Wag! (US:PET)2022-11-10 22:10Part I - Financial Information Financial Statements The unaudited condensed consolidated financial statements for September 30, 2022, reflect the company's financial position, operations, and cash flows, following a reverse recapitalization business combination in August 2022 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $66,985 | $16,462 | | Cash and cash equivalents | $28,024 | $2,845 | | Restricted cash | $24,719 | $0 | | Total Liabilities | $59,748 | $12,310 | | Forward share purchase agreements derivative liability | $19,668 | $0 | | Notes Payable – non-current portion | $24,494 | $1,200 | | Total Stockholders' Equity (Deficit) | $7,237 | ($106,113) | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric (in thousands, except per share data) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenues | $37,829 | $12,036 | | Total costs and expenses | $67,695 | $19,893 | | Net loss | ($44,371) | ($3,587) | | Net loss per share (Basic & Diluted) | ($3.60) | ($0.64) | Condensed Consolidated Statement of Cash Flows Highlights (Unaudited) | Metric (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,578) | ($10,350) | | Net cash provided by investing activities | $1,952 | $4,956 | | Net cash provided by financing activities | $51,524 | $2 | | Net change in cash, cash equivalents, and restricted cash | $49,898 | ($5,392) | - On August 9, 2022, the company completed its business combination with CHW Acquisition Corporation, a SPAC, accounted for as a reverse recapitalization, with Legacy Wag! being the accounting acquirer258284 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant revenue growth driven by Wellness and pet services recovery, alongside substantial increases in operating expenses due to business combination costs, with liquidity strengthened by merger proceeds and new financing - The company's mission is to be the 1 partner to busy pet parents, offering a mobile-first marketplace for services like dog walking, pet sitting, expert advice, and wellness plans through a community of 400,000 caregivers across 5,300 cities165167169 Key Performance Indicators and Non-GAAP Measures | Metric (in thousands, except percentages) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenues | $37,829 | $12,036 | | Net loss | ($44,371) | ($3,587) | | Adjusted EBITDA | ($3,448) | ($7,443) | | Bookings | $64,804 | $30,764 | | Take Rate | 58% | 39% | - The business combination in August 2022 resulted in a significant increase in cash, including $29.3 million (of which $24.7 million is in escrow for Forward Purchase Agreements), $5.0 million from a PIPE investment, and $29.4 million from a new financing arrangement190 - The company's liquidity was significantly improved post-merger, and management believes existing cash and investments are sufficient to fund operations for at least the next 12 months230 Results of Operations Revenues surged 214% to $37.8 million, primarily from Wellness, while total costs and expenses grew 240% to $67.7 million, driven by one-time business combination expenses, widening the net loss to $44.4 million Revenue Breakdown (Nine Months Ended Sep 30) | Revenue Type (in thousands) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Service revenue | $15,973 | $10,512 | +52% | | Wellness revenue | $21,856 | $1,524 | +1334% | | Total revenues | $37,829 | $12,036 | +214% | - General and Administrative expenses for Q3 2022 increased by $21.8 million (1090%) YoY, primarily due to one-time, non-cash expenses related to the business combination: $19.0 million for Earnout Shares and $1.8 million for Community Shares224 - Sales and Marketing expenses for the nine months ended Sep 30, 2022, increased by $19.7 million (394%) YoY, driven by a $10.6 million increase in partnership investments, a $2.9 million increase in advertising, and a $2.1 million stock compensation charge for Earnout Shares223 Liquidity and Capital Resources Historically incurring losses, the company's liquidity significantly improved post-business combination, with $51.5 million in net cash from financing activities, including merger proceeds and a new credit facility, deemed sufficient for the next 12 months - Net cash provided by financing activities was $51.5 million for the nine months ended Sep 30, 2022, a significant increase from just $2 thousand in the same period of 2021, primarily due to the business combination and related financing236240 - In August 2022, the company entered into a $32.17 million senior secured term loan credit facility with Blue Torch Finance, LLC, which matures in three years and bears a floating interest rate243128 - The company placed $24.7 million in escrow to secure obligations under Forward Purchase Agreements (FPAs), which allow certain investors to sell shares back to the company, and this escrowed amount is recorded as restricted cash23190 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from its variable-rate Blue Torch Credit Facility and equity price sensitivity on financial obligations like Forward Purchase Agreements and Earnout Shares - The company's primary market risks stem from its variable interest rate debt (Blue Torch Credit Facility) and equity price sensitivity on obligations like the Forward Purchase Agreement and Earnout Shares262 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - As of September 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective263 - No material changes were made to the company's internal control over financial reporting during the third quarter of 2022264 Part II - Other Information Legal Proceedings The company is involved in various legal proceedings, which management believes will not materially adversely affect its financial condition, results of operations, or cash flows - Management does not expect current legal proceedings to have a material adverse effect on the company's financial results265 Risk Factors The company faces significant risks including a history of net losses, intense competition, potential reclassification of Pet Caregivers, cybersecurity threats, and challenges as a newly public company post-SPAC merger - A primary risk is the potential reclassification of Pet Caregivers from independent contractors to employees, which would significantly increase costs and adversely affect the business model268325 - The company has a history of net losses, incurring $44 million in the first nine months of 2022, and its ability to achieve profitability is uncertain274 - The business is highly competitive, facing challenges from personal networks (friends/family), local operators, other digital marketplaces like Rover, and online directories291292 - The company's debt facility with Blue Torch is secured by substantially all of its assets, and a default could lead to foreclosure, which would materially harm the business363 Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the reporting period - The report indicates this item is not applicable498 Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - The company reported no defaults upon senior securities498 Mine Safety Disclosures This section is not applicable to the company's operations - The report indicates this item is not applicable498 Other Information The company reports no other information for this period - The company reported no other information498 Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate documents, officer certifications, and XBRL data files