Good day and thank you for standing by and welcome to the Wag! Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] I want to like turn the call over to your speaker today Dawn Frankfort, Managing Director at ICR. You may begin..

Good afternoon, everyone, and thank you for joining Wag!'s conference call to discuss our fourth quarter and full year 2022 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 SEC filings. Also, during the call, we may present both GAAP and non-GAAP financial measure. 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 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..

Thanks, Dawn. Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full year 2022 performance and strategic priorities for 2023. I'll begin by reflecting on Wag!'s first year as a public company, which was topped off with our best quarter to date.

We're building a strong non discretionary consumer branded premium pet care platform that is transforming the pet industry by becoming an all inclusive, trusted partner for the premium pet parents. In 2022, we transform Wag! from a service business, to a premium platform for pet care needs.

This inflection is centered around our belief that being busy shouldn't stop you from owning or taking care of your furry family members. We saw the guilt and stress that pet parents have and not being able to provide their pet sufficient attention and care. And as such, our mission is simple.

We exist to make pet ownership possible for busy people and to bring joy to pass and those who love them. And in 2022, we have made this possible.

The year was defined by our commitment to healthy and disciplined growth, which we accomplished with our success in the wellness category, increased Wag! premium penetration, robust partnership, momentum, operating efficiency and discipline, and the acquisition of pharmacy.com.

Our accomplishments this quarter and for the full year would not be possible without our passionate and hardworking team at Wag!, who have laid the building blocks for long-term success in 2023 and beyond. We couldn't be more excited about what we have accomplished and we are just getting started.

To frame the rest of our discussion today, we will review our 2022 financial results and cover our compelling growth strategy that positions us to deliver predictable and sustainable financial performance, while combining all corners of the pet market into our trusted platform.

After another exceptional quarter, we are raising our 2023 guidance for both revenue and adjusted EBITDA. We previously provided in our deal announcement presentation at the beginning of 2022.

Before turning it over to Adam, President and Chief Product Officer, who will give an update on our strategy and key initiatives for the year, I will give a high level summary of our fourth quarter and full year 2022 performance.

Then Alec, our Chief Financial Officer, will discuss our fourth quarter and full year 2022 results in more detail our capital allocation priorities and our guidance for 2023.

In the fourth quarter, we continue to execute on our discipline strategy and achieve achieved record revenue of 17 million, up 110% year-over-year, driving full year revenue growth of over 173% to 54.9 million.

Importantly, we continue to invest in our business focusing on our highest ROI assets while being disciplined, delivering fourth quarter adjusted EBITDA loss of approximately 400,000 and improvement from 2.5 million loss the year prior.

Further, we saw healthy platform participants of more than 434,000 and Wag! Premium penetration remains strong in the fourth quarter at 54%, as we rolled out $14.99 pricing tests in key markets across the United States Resulting in Wag! Premium price increase for new Pet Parents to $14.99 from $9.99.

As a reminder, Wag! Premium penetration is key to the platform resiliency, as it builds a deep and repeatable relationship with Pet Parents driving strong cross sell rates, and an increased LTV.

As you mentioned last quarter, we continue to test like premium pricing and benefits to maintain our long-term premium penetration target and add value to premium.

During the quarter, we saw continued momentum in our wellness business, which is a testament to our ability to transform Wag! into a holistic pet care platform that can meet any and all need the pets and those who love them.

As well as strengthen our overnight services business led by great relationships between Pet Parents and Pet Caregivers, which drives long duration overnight stays and was accelerated by incremental weather and canceled flights throughout the U.S. which led to stronger than expected ALD.

Turning to LTV to CAC for the fourth quarter, we saw an increase to 7 to 1. Demonstrating our operational excellence, efficiency and marketing spend, all of which proved the Wag! at a non-discretionary post pandemic neat.

During the quarter, we lean into strategic partnerships, where we did not have to invest in traditional marketing channel, which resulted in an organic user acquisition rate of 70%.

We continue to pursue partnership opportunities and 2023 such as with alignment healthcare are members enrolled and eligible plan that qualifying condition can use a Wag! app to receive their covered pet care benefits when they have an upcoming procedure or hospitalized or need support post discharge.

Moving to the supply side of the marketplace, we continue to believe that Wag! is the best gig in America.

We know that dedicated Pet Caregivers who have chosen to provide their services to us have contributed to our success, which is why we are constantly collecting feedback to ensure that Pet Caregivers are equipped with the tools they need to not only have a successful service, but a prosperous book of business.

By investing into the Pet Caregiver experience, and not only the Pet Parent experience, we are distinctly positioned to maintain a strong leadership position within the supply side of the market. This is evidenced by continued significant interest in the Pet Caregiver gigs despite the macro environment.

The average price that Pet Caregivers are paying to join the platform was from around 41.50 in Q3 to around 53.30 in Q4 and even further from the 29.95 at the start of the year based on real time supply and demand equilibrium, but there's reason we have been able to maintain a negative supply side CAC.

Before I passed the call over to Adam to discuss our growth initiatives, let me summarize why I'm so bullish about the future for our shareholders and positioned as a category leader in the pet care industry.

One our 2022 financial results demonstrate the effectiveness of our strategy and the benefits of continued investment in our current product offerings and measured expansion we're advantageous evidenced by our above targeted returns across the business. We continue to be the trusted on demand digital marketplace for premium Pet Parents.

Two, we have the capability to grow while sustaining impressive operating margins as a result of our performance driven culture, our exceptional talent, the inherent cross-out capabilities within our platform, as well as the cross markets within the pet industry and the continued humanization of pets paired with our customer-centric technology.

Wag! is an accessible, multi-faceted platform that is consolidating the fastest growing secular growth areas within the pet industry. And finally, we are proactively managing and deploying our capital to be accretive for shareholders, as seen to the Dog Food Advisor acquisition in January of 2023.

All of these factors contribute to my excitement and confidence about the future of Wag! And with that, Adam will provide additional color on our strategy..

Thanks, Garrett. I'll now walk through the five top level elements of our strategy, driving long-term shareholder value and how they evolve going into 2023. One, accelerate growth in existing markets; two, expand premium subscription offerings; three, platform expansion; four, opportunistic M&A; and five, operating scale.

We made significant progress in 2022 accelerating growth in existing markets, capitalizing on the slow and steady return to office and post pandemic activities. At 50% return to office per the Kastle Back to Work barometer, we have significant room to run in 2023.

We believe the demand for high quality personalized pet care far exceeds the existing market due to the increases in pet adoption and return to office policies. We plan to continue to grow within existing markets and capture additional share of wallet through the compounding effect of our premium subscription and additional product lines.

Coming out of the pandemic, there is an influx of new pet parents who will also participate in the return to normal shift and will need to utilize our non-discretionary services.

With the continued trend in the humanization of pets, we believe we are entering a secular trend in the pet health and wellness categories led by millennials and Gen Z many pet parents increasingly consider the needs of their pets, not just equally important to those of the rest of the family but more important. Approximately 70% of U.S.

households, or about 91 million homes owned a pet as of 2022 and 70 million of those are dog households. Of those, we specifically target the premium pet parent or roughly 15% of households in the current market who have a proven propensity towards premiumization across pet categories.

In 2022, we hit our long-term premium penetration target of 50% due to the success of our second growth driver expanding premium subscription offerings. We plan to continue testing premium pricing tiers, subscription tiers and product bundling throughout 2023 to grow revenue and drive additional value to the pet parent.

As a result of our testing in Q4, we are raising prices for new premium pet parents to $14.99 per month.

As a reminder, Wag! premium subscribers receive a 10% discount on all services, VIP customer support and unlimited 24x7 expert pet advice, which drives customer satisfaction and retention and their willingness to cross sell to our expanding set of products and services.

Third, we continue to focus on platform expansion in diversifying the products and services within the platform, including new features such as Browse & Book refined search, which helps pet parents find the perfect match based on pet caregiver specialties, notes from pet caregivers, allowing them to make a more informed decision before requesting a service.

And the launch of super and ultimate endorsements, which allow colleagues and existing pet parents to boost a pet caregiver at the beginning of their small business journey to show the pet parent community how great the pet caregiver is.

Importantly, in the fourth quarter, we renewed our partnership with Alignment Health, which provides alignment healthcare plan members with Wag! services. We will continue to grow the marketplace business through thoughtful product development and expanding the set of services available through our platform.

Wag!'s partnerships add value not only to us, but our pet parents as well. And we plan to build upon those relationships in 2023. Fourth in 2022 and going forward, we're prioritizing growth through opportunistic M&A, we believe that overtime, we can enhance the value of Wag! with strategic acquisitions in the pet industry.

In the fourth quarter, we acquired Pharmacy Inc, a concierge prescription and compounding service that delivers pet health directly to the pet parent store.

Additionally, we recently announced the Wag! entry into the pet food and treat category by successfully completing the acquisition of Dog Food Advisor in January, which helps busy pet parents decisions about dog food through the website dogfoodadvisor.com. This is an illustrative example of us building out the premium pet care platform.

The fifth element of our strategy is operating scale, which I'll briefly touch on and Alec will provide more detail. We're laser focused on our unit economics and fixed costs operating leverage, which drove operating margin improvements across the board.

Our customer acquisition unit economics as seen in our 7 to 1 LTV CAC ratio continued to outpace our expectations for the quarter and year. Adjusted EBITDA margin improved by 42% in 2022. In 2023, we continue to build our platform by investing in growth levers with a faster payback cycle, low fixed costs, and low OpEx.

We will continue to be disciplined operators and remain laser focused on managing gross margin and profit. And with that, let me turn the call over to Alec..

Thank you, Adam. And thank you everyone for joining our fourth quarter and full year '22 earnings call. It has been an incredibly exciting and successful year for the Wag! team as we grew the business through diversified revenue stream, launched new products and executed with operational excellence.

As a result, we finished '22 with all time record results significantly ahead of our expectations. I'll walk through our financial numbers by providing an overview of our fourth quarter and full year '22 results and then an overview of updated '23 guidance.

Closing out, our outstanding year Q4 '22 was another record quarter for the highest quarterly revenue since inception, totaling 17 million, up approximately 110% from Q4 '21. Adjusted EBITDA loss for the quarter improved 2.4 million, compared to 2.5 million in Q4 '21.

On a full year basis, full year '22 revenue increased 173% to 54.9 million, compared to 20.1 million in '21 while adjusted EBITDA loss improved to 3.9 million, compared to 9.9 million in '21.

Our acceleration is the outcome of pet parents demand, new partnerships, expansion into additional market testing and bundling Wag! Premium offers and continued marketing efficiency.

As expected, we saw a shift of pet parent needs from walking to sitting and voting in the fourth quarter in line with the usual seasonal demand mix to inclement weather across the country. We also experienced continued strong demand for wellness services, which contributed to 66% of revenue in Q4 '22, compared to 45% in Q4 '21.

Our wellness suite of services include valuable offering, such as expert pet advice, wellness plan, pet insurance comparison options, and new in '22 pet prescription and compound medicines at their pharmacy.

Turning to expenses during the fourth quarter, cost of revenue excluding depreciation and amortization was 1 million in Q4, '22, or 6% of revenue compared 2.8 million or 10% revenue in Q4, '21.

For the full year, cost of revenue excluding depreciation and amortization, with 4 million, or 7% of revenue, compared to 2.8 million or 14% of revenue in '21.

The dollar amount increase with a direct result of increased demand driving incremental payment processing fees and background check costs via increase in pet parent, pet activity and caregiver applicants. Nevertheless, cost of revenue decrease as a percentage of revenue as a technology scaling initiatives took place.

Platform operations and support expense was 2.8 million in Q4, '22, or 16% of revenue, compared to 2.6 million or 32% of revenue in Q4, '21. For the full year, platform operations and Support expenses 13.8 million or 25% of revenue compared to 10.3 million or 51% of revenue in '21.

While there has been an increase in expense in dollar terms year-over-year, driven by personnel related compensation costs and stock compensation expense as we hire and retain talent, perform operations and support expense of more than half as a percentage of revenue as a result of operational scale.

Sales and marketing expenses 10.5 million in Q4, '22, or 62% of revenue, compared to 65% of revenue in Q4, '21. For the full year, sales and marketing expenses 35.2 million or 64% of revenue versus 10.2 million or 51% of revenue in '21.

The dollar amount increase in sales and marketing expenses driven by partnership activity cost of new product initiatives, and launches and general marketing spent in order to harness net new pet parents and cross sell them complementary platform offerings via the Wag! ecosystem.

G&A expenses 3.9 million in Q4, '22, or 23% of revenue, compared to 2 million or 25% of revenue in Q4, '21. For the full year, G&A expenses 32.4 million or 59% of revenue, compared to 7 million or 35% of revenue in '21. Notably '22 includes approximately 21 million in transaction and integration expenses in connection with the IPO.

When excluded for like-for-like comparison, G&A expense represents 21% of revenue in '22, which is a decrease of 14 percentage points year-over-year.

The dollar amount increase in G&A expense is driven by personnel related compensation costs and stock compensation expense as we hire and retain key talent, M&A related costs and public company complaints including expenses related to the compliance with the rules and regulations of the SEC, and NASDAQ via legal audit and consulting fees.

Adjusted EBITDA which is an important profitability measure that we use entirely to manage the business improve 2 million to an adjusted EBITDA loss of 0.4 million. This compares to an adjusted EBITDA loss of 2.5 million in Q4, '21. Adjusted EBITDA loss for the year improves 3.9 million versus 9.9 million in '21.

Turning to our balance sheet, we ended the fourth quarter with over 39 million in cash and cash equivalents. This is primarily due to the IPO transaction cash proceeds and financing net of issuance costs that occurred in the third quarter of '22 together with 9.8 million cash received from a forward share purchase agreement in the fourth quarter.

Aside from these transactions, the increase was due to cash generated from our business operations.

Our balance sheet remains strong in the context of our operating cash use and puts us in a strong position to comfortably fund our growth objectives, while also maintaining flexibility to pursue strategic M&A when we believe the opportunity aligns with our goals.

I also want to highlight Wag’s overall headcount efficiency, which is another indication of our operational excellence. Despite the 173% revenue growth we have seen in the past year, we have only grown headcount by 9% bringing our total headcount at Wag! to 82.

Including all headcount counting platform operations and support, we reached 0.8 million revenue per employee based on a Q4 '22 run rate, well ahead of industry peers.

We have accomplished this through intense focus on systems automation, proprietary technology and a robust infrastructure which enables the platform to scale without additional headcount. We are efficient and remain judicious about hiring and headcount.

Our focus remains on employing and empowering the very best people in key positions, which has also come into play with recent Aqua HAI transactions and M&A strategy. We are building a team of best-in-class builders, doctors, designers, founders, engineers and pet lovers. Our vision is the special forces as opposed to a broadly talented navy.

In addition to building a great business, we are also passionate about building a great company and that can only be done by fostering a strong culture and dedication towards our customers and our community. In '22, we have already begun to bring focus and accountability to our ESG efforts.

We are measuring, managing, and reporting on some of our key diversity, equity, and inclusion metrics and priorities, which we look forward to sharing with you in our upcoming 10-K. Moving to our guidance for '23, as Garrett mentioned, we are very pleased with the strong performance we saw during the fourth quarter and the year.

As a result, we are raising our full year '23 guidance that we previously included in our April '22 investor day. For the full year '23 we now expect total revenue in the range of 75 million to 77 million, an increase of 37% to 40% year over year, and a 7% improvement versus our prior forecast at the midpoint of the range.

This forecast builds on our strong results in '22 while retaining an appropriate level of conservatism as we continue to face a very dynamic backdrop.

Adjusted EBITDA loss in the range of 0 to 2 million a 91% improvement versus our prior forecast at the midpoint of the range, this range contains multiple levers including sales and marketing spend, product development and expansion and pricing power.

Our financial guidance includes the following assumptions, The White House plans to terminate on May 11, both the public health and national emergencies declared in response to COVID pandemic as stated on January 30, '23. A continued trend in return to office as measured by the Kastle Back to Work barometer.

The accreted impact from the acquisition of Dog Food Advisor in January '23, which we expect will contribute 3 million of revenue and 1.5 million of positive adjusted EBITDA in ’23.Continued acceleration and wellness, including new ventures, expansion into additional markets, testing and bundling of Wag! Premium offers and improved marketing efficiency.

In summary, as illustrated by our strong Q4 '22 and full year '22 results, we have been and are currently experiencing demand in the face of a very dynamic backdrop.

Our ability to execute on that demand, achieve results above our previously announced plan, focus on operational excellence, and integrate and operate well thought out enterprises through M&A is a testament to our business strategy for '22 and for the future. And with that, we now welcome Q&A..

[Operator Instructions] And our first question comes from Tom White from D.A Davidson & Company. Your line is now open..

A couple questions, if I could. I guess just first on Wag! Premium Penetration, I think you've exceeded kind of that long-term target you first talked about. So, I guess, when you guys refer to kind of testing and bundling.

Is that more about sort of extracting kind of maximum revenue from this group of premium pet parents, if you will, that have already signed up and that are willing to kind of accept the price increases? Or is it kind of more about introducing new bundles to maybe kind of maximize, the penetration and come up with offerings that appeal to kind of a broader swath of parents? And I have a quick follow-up..

Yes. So, I would say the primary motivation at $14.99 price point is finding the [Technical Difficulty] price point price, ultimately, the right price for the current bundle of Wag! Premium.

That said, we're going to continue to test price and different bundling combinations that might be priced lower or higher $14.99 was just kind of the optimal given the current benefits..

And then Garrett, I was hoping maybe you give us an update on the overnight, stay part of your business. I think you touched on it briefly in the prepared remarks. But curious how that's been performing, obviously, a lot of the earnings results we've heard from the OTAs and stuff suggest that consumer travel, that recovery has been very robust.

But just curious, like how you guys think about overnight stays as kind of a compelling opportunity, maybe an opportunity for you guys to increase your share there. I know, it's not been a historically necessarily a huge part of a huge focus of you guys.

But I saw that Browse & Book feature, which would maybe seem to appeal to pet parents who are contemplating a longer stay, maybe just comment on kind of that opportunity around overnight today..

Taking a step back, look, we aim to be the Premium pet platform for the premium pet parent, right? So that means solving their needs, whether it's overnight care, and that's sitting in boarding drop-ins, which is reminder, we launched 20, 30 and 60 min drop-ins in totality across the U.S.

in 2022, which are really great for cats, and kind of non dogs, or even sometimes senior pets pups. So, we really do like the overnight business.

I think you saw with Browse & Book which is a great mention, which is gated behind premium in some cases, as a way for pet parents to discover great local pros in their neighborhood and actually message them ahead of submitting bag as well as our Wag! neighborhood network pages.

So, we're going to continue to build tools to enable great sitting in business and [Technical Difficulty] to it in the last few minutes.

It was certainly a healthy sitting on boarding time for the business as it usually is in Q4, particularly driven by incremental travel longer stays, unfortunately, due to a lot of just functional, like flight cancellations lever. And I think you all saw the Southwest news. So yes, it was just a great feat, I think we'll continue to lean in..

And thank you. And one moment for our next question. And our next question comes from Matt Koranda from ROTH MKM. Your line is now open..

Just curious if you could maybe touch on platform participation trends and the number of platform participants quarter-over-quarter.

Anything you saw in terms of churn as you raise price with the $14.99 to your, maybe if you could also just clarify when that was implemented and sort of how far along you are in terms of implementation on the tiered pricing?.

Yes, so the way to think about it, and again, great, thanks for the question, Matt. Appreciate the time, taking a step back.

Usually, we expect to see some degree of we'll call seasonality in Q4, as a function of the services business transitioning from what we'll call high frequency services, things like daytime walking and drop ins to longer duration overnight stays or dropping at certainly what we saw in this quarter, and will probably, I mean, I don't know for sure, we'll see what the trend looks like this year, but I'm assuming that'll be a consistent trend in our business.

We raised premium pricing throughout Q4, only for net new subs. So it did not affect subscribers. And it's really important to couple out. And what that means is, the premium trend should stay pretty resilient as a result.

And what we're really doing to Adam's point earlier is focused on making sure we're maximizing the value we provide in the price we can then capture from net new pet parents. And we've discovered that that is actually about 50% higher, especially monthly basis. So, it didn't affect the existing subscribers, only affects net new steps.

I'll pause everything in the questions..

Okay. No, that's very helpful clarification there, so thanks for that good. And then I guess just in terms of the '23 outlook, wanted to see if you guys could clarify or help us understand services versus wellness in the outlook there, it was helpful to have Dog Food Advisor broken out.

So I appreciate that, but just any further breakdown of the services versus wellness growth and outlook? And then any help on just sort of the contribution from pharmacy as well and notice that wasn't necessarily in the growth and outlook either.

So just help them that would be great?.

Yes, a lot of great questions. I'll do my best to parse than that. So I think Q4 is probably pretty healthy indication of future mix, frankly. We're really excited about the wellness business, with great leadership. They're a phenomenal team in place, just generally incredible things happening there as you can see, in Q4.

Again, we're leaning in to all parts of the business, what we're really trying to do is just maximize our ability to recycle capital efficiently and our tight times timescale, and so wellness has demonstrated that. First to really think about as like an optionality, something we're excited to test to get integrated.

We think has a real future potential with the business. But again, that is a California specific pharmacy and compounding business that's working directly with vet clinics and pet parents. You'll see us in Q4, we experimented with some customer offers with scaling in the [indiscernible] and building relationships.

You'll probably continue to see us do that, but it's not a material part of the wellness is revenue today..

And thank you. And one moment for our next question. And our next question comes from Jeremy Hamlin from Craig Hallum. Your line is now open..

Thanks, and congrats on the momentum in the business. I wanted to just first talk about seasonality a little bit in terms of platform participation in Q4 versus kind of typical expectation you have to start the year.

Certainly getting some great indicators with the Kastle return to work barometer that you are getting more and more people back in the office. I want to get a sense for how you, expect that to impact your business. I'm assuming that's more for the, you know, the services segment.

But also wanted to get a sense for what you were seeing on your wellness platform and whether or not growth there is being driven more by engagement on the insurance marketplace or if that's coming a little bit, you know, more from the other portions of that segment..

I'll take this one. Jeremy, always a treat. I hope everyone sees what I did there. Okay. In terms of seasonality, again, I think we generally expect Q4 to be a unique time period for the business where our services platform participants specifically transition from high frequency daytime to more overnight.

I don't think that'll be unique to any to this year or anything else. I would say that yes, the Kastle Back to Work barometer is a great indication we've mentioned that a few times in the past, about how services pet parents are thinking about their pets as people return to office. They start thinking about more than just leaving their pet.

They think about their pet's wellbeing, talking to a vet, maybe buying insurance, maybe needing their pet's RX and things delivered instead of picking it up.

So all those [indiscernible] and certainly, we think that Kastle and the go forward trend is a reason why we updated guidance frankly from our original forecast, and I think you're seeing it with Amazon and Disney and everyone else. Okay, so that's the first question. I think the second one was wellness growth.

Look, we're excited about all facets of wellness, frankly. We love the ability for pet parents to communicate directly with pet experts. We love that they can compare insurance quotes. We love that they can, you know, look through reviews for great pet insurance companies. There's a ton of great value add in our wellness category.

But I generally think the two places you'll see us really doubling down this year are going to continue to be pet parents' ability to compare and read and review pet insurance options. That seems to be a no-brainer in terms of the value it provides pet parents.

And two is their ability to shop and receive compound RX and other prescription meds directly their doorstep from their vet in a really simple way. Those two things seem to be a great lever for us and the things that pet parents are really wanting to drive forward..

Okay. Got it. And then that was a notable, regarding your employee headcount. You have seen a little bit of a step up here in your G&A cost. And so, I wanted to get a sense for what we saw here in Q4, if that's kind of more of a new baseline. You brought in obviously some people from transactions pharmacy.

You're going to add in some possibly some staff from DFA acquisition as well.

But just wanted to get a sense for where your baseline is on that, if Q4 is somewhat reflected or if there's anything unique specific to that step up in your G&A?.

No, I mean, I think Q4 is probably a helpful baseline. And look, I think that the way we think about the business, Jeremy at this point in 2023. It's just where do we -- are we going to be investing incremental dollars to maximize output for this, functionally our job, obviously. But really, it's headcount, sales, marketing, possibly M&A.

But I think Q4 is a pretty good indication of G&A trends, that might be other opportunities, that would be surprising, and we'd share with you if that was more M&A, or things like that, but I don't expect that. No surprises. So again, I think Q4 is a good baseline for the future..

And then last one, for me in terms of what you're seeing from, key competition, whether it's the kind of dollars being spent, to attract new customers, or whether it's competition for kind of the existing set.

What are you seeing out there from some of your peers, you had a slight step down, in your CAC, in the quarter or your LTV to CAC? Do you have -- is that more flexion of the value is slightly stepped down or more that the cost to acquire customers is up a little bit?.

It was more our willingness to participate, knowing kind of where we were. And so again, I think originally said was, well, I targeted three to one, we were six, seven to one, I think, the trend is really good in terms of LTV to CAC, or recycling these customers really quickly, and payments goes back really quickly and efficiently.

I can't speak a ton for our competitors.

I think generally last year, Jeremy, we said that we think this year, there'll be a huge opportunity to be really thoughtful about marketing, we thought this would be kind of a culling of D2C companies and brands, who will have to pull back pretty significantly as interest rates rose, as the network's functionally changed, whether that was Facebook or Apple.

And we're seeing that, we're really good at marketing. Frankly, we're really good at partnerships, we're really good at really just building relationships with customers. And we'll continue to do that. If anything, we've seen it be a bit less, I wouldn't say competitive, but a bit less noise in the marketplace.

And again, we're just going to be really disciplined with the dollars we allocate..

Last one, we didn't talk as much on this call on your pet caregivers, and you've experimented in terms of the fee charged to join the platform. Is that reflecting that you feel like you're getting closer to finding that right, price point, to have PCG's join the platform or any color you can share on that? Thanks..

Yes. It's really going to be continued. We're not done. To answer your question, Jeremy, we're really focused on equilibrium and the market clearing price is the best thing in America, I think, right? I think the whole team thinks that. And so we're really focused on the market clearing price to become a pet care giver in the Wag! ecosystem.

And I think we'll continue to test different mechanisms to make sure that best caregivers are getting the best gigs and are rewarded accordingly. So work is far from done there..

And thank you. And one moment for our next question. And our next question comes from Jason Helfstein from Oppenheimer. Your line is now open..

I'll just ask two questions. One, Garrett, can you talk philosophically about marketing versus cash flow? Now, that you've clearly shown to your point, you're good at marketing, you've got very nice leverage in the business of the past year.

How are you thinking about leaning into marketing now going forward relative to cash flow? Is it maintained kind of breakeven cash flow and just keep leaning in to marketing? That's entire maybe speak on a multiyear basis, right, just beyond '23? And then question number two.

We've seen kind of geographically different patterns with return to work right within the East Coast returning more than the West Coast.

Can you talk about maybe like what you're seeing? And to the extent, you've already seen, like good data from the East Coast and the West Coast is taking longer to return to work how you potentially can extrapolate that and how you factor that into '23 guidance? Thanks..

Yes. Hey, Jason, again, thanks for the time, great to hear from you. Always fun to hear your voice. Look, I think this market is a very dynamic one. And so we have been intensely focused on getting to scale, one of the most important parts. Remember, a couple quarters ago, I think we said we were pretty early.

And I think we're getting to a point of real revenue scale, hopefully happen the back half of this year. And so what we're then focused on is just making sure we're investing incremental dollars profitably into the platform.

So I don't think this business is in a position anytime soon to be just pumping out dollars functionally, there's too much opportunity ahead. We're really going to continue to lean in thoughtfully, but I don't think that's going to be at a significant cost basis to our shareholders. So I've answered your first one.

The second one in terms of geography, look, the Kastle Back to Work barometer is a great indication for kind of what you're seeing with pet parent trends generally. As you think about it, like I think we're at 50-ish percent earlier this month or in January, but like the biggest markets are lagging the average LA, SF, New York City, etc.

So pretty far behind and you look at like, Florida, parts of Florida and Texas are kind of way more open. So, we think there's kind of outside room to return to normal in the upside case, or only, we're certainly planning for that.

But that would be certainly where the opportunity would be is in these larger markets, which are significantly lagging, if they were to have a real kind of return to normal. That'd be great. So but I think that the trend is generally similar to what you're saying back to office in terms of capital..

And thank you. And one moment for our next question. And our next question comes from Brian Dobson from Chardan Capital Markets. Your line is now open..

So I guess to return to the subscription service, it's pretty impressive that you see pricing power in that monthly product.

I suppose, what kind of lifetime value are you seeing with your current subscribers? And do you think you'll experience the same retention rate at that higher pricing level?.

Yes, so we've been really thought -- and again great deal from Brian. We've been really thoughtful about premium from the start. One thing I would remind us, Brian, is that we are significantly ahead of where we thought we'd be with premium penetration. And our long-term goal was something like 50% we got there a couple years early.

And I think there's a couple reasons for that, one is we've added so much value to that subscription since we started that it's just we're really just catching up in terms of pricing. And two is we're really rapidly experimenting with the benefit that you get as a Wag! Premium pet parent, it's just a really delightful experience.

So I think the best way to think about LTV and dollars captured for the pet parent is revenue and platform participants and kind of what we've been capturing.

But you saw, I think in the LTV graph we published in our deck last year kind of each cohort of pet parents outperforming the previous, that's generally our goal with operators and builders and engineers and product aficionados. It's really just to increase the dollars we capture from the pet parents that are participating.

So I don't think we would do this with, we thought it was going to be a drag coefficient, frankly, anyway we actually think it's going to be a tailwind.

Does that answer your question?.

Yes, absolutely. And then I guess turning over to Dog Food Advisor, it's great to see that accrete Q1.

I guess what are some of the cross-selling -- what is the cross-selling avenue that you're most excited about when you're looking into to like, call it 2023 and 2024?.

Yes, I mean, thank you. I mean, we love that business and huge shout out to the founder, [Dr. Mike Zackman], who built it over the last 14 years. He’s just done a tremendous job. And we're really excited about taking on the opportunity to continue to serve millions of pet parents who are looking for great real recommendations on pet food.

So first and foremost, if you think about pet parents, every single person who owns a pet has one thing in common. They got to feed it. And so the idea that we now have Dog Food Advisor, which we believe is really the premium number one pet food recommendation engine on the web, we can tie that really, really nicely into our own ecosystem.

We can get really intelligent offers in front of our own services pet parents, pet parents might be buying pet insurance at the right time. People are talking to a vet through the platform. There's a lot of levers in terms of how we get thoughtful about personalized recommendations.

And then two, on the other side of things, when you're thinking about food and you're purchasing food, maybe for the first time there's a bunch of levers then to go back and upsell things like services or finding the perfect pet insurance plan. So just a lot of great synergies, we're not going to rush it. These things are sensitive.

You got to do it right, especially at this scale and age. But we're very, very excited about having something that's so evergreen for the pet parent..

And thank you. And I am showing no further question. This concludes today's conference call. Thank you for participating. You may now disconnect..