platform expansion; four, opportunistic M&A; and five, operating scale.

First, accelerate growth in existing markets. As Garrett mentioned, we see significant opportunity to accelerate our growth in existing markets as people resume to more normal activities out of the pandemic and utilize our expanded offerings. We've seen a slow and steady return to office, which is the primary Wag! use case with 44% of people back in office per Kastle data.

We expect this return-to-office trend to continue through the end of the year and into 2023. This return-to-work tailwind paired with our hyper-local network effect of pet parents and caregivers allows us to rapidly grow within existing markets and capture additional share of wallet through a best-in-class experience.

Second, expand premium subscription offerings. Our Wag! Premium subscription penetration increased from 34% in Q2 of 2021, 50% in Q2 of this year, demonstrating our ability to successfully upsell pet parents to a sticky recurring revenue stream. As a reminder, Wag! Premium subscribers receive a 10% discount on all services, the IP customer support and unlimited 24/7 expert pet advice, which drives customer satisfaction and retention.

We're focused on maintaining Wag! Premium subscription in the coming quarters as well as launching new product lines to drive long-term engagement and retention. To that effect, we're also in the middle of testing the Wag! premium benefit center, which gives pet parents exclusive best-in-class discounts and curated recommendations for dog food, treats, and more.

Our third growth driver is platform expansion. We continue to diversify the products and services within the platform, including wellness, which is by default, a high-margin product line as well as instant pay, which enables pet care givers to cash out their earnings same day for a small fee. These high-margin products and services will continue to provide upward pressure to take rate. We'll continue to focus our engineering and technology teams on innovative new offerings that resonate with our community and deliver long-term margin expansion and revenue growth.

Fourth, we intend to grow our business through opportunistic M&A. We are excited to announce that we have recently entered an agreement to acquire Furmacy, Inc., allowing us to expand our reach in the pet-wellness category.

Led by Co-Founder and CEO, Dr. Georgia Jeremiah, Furmacy's mission is to deliver pet health directly to your front door. Furmacy does this by empowering veterinary clinics with easy-to-use pharmacy software, giving them the ability to prescribe pet medication instantly and have it delivered to pet parent store the same day, usually in less than a few hours from a local warehouse. We expect this acquisition to close in Q3 of this year, pending regulatory approval and customary closing conditions.

The fifth element of our strategy is operating scale. We have a proven and scalable online platform that connects pet parents with the highest-quality pet caregivers. Our attractive unit economics and fixed-cost operating leverage underpin our long-term EBITDA target of 30%. This is demonstrated by our net loss percentage, improving from 68.2% in Q2 of last year to 8.5% in Q2 of this year, a period in which we grew revenues 256%. The competitive moats we've built over the past few years in infrastructure, brand strength and data capabilities leave us attractively positioned for accelerated growth as we become the number-one platform for pet well-being.

With that, let me turn the call over to Alec.

Thanks, Adam, and thank you, everyone, for joining us on our first earnings call as a public company. As Garrett mentioned, we just completed our business combination with CHW Acquisition Corp., and we are extremely excited about the future of the company. I'll start with a review of our second-quarter results, and then, I'll move on to our upward revised full-year 2022 outlook before turning it back to Garrett.

In the second quarter, we achieved record revenue of $12.8 million ahead of our expectations and generated year-on-year growth of 256% compared to $3.6 million in Q2 2021. This meaningful growth in revenue was primarily attributable to the consistent return to normal in a post-pandemic world alongside the growth in wellness and Wag! Premium.

The platform recognized 22 million gross bookings during the quarter compared to 9.8 million during Q2 last year, resulting in a platform take rate of 58%, up from 36% from the same period last year. The improvement in take rate was primarily driven by growth in Wag! Premium penetration and continued diversification of the platform, including significant expansion in the wellness category, as Garrett mentioned earlier.

Turning to expenses during the second quarter, cost of revenue, excluding depreciation and amortization were $1.2 million, up from $0.7 million a year ago, driven primarily by an increase in new pet caregiver applicant volume and payment processing costs on the higher transaction volume. Platform operations and support expenses remained stable year over year at $2.8 million compared to $2.7 million a year ago. This is a result of operational efficiency offsetting new talent joining the team.

Sales and marketing expenses were $7.3 million compared to $1.2 million a year ago. The increase was primarily attributed to a $4.5 million-rise in advertising expenses as we invest in brand awareness as well as a $1.5 million increase in personnel-related compensation and agency costs for our marketing team, consultants and advertising agency bonds.

G&A expenses were $2.4 million compared to $1.3 million a year ago or $1.9 million a year ago, adjusting out a $0.5 million one-time lease termination credit. The increase was primarily driven by an increase in personnel-related costs for our corporate functions and professional services costs as we geared up our public readiness and governance activities. Second quarter net loss improved to $1.1 million as compared to $2.4 million in the same period last year.

In addition to the GAAP measures I've discussed, adjusted EBITDA is an important profitability measure that we use internally to manage the business. For our second quarter of 2022, adjusted EBITDA improved to a loss of $900,000 or 6.9% adjusted EBITDA loss margin from a loss of $2.3 million or 64.7% adjusted EBITDA loss margin, a year ago. Adjusted EBITDA improvement as a direct result of operational efficiencies as recognized in operations and support expenses, accelerating revenue and continued marketing efficiency.

Now briefly touching on our balance sheet for the second quarter of 2022, our Q2 balance sheet remains strong in the context of our operating burn with over $9.4 million in cash, cash equivalents and investments.

Now turning to our 2022 financial guidance, the June quarter generated robust growth and industry demand trends remained strong. As a result, we are raising the prior guidance we provided in our Q1 earnings release. Our revised guidance assumes a continued trend in return to office as measured by the Kastle Back to Work Barometer in addition to a normalized travel season and finally, continued acceleration of wellness and stickiness in Wag! Premium as a result and marketing efficiency alongside our ability to continue to innovate in product and services.

Taking into account the macroenvironment, we are assuming a modest impact to existing consumer demand as a result of inflationary concerns, specific to considered purchases and services as well as a modest impact to caregiver engagement as a function of gas prices.

For the full-year 2022, we now expect total revenues in the range of $47.5 million to $49 million, an increase of 136% to 144% year over year and a 15% improvement versus our prior forecast at the midpoint of the range. Adjusted EBITDA loss in the range of $8 million to $10 million, a 42% improvement versus our prior forecast at the midpoint of the range.

In summary, we are very pleased with the strong operating performance in the quarter and remain energized about our business for the balance of the year and beyond.

With that, let me turn it back to Garrett.

Thanks, Alec. Before we take your questions, let me summarize. We believe we have a tremendous opportunity to continue the momentum in our business and are extremely proud of what we have accomplished in our first quarter as a public company. We're the one-stop shop for premium pet care and our simplifying access to the pet services industry through our vertically integrated technology platform.

We believe we are just getting started in an industry has no signs of slowing down. We remain laser-focused on expansion, delivering attractive margins, a path to profitability and providing an unparalleled user experience.

(Operator Instructions)

Tom White, D.A. Davidson.

Great. Good morning, everyone. Thanks for taking my questions. [Really] some momentum here as it relates to revenues. Just curious -- given the results in the quarter and the third-quarter results to date, can you maybe just give a little bit more color about how you're expecting third quarter to play out in terms of revenues and maybe just talk through a little bit the puts and takes that get you to the new revenue range for the year?

And then just secondly, on the -- you touched on factoring in a little bit of headwind potentially from macropressure and inflation. Just curious -- the extent to which you're actually seeing that, particularly maybe for some of the more premium-priced products in the marketplace. Maybe just talk a little bit about whether you're seeing any impact on your core pet parent demographic spending-wise. Thanks.

Thanks, Tom. Good to see you or I guess good to hear from you. Two questions here. First on how we're thinking about the rest of the year. Historically, I would say our business had some level of seasonality just as a function of holidays and holiday demand. It's unclear to us how consumer demand will spread this year. And that's a function of two things.

One is going to be does travel mean revert faster than anticipated as a function of the macro. That's our first big question and the second is how quickly do people return to what I'm going to call normal, what we're going to call normal -- that return is going to be return to office, return to movies, returned to dinner, return to normal day-to-day life, post-summer as kids return to school.

I think that we've got a year that's very different than the years prior, as I'm sure you can imagine. And so, for that reason, we're still thinking through and managing how Q3 and Q4 were spread and how that would be different than the years prior in a normal environment. [I think more to come there's new].

Your second question around how consumer behavior might be changing in this kind of macroenvironment. First things first, I think we saw a couple of interesting trends in Q2. One, as we saw, an abundance of people looking to become and build a business as a pet caregiver on the Wag! platform. It was a very surprising level of demand, a very surprising amount of virality, interest and engagement across social and indirectly in the app. That was number one. We're very surprised by the level of engagement from caregivers. And obviously, we don't know why. Maybe it's people looking for side income, side cash, whatever else there might be, but it was incredible.

Two is we certainly are seeing a slight trend in consumers being more sensitive when they are traveling. [So, let me] expand on that. Normally in a travel period, consumers opt for our overnight services that are offered on the platform; those would be things like sitting and boarding. We're seeing a slight change in the way consumers use sitting and boarding and many are now opting toward what we call multi-day services.

So, instead of, for example, booking one boarding for three days, you might book three to five drop-ins and walks every day for three days. And that might be a function of price, that might be a function of time with pet, that might be a function of you have other people helping you out; we are still looking into why that trend is changing. [I could just] generally say that people are more sensitive to these higher purchase tickets.

We have not seen a step down in consumer demand, meaning we haven't seen people move from 60-minute dog walks to 30-minute dog walks, but we're just generally anticipating some level of change as a function of the macro, most likely, probably more correlated to the way they travel or the way they do these weekend episodic services. I'm happy to [expand] anything else, Tom.

Yes, that's great. That's very helpful and makes sense. I guess maybe just one follow-up, if I could. On the Furmacy deal, could you maybe just tell us a little bit more about the business and how it fits into your broader ambitions around Rx? And just curious, how many markets are they in today? How quickly can this get rolled out more broadly?

Yes. Again, [make] time for the time. Look, taking a step back, I think, hopefully people understand management decently well at this point, but you know we like to move fast. You know we like to build amazing products and services that delight millions of people. We're really excited about the opportunity to partner with Furmacy.com, which is expected to close this quarter, assuming regulatory and all the other needed approvals.

We'll have more to share in that business soon. I don't want to get ahead of our skis but I could just generally say we're very excited about the opportunity to partner with vet clinics. [We have] a massive opportunity to continue to simplify the life of veterinary clinics, technicians and assistants who operate every day in these busy, fast-paced environments. If some of you all have been to the vet recently, there's just an intense demand and the supply needs help. That's number one.

And number two is we were excited to partner with pet parents in simplifying how they get access to these Rx compound and other over-the-counter and prescribed meds. So, more to come on how we think about that business expanding, growing. I could say they're in a really great position. We think they are going to be a really successful business and we can't wait to have them under the Wag! umbrella.

Great. Thank you (technical difficulty)

Thank you. Jason Helfstein, Oppenheimer.

Thanks. Congrats on the milestone. A few questions. Just talk about how [mix] impacted take rate. Did it all shift to Premium? Or do you have to think about other factors? And then, digging into take rate, 58% does seem high for a walking and sitting business, but maybe talk about how you plan to reinvest this into more services such as [Furmacy].

Then just a follow-up on marketing, 8 to 1 CAC also suggests you should be leaning more into marketing because that's a super-efficient ratio. Maybe just talk about the constraints to marketing specifically capital and then, if there are any other cost supply constraints to growing such as walkers. So, just any color. Thank you.

Yes. Hey, Jason. Appreciate the time. Taking a step back as a reminder, we have our services line of the business, which is things like dog walking, sitting, boarding, training, et cetera, and the wellness line of the business or just by default, higher margin. These services take rate has been a steady 40% on services completed to the platform since the business started in 2015. We have to manage what we call the contra, the discounts on the services take rate and now it's at a max threshold, we think of where it's going to be long term.

Where you're really seeing upward pressure on take rate is not necessarily on the earnings from the caregivers, meaning we're not taking more dollars from their pockets -- what you're seeing us do is find more high-margin products and services that we can introduce into the ecosystem of Wag! and capitalize on in a more efficient way.

For example, we operate one of the largest pet insurance marketplaces in the US. We help people find pet insurance and we partner with the best pet insurance companies to do that. We offer 24/7 expert advice. We offer Wag! Premium subscription, which we noted was 50% of active pet parents in the quarter and obviously applies upward pressure as well because of that subscription fee revenue.

So, I think what you're going to see, Jason, is us continuing to diversify to other high-margin products or services, which when you blend into gross bookings, applies additional upward pressure to take rate.

I'll add one more thing, which you'll see in our release, is instant pay. We've released instant pay, which enables caregivers to get their dollars earned immediately instead of having to wait every week for the dollars you earned to be deposited to your bank account. You can cash out same day for a small fee and again, that small fee is the transaction fee that Wag! capitalizes on and again, apply upward pressure on take rate.

Jason, there was a bunch of other questions. I think the second one was LTV to CAC, [my answer] right? I think we're being really mindful about the dollars we're deploying. And frankly put, I think we just saw really clear tailwinds in Q2, and I think we're very bullish on those tailwinds. To be really honest, I mentioned the caregiver part, that some of that was surprising to us, just the virality. We're now really spending time managing the marketplace response, meaning supply and demand on a market-level basis.

[I can continue] to see us get very aggressive in brand and marketing in the go-forward quarters. Don't view 8 to 1 as a long-term consensus target for us. The 8 to 1 is a, wow, we need to spend more and we're going to but with the mindset of we're going to continue to monitor EBITDA. And I think you saw adjusted EBITDA was $900,000 loss in Q2, which was significantly ahead of our own expectations. So, we've got to be mindful of both levers.

Jason, remind me of the third question, please. Was it how we think (multiple speakers)

I think you covered it unless you wanted to talk about roadmap -- services roadmap a bit more because to that point, you can clearly draft of those Premium members to launch more services?

Yes, I think you said it best Jason, we're very bullish on the ability to continue to keep pet parents engaged with Premium and then upsell them to other products and services. I think that's truly what differentiates Wag! as a premium pet platform.

I don't want to give too much away on how we think about the future. I can just generally say any high growth secular opportunity that exists in pet that we think has room for significant margin or our ability to take margin from our competitors, we will invest in and I think there's really no signs of a slowing down on that.

Thank you.

Thank you.

Rohit Kulkarni, MKM Partners.

Thank you. Congrats, guys, on the leaseback IPO and really solid results. A few questions. I'll just go one at a time. On big picture, Garrett, you mentioned that you just don't view yourself as a dog-walking-only company. Maybe talk about where are you with diversifying your revenue base from where you're exclusively only dog walking versus non-dog walking revenues coming through the door. Where are you today? And where do you see that evolve over the next, call it, 12 to 24 months?

And another big picture for Adam is -- love the five strategic elements that you walked us through. Zoning into just existing markets, maybe give us some color around -- where do you see your penetration from existing markets? Maybe give anecdotal data points around the range of penetration that gives you more confidence that if we just keep doing more of the same in existing markets, there is a pretty long runway of growth. And then, I have a couple for Alec, but again, congratulations.

Well, I'll start, Adam and I'll pass it to you if that works. Rohit, good to hear from you. I appreciate the time. I generally think that we're really well positioned and [it's just me] speaking here for whatever is going to happen in the macro, meaning if tons of people go back to work to office faster than we anticipated, you're obviously going to see that in the daytime services business. You are going to see with walking and drop-ins and training as people get their pets better behaved.

If travel doesn't slow, which again is not what we're anticipating but if for some reason it doesn't slow, nighttime services, overnights will continue to grow nicely. If, generally, people continue to adopt pets and take care of their pets like members of the family, which they seem to be doing, there seems to be a general trend of, what we call, furry family members -- I think the insurance that all these other opportunity [are like standard growth].

So, I would say that long term, none of our businesses should be the majority in terms of these services business. Walking should be an interesting double-digit percent of our business, low double-digit. I think sitting and boarding, same kind of thing that overnight -- we really look at the diversification of services as comfort around what's going to happen with the macro.

And with that, Adam, I want to pass it to you to talk about existing market penetration and where we think we're going to be.

Sure. Thanks for the question. The first place I would want to go with this is just the fact that there's close to a hundred million pets in the US. And this is not a business that only exists in Tier 1 markets. We have a pretty healthy distribution of our revenues across all of our service lines across all city sizes -- Tier 1, Tier 2, Tier 3, Tier 4 markets -- basically anywhere where there is a pet and a premium pet parent who you know -- that dog spend time in a sweater on the couch, we're doing business. So, the question effectively is to what degree is there differences between cities in this return-to-normal, return-to-travel environment that Garrett alluded to.

There is some difference. You might call it red versus blue states in terms of where are these different cities on their [paths] back to normal. But we have a pretty established brand and established foothold in all these different geo-types. So, it really is just how the macro unfolds to [Garrett's point].

Okay. Thanks, guys. A couple for Alec. Maybe talk about second-half expense outlook that you can control, particularly sales and marketing. Any step-up in the dollar amounts that you are planning to spend on advertising? How are you thinking about that? At least from the second-half guidance, it does feel that the margins are going to be significantly lower in Q3, Q4, perhaps that's voluntary in terms of how you're planning to spend on advertising in Q3 and Q4?

Yes, of course. Looking to the second quarter, as Garrett mentioned, we're definitely going to lean into [sitting] and sales marketing as long as it's efficient, targeting down to 3 to 1 CAC to LTV. So, if the opportunity is there, we will spend. But as we mentioned previously, we're very mindful of the dollars that we spend and spending in a responsible manner.

Okay. And I guess -- and the longer term, to the extent you can provide color 30% EBITDA margins over what period or what scale do you feel comfortable reaching that goal? Is there a specific point in time in the model where you feel that there is going to be significant network effects that lead to the operating scale to start accelerating that leverage in the model? Just would love to see how you're thinking through the longer-term margin profile, time, scale, scope over which you can get there.

Yes, we're in early innings right now, and there's an amazing opportunity in front of us. To your question, I think three to five years, 30% EBITDA margin seems reasonable. But again, it depends on the macro post-pandemic world, introducing new products that will adapt to that timescale and how soon we get there.

Okay, thanks. Thanks, Garrett. Thanks, Adam. Thanks, Alec.

(Operator Instructions)

Jeremy Hamblin, Craig-Hallum.

Thanks for taking the question and congrats on the milestone here. I wanted to understand your view of the return-to-work scenario and whether or not -- are you looking for more of your premium households to be back on a full-time basis, five days a week in the office? Is it more advantageous in some ways that you -- maybe a hybrid model where people are in the office and two to three or four days a week from a longer-term stability of the model? That's part one.

And then, wanted to piggyback here. As we think about longer term, it's a terrific goal 30% margin, three to five years, but on a nearer-term basis, I wanted to understand as the business models evolve to your cash burn on, I think that you were looking for a breakeven in the $5 million to $6 million of [revs] per month. Wanted to understand where you are with that today.

Then, the last item is in terms of the supply of pet care givers -- you've built a really nice platform here, basically about 400,000 -- how is that pipeline? How are you looking to grow that here over the next year or so?

Well, great questions, Jeremy, and thank you for the time. I'll go in order of questions asked, hopefully. So, hybrid work -- look, I think personally and as a management team, we're not anticipating the world to mean revert to 100% back to office, probably ever. I think long-term, where we can get to 70%-ish back, a few days a week, that would be great. I think that's a pretty aspirational normal state in the next 18 to 24 months.

And as a reminder, look, the average Wag! pet parent using Wag! once a week, assuming they're not on Premium. And so, if you're in the office, a couple of days a week, that's all we need. We [only need] a couple of days a week. And leaving or pet home alone, I think in a hybrid environment, could be actually even more stressful because your pet isn't aware that you're gone and isn't used to you being gone -- so probably supply the use case is more relevant. It's just more like going back a few days a week. And that's going to be the catalyst for the Wag! services business and probably, the largest tailwind we'll see that's organic.

In terms of revenue and how we think about breakeven, I certainly think the guidance we provided before is not off -- that revenue range being breakeven. What this is really going to come down to is our willingness to grow the business by re-investing that capital. We think Q2 is a pretty good indicator of how efficient we can be with capital. Think about it, we had [12.8] and we burned -- and the adjusted -- to come down to is our willingness to grow the business by re-investing that capital.

We think Q2 is a pretty good indicator of how efficient we can be with capital. Think about it, We had [12.8] and we burned -- and the adjusted EBITDA was $900,000. I think we'd take that all day. We think there's some really great growth to be had -- 256% year over year at what we would assume [EBITDA].

So, as long as that trade-off is there, we'll take that -- meaning burn but certainly not to say that we can't show profit earlier if we so wanted. I just think that's going to be really a question of a trade-off. And I don't know if you want to take that tradeoff today, knowing where we are in this cycle of return to normal and where we are in the cycle of pet parents rediscovering and uncovering their pets' needs.

And then finally, and Adam and feel free to jump in here, when we think about pet caregivers, we've been extremely fortunate to have such engagements and satisfaction from the caregiver base that participates on the Wag! platform today. You can google it yourself. There's just an unbelievable amount of people who want to participate in this gig and really enjoy it and have a great time.

I think our job going forward is going to be finding new ways for the caregivers to participate in the lives of pets, meaning more product and service innovation. And two is going to be keeping them very busy. I think the number-one request we get from new caregivers who participate in the platform is, how do I get more gigs? I want to take care more of my neighbors' pets. And so, finding more innovative ways to meet new pet parents, take care of pets, [is by] top of our list. So, really, we're spending a lot of time on keeping them busier and introducing them to more pets.

Adam, anything you could add?

No, I thought that was great. I think that's exactly it.

Great. Then just as another follow up here, your Premium subscription penetration, that seems like pretty extraordinary growth in a relatively short period of time. I wanted to get a sense for whether or not that's building or accelerating on a cadence basis. In other words, are you seeing -- were you see more momentum in the May-June timeframe as opposed to earlier this year with that adoption to Premium subscription.

And then, the second part of that is how you're thinking about the pricing on that. Obviously, it may be too soon to make any change, but wanted to get a sense for whether or not you're evaluating pricing to either move up or down to drive even faster penetration?

Adam, Why don't you take this one?

Sure. The first question just about the increased penetration year over year to 50% of active customers in Q2 -- the way to really read through that is as customers emerge from the pandemic and their use case and habits, daily routine becomes more predictable, it's easier to subscribe to Wag! Premium and say, yes, I want to pull this into how I take care of my pet on a daily basis. So, that's going to be the main increased penetration driver.

Your second question was about pricing. Our philosophy here is really akin to Amazon Prime, where it's not -- we're not necessarily trying to primarily monetize the customer through the cost of the subscription, in fact, we'd like the subscription to feel like an absolute no-brainer at the price. It's really about holding you into our ecosystem.

And that really plays to what is our larger aspiration. It's to build a platform where we have a dozen really, really amazing services for the Premium pet parent, and they're all tied together by the Premium subscriptions. So, when you have -- when any of those need states arise, you wouldn't try to go to another brand, you do it within our ecosystem because of all the benefits it provides to you.

The final question was around penetration over time and how we're thinking about growing Wag! Premium generally. So, it's really about just improving the subscription, making it more native to all of the products and services and having just really, really great marketing and product tie-ins.

At 50% penetration, that was the target we set for ourselves when we launched the Premium subscription in the first place (technical difficulty) we think that there is opportunity for continued upside there. But the 50% Premium penetration level is -- we're pretty happy about it in terms of the percentage. We will, of course, be trying to grow the absolute count of subscribers through the different strategies I just mentioned.

Got it. All right. Thanks, guys. Best wishes.

Thanks.

And I'm showing no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.