Wag! Group Co. (NASDAQ:PET) Q4 2023 Results Conference Call February 14, 2024 4:30 PM ET Company Participants Garrett Smallwood - Chief Executive Officer and Chairman Adam Storm - President and Chief Product Officer Alec Davidian - Chief Financial Officer Conference Call Participants Jeremy Hamblin - Craig-Hallum Capital Group Matt Koranda - ROTH MKM Greg Pendy - Chardan Aria Cole - Cole Capital Operator Greetings. Welcome to the Wag! Q4 2023 Earnings Conference Call [Operator Instructions]. Please note thi ...

Wag! Group Co. (NASDAQ:PET) Q3 2023 Earnings Conference Call November 8, 2022 4:30 PM ET Company Participants Greg Robles - Investor Relations Garrett Smallwood - Chairman and Chief Executive Officer Adam Storm - President and Chief Product Officer Alec Davidian - Chief Financial Officer Conference Call Participants Jason Helfstein - Oppenheimer Jeremy Hamblin - Craig-Hallum Tom White - D.A. Davidson Matt Koranda - Roth Capital Operator Greetings, and welcome to the Wag! Third Quarter 2023 Earnings Conferen ...

(Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission File Number: 001-40764 Wag! Group Co. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Exact name of registrant as specified in its charter) Delaw ...

Wag! Group Co. (NASDAQ:PET) Q2 2023 Results Conference Call August 8, 2023 4:30 PM ET Company Participants Dawn Francfort - IR Garrett Smallwood - Chairman and CEO Adam Storm - President and Chief Product Officer Alec Davidian - CFO Conference Call Participants Jason Helfstein - Oppenheimer Wyatt Swanson - D.A. Davidson Matt Koranda - ROTH MKM Jack Cole - Craig Hallum Greg Pendy - Chardan Operator Good day, and thank you for standing by. Welcome to the Wag! 2Q '23 Earnings Conference Call. At this time, all ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or Wag! Group Co. (Exact name of registrant as specified in its charter) Delaware 88-3590180 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ (State or other jurisdic ...

Financial Data and Key Metrics Changes - The company achieved record revenue of $20.6 million in Q1 2023, representing a 113% year-over-year increase [7][25] - Adjusted EBITDA loss improved to $0.4 million from a loss of $2.6 million in the same period last year, marking significant progress towards profitability [7][30] - Adjusted EBITDA margin improved from minus 21.8% in Q1 2022 to minus 1.9% in Q1 2023, a 20 percentage point improvement [30] Business Line Data and Key Metrics Changes - Revenue from wellness offerings grew from $5.2 million in Q1 2022 to $13.9 million in Q1 2023, indicating strong demand for pet insurance and wellness plans [26] - Service revenue increased from $4.4 million in Q1 2022 to $5.4 million in Q1 2023, driven by a steady increase in workers returning to the office [27] - The newly acquired Dog Food Advisor contributed $1.4 million in revenue through the pet food and treats segment [27] Market Data and Key Metrics Changes - The company reported a total of 611,000 platform participants, an increase of 88% year-over-year [42] - Premium penetration among Wag! users increased to 55%, exceeding expectations even after a price increase to $14.99 per month [42][43] - The pet insurance penetration in the U.S. remains low at less than 4%, compared to over 20% in the UK, indicating significant growth potential [26] Company Strategy and Development Direction - The company aims to capitalize on the growth in pet ownership and expand its product offerings across the pet care market [12][13] - Key strategic elements for 2023 include accelerating growth in existing markets, expanding premium subscription offerings, and opportunistic M&A [46] - The company is focused on achieving positive adjusted EBITDA margins for the remainder of 2023 through efficient marketing and operational excellence [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the return to office trend and its potential to drive demand for services as weather conditions normalize [8][19] - The company anticipates continued growth in the pet industry, driven by rising pet ownership and increasing demand for premium products and services [139] - Management acknowledged potential risks to financial performance in 2023, including disruptions to global supply chains and changes in consumer behavior [61] Other Important Information - The company ended Q1 2023 with approximately $33 million in cash and cash equivalents, providing a strong balance sheet to support growth objectives [59] - The company raised its full-year 2023 guidance, projecting revenue growth of over 50% year-over-year and adjusted EBITDA margins of over 1% [32][31] Q&A Session Summary Question: Can you elaborate on the acceleration in platform participants? - Management noted that the increase was driven by strong demand across services, pet food, and wellness segments, with no significant imbalance in supply and demand [34][64] Question: What are the key drivers of wellness revenue this quarter? - Management expects some normalization in Q2 and Q3, with a potential reacceleration in Q4, particularly in pet insurance and wellness plans [65] Question: How is the Dog Food Advisor acquisition performing? - The acquisition is validating the company's thesis about premium pet parents, with strong interest in high-quality products [67] Question: What are the expectations for service revenue trends? - Management indicated that service revenue was affected by severe weather in Q1, but they expect resilience and acceleration moving forward [100] Question: How does the company view the hybrid work environment? - Management believes that a slow return to office will benefit their services, as pet parents will increasingly seek pet care solutions [70][73]

Pet Food & Treats Pet Food Pet Treats 6 Drop-In Sitting Boarding Training Shop Walking ● 10% Off All Services ● 5% Off All Products ● Exclusive Benefits Center Wag! Services (26%) Wag! 30% LTV:CAC Premium Pet Spend is a Large, Resilient Category with (American Pet Product Association) CONFIDENTIAL Ownership = Category Tailwinds https://www.forbes.com/advisor/pet-insurance/pet-ownership-statistics/ The Wag! Platform Wag! Premium Benefits ● 12 million+ reviews provide assurance on quality of care 12 Browse & ...

[Part I - Financial Information](index=5&type=section&id=Part%20I%20-%20Financial%20Information) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Wag! Group Co.'s Q1 2023 financials show revenue growth driven by Wellness and acquisitions, despite widening net losses and negative operating cash flow Condensed Consolidated Balance Sheet Summary (Unaudited) | (in thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $24,502 | $38,966 | | Total current assets | $34,746 | $47,423 | | Goodwill | $4,501 | $1,451 | | Intangible assets, net | $8,173 | $2,590 | | **Total assets** | **$49,650** | **$52,311** | | **Liabilities & Equity** | | | | Total current liabilities | $16,146 | $16,491 | | Notes payable – non-current portion, net | $25,270 | $24,970 | | **Total liabilities** | **$42,119** | **$42,389** | | **Total stockholders' equity** | **$7,531** | **$9,922** | Condensed Consolidated Statements of Operations (Unaudited) | (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenues | $20,623 | $9,666 | | Total costs and expenses | $22,836 | $11,984 | | Loss before income taxes | $(3,787) | $(2,350) | | **Net loss** | **$(3,787)** | **$(2,350)** | | Net loss per share (basic and diluted) | $(0.10) | $(0.38) | Condensed Consolidated Statement of Cash Flows Summary (Unaudited) | (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,580) | $(2,245) | | Net cash used in investing activities | $(10,661) | $(6,720) | | Net cash (used in) provided by financing activities | $(223) | $9,664 | | **Net change in cash and cash equivalents** | **$(14,464)** | **$699** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, acquisitions like Dog Food Advisor, revenue streams, debt, and identified material weaknesses in internal controls - On January 5, 2023, the Company acquired Dog Food Advisor for **$9.0 million** in cash, adding **$5.95 million** in intangible assets and **$3.05 million** in goodwill[92](index=92&type=chunk)[93](index=93&type=chunk) Revenue by Offering (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Service revenue | $5,397 | $4,432 | | Wellness revenue | $13,855 | $5,234 | | Pet food & treats revenue | $1,371 | — | | **Total revenues** | **$20,623** | **$9,666** | - The company secured a **$32.2 million** senior secured term loan credit facility with Blue Torch Finance, bearing a floating interest rate and maturing in three years from August 9, 2022[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Subsequent to quarter end, on April 6, 2023, the company acquired Maxbone to expand into the Pet Supplies market[146](index=146&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strategic expansion and 113% Q1 2023 revenue growth to $20.6 million, offset by increased net loss from higher operating expenses - The company's strategy involves expanding into high-growth areas like pet wellness and the **$50 billion** Pet Food & Treats market, notably through the Dog Food Advisor acquisition[150](index=150&type=chunk)[153](index=153&type=chunk) - Key operational trends include increased pet adoption, return-to-office policies driving service demand, and pet humanization boosting interest in wellness products[158](index=158&type=chunk) Non-GAAP Financial Metrics (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenues | $20,623 | $9,666 | | Net loss | $(3,787) | $(2,350) | | **Adjusted EBITDA** | **$(397)** | **$(2,112)** | | Adjusted EBITDA Margin | (1.9)% | (21.8)% | [Comparison of the Three Months ended March 31, 2023 and 2022](index=37&type=section&id=Comparison%20of%20the%20Three%20Months%20ended%20March%2031%2C%202023%20and%202022) Q1 2023 revenues grew 113% to $20.6 million, driven by Wellness and Pet Food & Treats, but rising expenses led to a 61% wider net loss of $3.8 million Results of Operations Comparison (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $20,623 | $9,666 | $10,957 | 113% | | Total costs and expenses | $22,836 | $11,984 | $10,852 | 91% | | Net loss | $(3,787) | $(2,350) | $(1,437) | 61% | - The **$10.9 million** revenue increase was primarily due to an **$8.6 million** rise in Wellness revenue and **$1.4 million** in new Pet Food & Treats revenue from the Dog Food Advisor acquisition[189](index=189&type=chunk) - Sales and marketing expenses increased by **$7.2 million** (**118%**), mainly from a **$5.2 million** increase in partnership-related costs[192](index=192&type=chunk)[193](index=193&type=chunk) - General and administrative expenses grew by **$2.6 million** (**111%**), driven by a **$1.4 million** increase in personnel costs and **$1.1 million** in other administrative expenses to support public company activities[194](index=194&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company continues to incur operating losses and negative cash flows, with Q1 2023 net cash used in operations at $3.6 million, but expects current liquidity to suffice for 12 months - The company expects continued operating losses and negative operating cash flows as it invests in growth[197](index=197&type=chunk) Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,580) | $(2,245) | | Net cash used in investing activities | $(10,661) | $(6,720) | | Net cash (used in) provided by financing activities | $(223) | $9,664 | [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on its Blue Torch Credit Facility and equity price sensitivity of contingent Earnout Shares - The company's primary market risks relate to interest rates on its Blue Torch Credit Facility and equity price sensitivity of its Earnout Shares[228](index=228&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of March 31, 2023, due to identified material weaknesses in internal control over financial reporting - As of March 31, 2023, the company's disclosure controls and procedures were deemed ineffective by management[231](index=231&type=chunk) - Material weaknesses were identified related to insufficient resources for risk assessment and technical accounting, plus deficiencies in IT general controls, logical access, and segregation of duties[232](index=232&type=chunk) [Part II - Other Information](index=45&type=section&id=Part%20II%20-%20Other%20Information) [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, primarily regarding pet caregiver classification, with no expected material adverse financial impact - The company is involved in legal proceedings regarding pet caregiver classification, including a challenged **$1.3 million** California EDD assessment for unemployment insurance contributions[107](index=107&type=chunk)[110](index=110&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year 2022 - No material changes have occurred from the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2022[237](index=237&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period [Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) No other information is reported for the period [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents and Sarbanes-Oxley certifications

Part I [Item 1 Business](index=4&type=section&id=Item%201%20Business) Wag! Group Co. operates a holistic pet care platform, expanding through acquisitions and technology, achieving significant revenue growth while focusing on market acceleration and subscription expansion in a competitive industry - Wag! Group Co., founded in 2014, expanded into pet wellness through acquisitions of Compare Pet Insurance Services, Inc. (August 2021) and Furmacy, Inc. (Q4 2022), and into pet food/treats with Dog Food Advisor (Q1 2023)[15](index=15&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The company experienced strong growth, increasing annual revenue by over **170% from 2021 to 2022**[17](index=17&type=chunk) - Wag! derived 2022 revenue from service fees, Wag! Premium subscription fees, Pet Caregiver registration fees, and wellness revenue (affiliate fees, prescription/OTC sales), with additional revenue from pet food/treat affiliate fees expected in 2023[23](index=23&type=chunk) - Key strategies include accelerating growth in existing markets (95% U.S. population access, **434,234 transacting participants in Q4 2022**), expanding Wag! Premium subscriptions, platform expansion (Petted.com, Furmacy), and opportunistic M&A (Dog Food Advisor)[28](index=28&type=chunk)[29](index=29&type=chunk) - The total U.S. pet spending market was **$123.6 billion in 2021**, a **19% increase** from the prior year, with Wag! operating in three of four main categories (Pet Food & Treats, Supplies/OTC Medicine, Vet Care/Product Sales, Other Services)[30](index=30&type=chunk) - The platform offers dog walking, drop-in visits, boarding, sitting, and training, with 24/7 customer service and up to **$1 million property damage protection**, approving over **450,000 Pet Caregivers** through 2022 and receiving over **96% five-star reviews** from 11 million Pet Parent reviews[19](index=19&type=chunk)[20](index=20&type=chunk)[34](index=34&type=chunk) - Wag! Wellness includes Vet Chat (24/7 licensed pet expert advice), wellness plans, pet insurance comparison (Petted.com), and prescription Rx delivery (Furmacy)[37](index=37&type=chunk) - As of December 31, 2022, the company had **82 employees** operating with a remote-first hybrid workplace strategy, emphasizing DEI values through donations and diversity events[58](index=58&type=chunk)[59](index=59&type=chunk) - Wag! is subject to evolving laws and regulations concerning worker classification (e.g., California AB-5, DOL proposed rule), insurance producer licensing, consumer protection, and data privacy (e.g., CPRA)[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[80](index=80&type=chunk) - The company relies on trademarks and trade secrets for intellectual property protection, holding **7 registered U.S. trademarks** as of December 31, 2022, and is involved in an ongoing trademark infringement lawsuit with Wag Hotels, Inc[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) Wag! faces diverse risks including pandemic impacts, sustained net losses, intense competition, operational challenges, regulatory compliance, financial obligations, cybersecurity threats, and public company complexities - The COVID-19 pandemic has materially adversely impacted and will continue to impact Wag!'s business, operating results, and financial condition, leading to a hybrid workplace setup[95](index=95&type=chunk)[96](index=96&type=chunk) Net Losses (2020-2022) | Year | Net Loss (in millions) | | :--- | :--------------------- | | 2020 | $18.8 | | 2021 | $6.3 | | 2022 | $39.0 | - Wag! is substantially dependent on revenues from a small number of customers utilizing Wag! Wellness services and products; in 2022, two customers accounted for an aggregate of **27% of total consolidated revenues**[103](index=103&type=chunk) - The company faces increasing competition from family/friends/neighbors, local independent professionals, large commercial providers (kennels, daycares), online aggregators (Google, Yelp), and other digital marketplaces (Rover, Care.com)[118](index=118&type=chunk) - There is a risk that Pet Caregivers could be reclassified as employees under applicable law, which would materially adversely affect the business through monetary exposure, claims for benefits, and significant alterations to the business model[151](index=151&type=chunk)[153](index=153&type=chunk) - Wag! operates in regulated industries (e.g., insurance, pharmacy) requiring licenses, and revocation or suspension of these licenses could materially adversely affect the business[154](index=154&type=chunk)[156](index=156&type=chunk) - The company is exposed to cybersecurity risks, including cyberattacks, data breaches, and unauthorized access to personal information, which could interrupt operations, harm its brand, and result in significant legal and financial exposure[194](index=194&type=chunk)[197](index=197&type=chunk) - Wag! relies on third-party payment service providers and any disruption or increased fees from these providers could materially adversely affect its business[211](index=211&type=chunk) - The company identified material weaknesses in its internal control over financial reporting related to insufficient resources for risk assessment, technical accounting, and IT general controls, which may result in material misstatements[269](index=269&type=chunk)[274](index=274&type=chunk) - As an 'emerging growth company,' Wag! may choose reduced reporting and disclosure requirements, potentially making its common stock less attractive to investors[277](index=277&type=chunk)[280](index=280&type=chunk) [Item 1B. Unresolved Staff Comments](index=67&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report [Item 2. Properties](index=67&type=section&id=Item%202.%20Properties) Wag! Group Co. leases its corporate headquarters in San Francisco until 2026 and additional office/warehouse spaces in Phoenix and El Dorado Hills until 2023, owning no real property - Wag! does not own real property; it leases its corporate headquarters in San Francisco (lease expires **2026**) and additional office/warehouse space in Phoenix and El Dorado Hills (leases expire **2023**)[325](index=325&type=chunk) [Item 3. Legal Proceedings](index=68&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding the Company's legal proceedings is detailed in Note 9 – Commitments and Contingencies of the Notes to consolidated financial statements - Legal proceedings are discussed in Note 9 - Commitments and Contingencies of the Notes to consolidated financial statements[326](index=326&type=chunk) [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Wag! Group Co Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=69&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Wag! Group Co.'s common stock and public warrants trade on Nasdaq, with the company repurchasing **1.4 million shares** in November 2022, and it plans to retain future earnings without paying dividends - Wag!'s common stock (PET) and public warrants (PETWW) began trading on The Nasdaq Global Market on **August 10, 2022**[330](index=330&type=chunk) Share Repurchases (Q4 2022) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------------------- | :----------------------------- | :--------------------------- | | November 1, 2022 - November 30, 2022 | 1,438,378 | $10.30 | - As of March 24, 2023, there were **153 holders of common stock** and **6 holders of record of Public Warrants**[331](index=331&type=chunk) - Wag! has never declared or paid any dividends on its common stock and anticipates retaining all future earnings for operations and expansion[332](index=332&type=chunk) - In December 2022, Wag! filed a registration statement for shares under the 2022 Omnibus Incentive Plan, and in October 2022, approximately **90,000 shares** were issued for the acquisition of Furmacy, Inc. prior to the registration statement's effective date[333](index=333&type=chunk)[334](index=334&type=chunk) [Item 6. [Reserved]](index=69&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Wag! Group Co. achieved significant revenue growth in 2022, driven by Wellness and services, while incurring net losses due to increased operating expenses and public company costs, though maintaining sufficient liquidity - Wag! Group Co. was founded in 2015 and became a public company through a reverse recapitalization with CHW Acquisition Corporation on **August 9, 2022**[340](index=340&type=chunk)[365](index=365&type=chunk) - The company's mission is to be the 1 partner to busy Pet Parents, offering a holistic pet care platform including services, wellness options, and pet food/treats[339](index=339&type=chunk) - Wag! achieved its highest quarterly revenues in **Q4 2022**, exceeding **$17 million**, and saw significant outperformance in Pet Parent activity for cohorts joining since 2020 compared to earlier cohorts[344](index=344&type=chunk) - Key strategies include accelerating growth in existing markets (e.g., Wag! Neighborhood Network), expanding subscription offerings (Wag! Premium accounts for over **50% of monthly active users**), platform expansion (Petted.com, Furmacy), and investing in new markets and M&A (e.g., Dog Food Advisor acquisition in 2023)[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk) - Pet ownership trends, including increased adoptions during the pandemic and return-to-office policies, are driving demand for high-quality, personalized pet care and pet insurance, with **97% of U.S. pets** remaining uninsured[352](index=352&type=chunk)[353](index=353&type=chunk) Consolidated Operations Data (Years Ended December 31, 2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | $ Change (in thousands) | % Change | | :-------------------- | :-------- | :-------- | :-------- | :------- | | Revenues | $54,865 | $20,082 | $34,783 | 173% | | Cost of revenues | $4,024 | $2,777 | $1,247 | 45% | | Platform operations & support | $13,825 | $10,265 | $3,560 | 35% | | Sales and marketing | $35,156 | $10,221 | $24,935 | 244% | | General and administrative | $32,415 | $6,956 | $25,459 | 366% | | Depreciation & amortization | $571 | $388 | $183 | 47% | | Total costs & expenses | $85,991 | $30,607 | $55,384 | 181% | | Change in fair value of derivatives | $(4,958) | — | $(4,958) | NM | | Gain on PPP loan forgiveness | — | $3,482 | $(3,482) | NM | | Interest expense, net | $(2,470) | $(61) | $(2,409) | 3949% | | Loss before income taxes | $(38,554) | $(7,104) | $(31,450) | 443% | | Income tax benefit (expense) | $(13) | $793 | $(806) | NM | | Net income (loss) | $(38,567) | $(6,311) | $(32,256) | 511% | - Revenue increased by **$34.8 million (173%)** in 2022, primarily due to a **$27.9 million increase** in Wellness revenue and a **$6.9 million increase** in Service revenue[381](index=381&type=chunk) - Sales and marketing expenses surged by **$24.9 million (245%)** in 2022, driven by increased partnerships, advertising, and personnel costs[384](index=384&type=chunk)[385](index=385&type=chunk) - General and administrative expenses increased by **$25.5 million (366%)**, largely due to **$19.2 million** in stock compensation expense related to Earnout Shares and public company operating costs[386](index=386&type=chunk) Cash Flows (Years Ended December 31, 2022 vs. 2021) | Cash Flow Type | 2022 (in thousands) | 2021 (in thousands) | | :---------------------------- | :-------- | :-------- | | Net cash flows used in operating activities | $(2,803) | $(12,256) | | Net cash flows (used in) provided by investing activities | $1,835 | $8,087 | | Net cash flows provided by financing activities | $37,089 | $(51) | | Net change in cash, cash equivalents, and restricted cash | $36,121 | $(4,220) | - Net cash used in operating activities decreased by **$9.5 million** in 2022, primarily due to increased accounts payable and improved net loss (excluding non-cash items)[397](index=397&type=chunk)[398](index=398&type=chunk) - Net cash provided by financing activities increased by **$37 million** in 2022, driven by proceeds from Forward Share Purchase Agreement expiration, Trust Account release, PIPE and Backstop Investors, and the Blue Torch Credit Facility[401](index=401&type=chunk) Adjusted EBITDA (Years Ended December 31, 2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------- | :-------- | :-------- | | Net income (loss) | $(38,567) | $(6,311) | | Adjusted EBITDA | $(3,872) | $(9,915) | | Adjusted EBITDA Margin | (7.1)% | (49.4)% | - Adjusted EBITDA improved from **$(9.9) million in 2021** to **$(3.9) million in 2022**, reflecting better operating performance when excluding non-cash and non-recurring items[409](index=409&type=chunk)[410](index=410&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Wag! is exposed to market risks primarily related to interest rates and market price sensitivity on financial obligations, specifically the Blue Torch Credit Facility, Earnout Shares, and Management Earnout Shares, which bear variable interest rates or are subject to equity price fluctuations - Wag! is exposed to market risks from interest rates and market price sensitivity on financial obligations, including the Blue Torch Credit Facility, Earnout Shares, and Management Earnout Shares[425](index=425&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=84&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Wag! Group Co.'s audited consolidated financial statements for 2022 and 2021, including balance sheets, statements of operations, cash flows, and comprehensive notes on accounting policies, business combinations, and debt - The consolidated financial statements for Wag! Group Co. as of and for the years ended December 31, 2022 and 2021 are presented, audited by BDO USA, LLP[427](index=427&type=chunk) Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability Category | 2022 (in thousands) | 2021 (in thousands) | | :----------------------- | :-------- | :-------- | | **Assets:** | | | | Cash and cash equivalents | $38,966 | $2,845 | | Total current assets | $47,423 | $12,010 | | Total assets | $52,311 | $16,462 | | **Liabilities:** | | | | Total current liabilities | $16,491 | $9,980 | | Notes Payable – non-current portion | $24,970 | $1,200 | | Total liabilities | $42,389 | $12,310 | | **Equity:** | | | | Total stockholders' equity (deficit) | $9,922 | $(106,113) | Consolidated Statements of Operations (Years Ended December 31, in thousands) | Item | 2022 (in thousands) | 2021 (in thousands) | | :---------------------- | :-------- | :-------- | | Revenues | $54,865 | $20,082 | | Total costs and expenses | $85,991 | $30,607 | | Net income (loss) | $(38,567) | $(6,311) | | Net loss per share, basic and diluted | $(2.07) | $(1.10) | Consolidated Statements of Cash Flows (Years Ended December 31, in thousands) | Cash Flow Activity | 2022 (in thousands) | 2021 (in thousands) | | :---------------------- | :-------- | :-------- | | Net cash flows used in operating activities | $(2,803) | $(12,256) | | Net cash provided by investing activities | $1,835 | $8,087 | | Net cash provided by financing activities | $37,089 | $(51) | | Net change in cash, cash equivalents, and restricted cash | $36,121 | $(4,220) | - The Business Combination with CHW Acquisition Corporation on **August 9, 2022**, was accounted for as a reverse recapitalization, with Wag! Labs, Inc. as the accounting acquirer[445](index=445&type=chunk)[516](index=516&type=chunk) - Wag! acquired Furmacy, Inc. in **October 2022** for **$283 thousand in stock** and Dog Food Advisor assets in **January 2023** for **$9.0 million in cash**, expanding its wellness and pet food offerings[334](index=334&type=chunk)[447](index=447&type=chunk)[538](index=538&type=chunk)[625](index=625&type=chunk) Revenue Disaggregation by Offering (Years Ended December 31, in thousands) | Offering | 2022 (in thousands) | 2021 (in thousands) | | :-------------- | :-------- | :-------- | | Services revenue | $21,823 | $14,951 | | Wellness revenue | $33,042 | $5,131 | | Total revenues | $54,865 | $20,082 | - The company's contract liabilities (unredeemed gift cards, Wag! Premium prepayments, consumer credits) were **$2.2 million in 2022** and **$1.9 million in 2021**[540](index=540&type=chunk) - Wag! settled its Forward Share Purchase Agreements (FPAs) derivative liability in **November 2022**, repurchasing **1.4 million shares** for **$14.8 million** and recognizing a **$7.8 million gain** on the unexercised portion[544](index=544&type=chunk)[545](index=545&type=chunk)[546](index=546&type=chunk) Goodwill (in thousands) | Date | Amount (in thousands) | | :--------------- | :----- | | December 31, 2020 | $0 | | CPI Acquisition | $1,427 | | December 31, 2021 | $1,427 | | Furmacy Acquisition | $24 | | December 31, 2022 | $1,451 | Intangible Assets, Net (as of December 31, 2022, in thousands) | Category | Gross Book Value (in thousands) | Accumulated Amortization (in thousands) | Net Book Value (in thousands) | | :--------------------------- | :--------------- | :----------------------- | :------------- | | Developed technology | $783 | $(226) | $557 | | Customer relationships and licenses | $2,166 | $(422) | $1,744 | | Trademarks | $291 | $(56) | $235 | | Pharmacy board licenses | $5 | — | $5 | | Total Finite Life Intangibles | $3,245 | $(704) | $2,541 | | Total Indefinite Life Intangible Assets | $49 | — | $49 | - Wag! is involved in legal proceedings related to Pet Caregiver classification, including a **$248 thousand liability** for unemployment insurance contributions in New York and a challenged **$1.3 million assessment** in California[566](index=566&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk) - The company received a **$5.1 million PPP Loan** in **August 2020**, with **$3.5 million forgiven** in **September 2021**, leaving an outstanding principal balance of **$1.2 million** as of December 31, 2022[572](index=572&type=chunk)[573](index=573&type=chunk) - On **August 9, 2022**, Legacy Wag! entered into a **$32.17 million senior secured term loan Credit Facility** with Blue Torch Finance, LLC, secured by substantially all company assets, with an outstanding principal balance of **$26.2 million** as of December 31, 2022[574](index=574&type=chunk)[579](index=579&type=chunk) - Blue Torch also received **1,896,177 Lender Warrants** to acquire common stock at **$11.50 per share**, classified as equity[580](index=580&type=chunk)[583](index=583&type=chunk) Future Minimum Debt Payments (as of December 31, 2022, in thousands) | Year | Amounts (in thousands) | | :--- | :------ | | 2023 | $1,264 | | 2024 | $1,751 | | 2025 | $30,227 | | Total principal amount | $33,242 | - Wag! had U.S. federal and state net operating loss carryforwards of approximately **$209 million** and **$178 million**, respectively, as of December 31, 2022, with a full valuation allowance recorded[619](index=619&type=chunk) Anti-Dilutive Securities Excluded from EPS (Years Ended December 31) | Security Type | 2022 (Number of Shares) | 2021 (Number of Shares) | | :---------------------------- | :----------- | :----------- | | Series Seed convertible preferred shares | — | 4,376,930 | | Series A convertible preferred shares | — | 5,902,952 | | Series B convertible preferred shares | — | 6,506,794 | | Series C convertible preferred shares | — | 7,072,149 | | Series P convertible preferred shares | — | — | | Earnout Shares | 15,000,000 | — | | Options and RSUs issued and outstanding | 11,388,842 | 7,537,744 | | Warrants issued and outstanding | 18,291,741 | 88,756 | | Total | 44,680,583 | 31,485,325 | - The Lock-Up Period for certain stockholders, related to the Business Combination, expired on **February 5, 2023**, removing transfer restrictions[628](index=628&type=chunk)[629](index=629&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=118&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) There is no information to report regarding changes in or disagreements with accountants on accounting and financial disclosures, as previously reported in the Current Report on Form 8-K filed on August 9, 2022 - No information to report regarding changes in or disagreements with accountants, as previously reported on Form 8-K filed **August 9, 2022**[631](index=631&type=chunk) [Item 9A. Controls and Procedures](index=118&type=section&id=Item%209A.%20Controls%20and%20Procedures) Wag! Group Co.'s disclosure controls and procedures were ineffective as of December 31, 2022, due to material weaknesses in internal control over financial reporting, which the company is actively remediating - As of December 31, 2022, Wag!'s disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[633](index=633&type=chunk) - Material weaknesses identified include insufficient resources for internal control risk assessment, evaluation of technical accounting for material transactions, and effective design/implementation of process-level controls[634](index=634&type=chunk) - Additional material weaknesses relate to the risk assessment process for IT general controls, logical access, segregation of duties, program change controls, and process-level controls impacting financial reporting[634](index=634&type=chunk) - The company is implementing remedial measures, including technology, hiring personnel, and engaging external resources, to address these material weaknesses[635](index=635&type=chunk) - Post-Business Combination, the design of internal controls over financial reporting requires significant time and resources, as the predecessor's controls are no longer applicable[636](index=636&type=chunk) [Item 9B. Other Information](index=120&type=section&id=Item%209B.%20Other%20Information) This item contains no additional information [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevents Inspections](index=120&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevents%20Inspections) This item is not applicable to Wag! Group Co Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=121&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance, including the Code of Ethics and Business Conduct, will be incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders - Information on directors, executive officers, and corporate governance will be incorporated by reference from the **2023 annual meeting proxy statement**[641](index=641&type=chunk) - Wag! has adopted a Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines, and a Code of Business Conduct, available on its investor relations website[642](index=642&type=chunk) [Item 11. Executive Compensation](index=121&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation will be incorporated by reference from the definitive proxy statement for the 2023 annual meeting of shareholders - Executive compensation information will be incorporated by reference from the **2023 annual meeting proxy statement**[644](index=644&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters](index=121&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owner%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, will be incorporated by reference from the definitive proxy statement for the 2023 annual meeting of shareholders - Security ownership information will be incorporated by reference from the **2023 annual meeting proxy statement**[645](index=645&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=121&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence will be incorporated by reference from the definitive proxy statement for the 2023 annual meeting of shareholders - Information on related transactions and director independence will be incorporated by reference from the **2023 annual meeting proxy statement**[646](index=646&type=chunk) [Item 14. Principal Accounting Fees and Services](index=121&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services will be incorporated by reference from the definitive proxy statement for the 2023 annual meeting of shareholders - Principal accounting fees and services information will be incorporated by reference from the **2023 annual meeting proxy statement**[647](index=647&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=120&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed, including key agreements such as the Business Combination Agreement, Certificate of Incorporation, and Financing Agreement - The section lists various exhibits filed, including the Business Combination Agreement, Certificate of Incorporation, Bylaws, Warrant Agreement, Lock-Up Agreement, and Financing Agreement[650](index=650&type=chunk)[651](index=651&type=chunk) [Item 16. Form 10-K Summary](index=124&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided [Signatures](index=125&type=section&id=Signatures) This section contains the signatures of Wag! Group Co.'s Chief Executive Officer, Chief Financial Officer, General Counsel, and Directors, affirming the filing of the registration statement on March 30, 2023 - The registration statement was signed on behalf of Wag! Group Co. by its Chief Executive Officer, Garrett Smallwood, and other key officers and directors on **March 30, 2023**[657](index=657&type=chunk)[662](index=662&type=chunk)

Financial Highlights FY 2022 Revenue of $54.9 million exceeded expectations – Raising FY 2023 guidance for Revenue and Adjusted EBITDA Wag! Adj. EBITDA Revenue Waq! ● A continued trend in return-to-office, as measured by the Kastle back-to-work barometer. * "Original Forecast" provided in April 2022 Investor Deck on the Company's Investor Relations website **Reflecting values at the midpoint of the range Wellness ● 10% Off All Services ● Exclusive Benefits Center 5 7 Platform Participant is defined as a Pet ...