Wag! Group - Q3 2023

Transcript

Operator (participant)

Greetings, and welcome to the Wag! Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Robles, with Investor Relations. Thank you, sir. You may begin.

Greg Robles (Investor Relations Associate)

Good afternoon, everyone, and thank you for joining Wag!'s conference call to discuss our third quarter 2023 financial results. On the call today are Garrett Smallwood, Chief Executive Officer and Chairman, Adam Storm, President and Chief Product Officer, and Alec Davidian, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements. These forward-looking statements are subject to risks and uncertainties and involve factors that could cause actual results to differ materially from those expressed or implied by such statements. A discussion of these risks and uncertainties are included in our filings within the SEC. We also remind you that we undertake no obligation to update the information contained on this call. These statements should be considered estimates only and are not a guarantee of future performance. Also, during the call, we present both GAAP and non-GAAP financial measures.

Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued today. The earnings release is available on the investor relations page of our website and is included in Exhibit and Form 8-K, furnished to the SEC. These non-GAAP measures are not intended to be a substitute for our GAAP results. Lastly, you can find our earnings presentation posted on our IR website and with the SEC. And with that, I will now turn the call over to Garrett Smallwood.

Garrett Smallwood (CEO and Chairman)

Good afternoon, and thank you for joining us today to discuss our financial performance for the third quarter of 2023. We are excited to announce another successful quarter for the Wag! team, exceeding our own expectations for both revenue and adjusted EBITDA.

This quarter further demonstrates that we are transforming the pet industry by becoming an all-inclusive, trusted partner for the premium pet parent and capitalizing on the secular growth of pet ownership. We continue to build lasting, high-frequency relationships with households across the U.S. by becoming their go-to destination for premium services, health, and wellness. While we remain laser-focused on profitability for the remainder of 2023, we continue to invest in our platform and technology, building proprietary solutions to the most important needs. In 2024 and beyond, we will continue to use our proprietary technology, scalable platform, and deep and trusted relationships with premium households to strike the right balance of growth and profitability. With that, I will provide a brief overview of our financial results for the third quarter.

Following that, Adam, our President and Chief Product Officer, will share updates on our strategic plans and key initiatives for the remainder of 2023 and beyond. Then Alec, our Chief Financial Officer, will provide a more detailed analysis of our third quarter results, discuss our capital allocation priorities, and reiterate our 2023 guidance. During the quarter, revenue grew by 42% year-over-year to $21.8 million. This growth was driven by the success of our wellness business, fueled by demand for pet insurance and wellness products. In addition to the success of Paw Protect, the only pet insurance product in the U.S. with instant pay, we're seeing early signs of success with Cat Food Advisor, which validates our longer-term growth initiatives by expanding our reach in the pet food and treats category.

Our adjusted EBITDA was $1 million, an increase from a loss of $0.5 million in the same period last year. As we navigate the dynamic macroeconomic landscape, our primary objective remains centered around achieving a sustainable equilibrium between growth, profit, and margin. In the third quarter, Platform Participants increased to 632,000, an increase of 34% year-over-year, and Wag! Premium maintained strong penetration at 52%. Our third quarter organic acquisition rate was more than 70%, which is a result of our focus on dynamic partnerships, a best-in-class experience, and our referral programs. We continue to be thoughtful and deliberate around capital allocation and brand building, and as a result, our LTV to CAC ratio was a deliberate 9:1.

On the supply side of the business, we maintained a supply and demand equilibrium through a variable platform fee, which averaged $50.26 in Q3 2023. In summary, the team at Wag! continues to execute against our goals and deliver strong and sustainable results. Our third quarter results demonstrate our ability to scale the platform faster and more profitably than anticipated and show the effectiveness of our strategy and business model to become the number one platform for premium pet parents. Simply put, we have out-executed on the strategy we set forth almost two years ago for the seventh consecutive quarter. And with that, I will turn the call over to Adam Storm to review our strategy for the remainder of 2023.

Adam Storm (President and Chief Product Officer)

Thanks, Garrett. I'll once again walk through the five top-level elements of our strategy to drive long-term shareholder value and profitable growth. One, accelerate growth in existing markets. As Garrett mentioned, the third quarter was another record revenue quarter, driven by the demand for pet insurance and wellness products across the U.S., as well as a post-summer return to normal daytime service habits.

We will continue to leverage our technology and best-in-class user experience to innovate on comparison tools and matchmaking services for highly fragmented experiences with the largest total addressable markets, such as pet food and treats, and pet insurance. Two, expand premium subscription offerings. Our premium penetration rate remained at a robust 52%, ahead of our long-term goal of 50%. We are continuing to test the value of the Wag! Premium bundle by introducing new benefits and experimenting with current offers. We are actively experimenting around a 10% price discount for new subscribers, with an emphasis on the upcoming holidays, which skew toward overnight sitting and boarding, which is a higher average order value service set. Three, platform expansion.

Last quarter, we rolled out the Wag! Store in partnership with maxbone, which we acquired in Q2 of 2023, bringing modern pet essentials to our engaged community of pet parents and pet caregivers. Maxbone has incredible assortment of premium products, for example, the Christian Cowan collab jumper, which Kim Kardashian organically posted about on her Instagram page with her Pomeranian, Sushi. I urge you to check it out. Other bestsellers include the Eco Sling Carrier and the Easy Fit Harness, which come in fun colors such as peach, yellow, ivory, and dust blue. We will continue to roll out seasonal products, collaborations, and must-haves to expand the Wag! brand while capturing additional share of wallet. Fourth, opportunistic M&A.

Wag! continues to be strategically positioned to leverage pet-specific M&A opportunities due to our ability to swiftly integrate new assets into our platform, supported by our deep understanding of the consumer and our technology-first DNA. We are most excited about assets that have high rates of organic acquisition, a product or service that is beloved by customers, and/or categories of household spend that we do not currently capture. Fifth, operating scale. This quarter, we saw operating margin improvements across all areas due to the positive impact of our unit economics and fixed cost operating leverage. Adjusted EBITDA margin improved substantially year-over-year from -3% to +5%, an eight percentage point improvement. This significant year-over-year improvement is inherent to our high-margin software marketplace model, where incremental revenue significantly enhances the adjusted EBITDA profile of the entire platform.

2023 continues to be our year of efficiency and focus on full year adjusted EBITDA profitability, which we have achieved as of Q3 2023. We will continue to invest in efficient marketing payback cycles, operational excellence, platform integration and cross-sell, and best-in-class customer experience. I will now turn the call over to Alec to discuss our third quarter financial results in more detail.

Alec Davidian (CFO)

Thanks, Adam. Q3, building on our Q1 and Q2 momentum, placed with record Platform Participants of 632,000, revenue of $21.8 million, and adjusted EBITDA of $1 million, resulting in back-to-back adjusted EBITDA profitable quarters. This also takes us to full year 2023 adjusted EBITDA profitable year to date, a huge milestone in the company's history. Third quarter revenue of $21.8 million exceeded our expectations, up 42% from last year, driven by strength across all three revenue categories. This resulted in an adjusted EBITDA profit of $1 million for Q3, versus an adjusted EBITDA loss of $0.5 million last year. Breaking down the three revenue categories. Services revenue was $6.6 million, growing 12% from Q3 last year, making this the largest service revenue quarter to date.

We continued to see post-summer return to normal service habits, combined with a continued slow and steady return to office trend. Services also includes nominal amounts of e-commerce revenue from maxbone and Wag! Store. Wellness revenue was $13.5 million, increasing 42% from Q3 last year, driven by demand for our pet insurance and wellness products through our proprietary comparison engine technology. Our technology's ability to add value to customers is clear, and in Q3, we experienced record traffic as summer return to normal activities resumed. Pet food and treats revenue, a new revenue category for this year, was $1.7 million. Dog Food Advisor and newly launched Cat Food Advisor continue to provide pet parents with high-quality information to allow them to make the right food decisions for their pets. Turning to expenses.

Cost of revenue, excluding depreciation and amortization, of $1.4 million, was consistent year-over-year at 7% of revenue. Platform costs were down year-over-year as a result of very thoughtful operational excellence and the scalability of our tech stack, offset by product costs from the sale of products through maxbone and Wag! Store. Platform operations and support expense of $3 million equates to 14% of revenue, down from 37% a year ago. While non-revenue generating platform operations and support functions remain a key backbone to the business, our operations have become highly efficient over the past year through redesign and use of AI tools to get answers faster. Sales and marketing expense of $12.8 million equates to 59% of revenue, down from 73% a year ago.

We saw numerous opportunities to put dollars to work in sales and marketing across our various revenue streams and will continue to take advantage of efficiencies as we identify them. G&A expense of $4.7 million equates to 21% of revenue, down from 165% a year ago, which included transaction costs. 21% represents the lowest ratio since we have become public and illustrates the scalability of our platform and operational excellence of our leadership team. From a balance sheet perspective, we ended the third quarter with approximately $31 million in cash, cash equivalent, and accounts receivable. Our adjusted EBITDA positive results puts us in a strong position to continue to deploy cash for sales and marketing, product innovation, and value-add acquisitions. Moving to our guidance for 2023.

Taking into consideration results year-to-date, we reiterate our full year 2023 forecast of: total revenue in the range of $80 million-$84 million and adjusted EBITDA guidance to a range of $0-$2 million. $82 million and $1 million are at the midpoint of the respective ranges. For the fourth quarter, we expect total revenue of $20 million at the midpoint of the full year 2023 range, which would be an 18% increase in revenue over Q4 2022, and adjusted EBITDA of $0.3 million at the midpoint of the full year 2023 range, which would be a 168% improvement over Q4 2022 adjusted EBITDA. With our strong Q2 results, which took year-to-date adjusted EBITDA to $0.7 million, we are in a strong position to complete 2023 fiscal year as an adjusted EBITDA profitable company.

We continue to be thoughtful and consider the macroeconomic environment and potential slowdown in consumer spending. Our financial guidance includes the following considerations. The forecast incorporates our internal target of the Rule of 50, meaning a total of greater than 50% for revenue growth, plus adjusted EBITDA margin for the full year. We expect holidays to drive incremental overnight versus daytime service demand, but also expect that severe weather will impact service demand. Pet adoption during the holidays also positively impacts pet insurance penetration and demand for wellness plans. We anticipate that continued growth in the pet industry, driven by factors such as higher rates of pet ownership, pet insurance penetration, and increasing demand for premium pet products and services, will have a positive impact on our full year 2023 results, including on our entrance to pet food and treats.

General trends related to the state of the economy, interest rates, consumer confidence. We have factored in potential risks and opportunities related to these macroeconomic factors in order to accurately forecast our financial performance. Finally, we recognize that there may be potential risks to our financial performance in 2023, such as disruptions to global supply chains, changes in consumer behavior due to unexpected events such as a delayed or imbalanced return to office, digital and performance marketing trends, the potential impact of AI, and our ability to expand through partnerships. In summary, our strong quarter results illustrate our team's strong ability to execute across our diversified revenue streams, taking advantage of opportunities that arise to build a profitable business and shareholder value. With that, we now welcome Q&A. Operator, can you kindly open it up for Q&A?

Operator (participant)

Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to ask a question at this time. One moment while we poll for the first question. The first question comes from Jason Helfstein with Oppenheimer. Please proceed.

Jason Helfstein (Managing Director)

Everyone, thanks. So Garrett, you're coming off of over 40% revenue growth this quarter. You know, want to push you to kind of comment on how you're thinking about growth potentially next year. And then, you know, how are you thinking about marketing relative to kind of growth? You know, you talked about a Rule of 50. Is that something that you want folks to focus on next year? But just whatever you can talk about, kind of like growth versus marketing as we're thinking about next year. And then secondly, any kind of color on mix of service versus wellness as we move into next year? Do we just kind of look at the current trends and just kind of assume the same mix shift as we move into next year? Thank you.

Garrett Smallwood (CEO and Chairman)

Thanks, Jason. Good to hear from you. Great question. I think, taking a step back, we're certainly very excited about the progress in 2023. Some good news, we haven't really seen any sort of consumer slowdown or, you know, change in behavior that I think maybe some were anticipating as a function of the macro this year. We feel like we have a really resilient premium consumer base. In terms of next year, obviously, we'll have more to share next quarter in terms of forecast, but I definitely think the minimum expectation, just broadly, is we're a Rule of 30, if not 40 marketplace. I think we're gonna see how this kind of quarter pans out, frankly, meaning Q4. But I think we're very excited about next year's potential.

There's a lot of great products and services on the roadmap in addition to the ones we launched this year. But to answer your question specifically, we're really just laying the groundwork to accelerate growth in 2024, and that growth should be very profitable, is our expectation.

Jason Helfstein (Managing Director)

Thank you.

Operator (participant)

Our next question comes from Jeremy Hamblin with Craig-Hallum. Please proceed.

Jeremy Hamblin (Senior Research Analyst)

Thanks, and congrats on the strong results here across your your segment. So, you know, I wanted to dive into your your wellness segment here, and just understand in terms of, you know, driving that growth also, you know, over 40% growth in that segment, is that being driven by more participation, more participants? I mean, you had a record number here in Q3 at 632,000, or being more driven by higher spend, or the combination of both?

Garrett Smallwood (CEO and Chairman)

Hey, Jeremy, great to hear from you. Again, Garrett here. Wellness is certainly a very exciting category. You know, I think you're seeing a number of insurers and wellness players and health players leaning into our marketplace. It's a great place to find and meet customers. We're certainly enjoying it in terms of our opportunity to match customers with great experiences and services and products they care about. In terms of participant growth, wellness is functionally gonna grow as a function of net new customers. Really, that's, you know, we're seeing basically like a one-to-one. More revenue from wellness implies more net new participants in the platform, and then you can imagine that those customers then cross-sell to the other ecosystems of products, right?

So you come for purchasing the right pet insurance product somewhere or finding the right pet insurance product somewhere, and then you stay for, you know, a daytime service or an overnight service or purchasing a maxbone product.

Jeremy Hamblin (Senior Research Analyst)

Got it. Okay, and then let me let me shift gears here and talk about, you know, sales and marketing. You know, as we as we look ahead here, you know, we're gonna get into, you know, an election year. Sometimes, you know, costs are a little bit higher for advertising. You guys are still running really strong, you know, CAC ratio, 9:1, I think, in the quarter. You know, any color that you might be able to share in terms of, you know, the the strategy you're utilizing to reach new customers, as well as to, you know, keep existing customers engaged on the platform or to reactivate, you know, lapsed customers?

Garrett Smallwood (CEO and Chairman)

Yeah, so I, I certainly think if you look at the LTV to CAC, we're running incredibly efficiently, is probably the best way to put it. We certainly think there's room to run. We made it pretty clear, I think, in the last two earnings, that we're very focused on profitability for this year, and we're thrilled that we're adjusted EBITDA profitable for the fiscal year as of this quarter. We don't expect that to change, obviously, for the remainder of the year. So now that we know we have kind of Adjusted EBITDA profitability as a, a minimum expectation, now I think we're feeling more comfortable with our, our ability to deploy more in sales and marketing.

So in terms of next year's thinking, I'd be surprised if we weren't leaning further into sales and marketing, whether that's with, you know, the big partners you'd expect, whether that's with partners that are offline, that we already have in place, or just, you know, existing customers that we wanna retarget or reach with custom offers. But generally, I think next year we expect to lean even further into sales and marketing.

Jeremy Hamblin (Senior Research Analyst)

Got it. And then, just a couple other questions here. You know, in terms of your pet caregiver pipeline, you know, have you seen any change? I mean, we still have, you know, unemployment is still quite low, but you are seeing an uptick, you know, in first-time unemployment. Are you guys seeing that pipeline still strong? Is it getting better? And then are you still experimenting in terms of the fee that you're charging to join the platform for the PCGs?

Adam Storm (President and Chief Product Officer)

Hey, Jeremy, this is Adam. Good set of questions. Long story short, no, there's no change in our supply characteristics. We really think it's the best gig in America, you know, walking dogs and sunny days and nice neighborhoods. It's you know it's kind of what everybody wants to do. In terms of kind of how the broader macro affects it, you know, in theory, unemployment would be good for us because it would make the gig more kind of, you know, competitive or whatever you wanna call it, but I really don't think that there's a macro tie-in. I think this is an awesome gig that, you know, people wanna do, you know, rain or shine, no pun intended. I don't think we're.

Regardless of what happens to the macro, I don't think that's gonna be a have a large impact. In terms of the onboarding fee you mentioned, it's really about finding price equilibrium or supply-demand equilibrium in a market. We're not, like, looking to really drive that as a primary revenue source, so any fluctuation you see in that onboarding fee is really just a supply and demand mechanism.

Jeremy Hamblin (Senior Research Analyst)

Got it. Last one for me, high-level question: You noted, this year's focus on profitability, which you look well on track to achieve. In terms of looking a little bit ahead here, you know, what is the... In an environment like this, where you get kind of, you know, shaky set of investors, a little more uncertainty in the macro, what's a reasonable timeline that you guys are thinking about to get your EBITDA margins into, let's say, the high single-digit range or maybe even up to 10%?

Garrett Smallwood (CEO and Chairman)

Yeah, so I think last quarter.

Yeah, no, I think last quarter, Alec hinted that we plan on reaching free cash flow by second half of 2024, which I think is a really important milestone, Jeremy, to your point. It's gonna default our ability to kind of manage the business independently from any macro factors.

And I think that would also then imply a strong EBITDA margin of, you know, high single digit. So I think that's sooner than anticipated, and we certainly expect to, you know, hit our free cash flow target in the second half of 2024.

Jeremy Hamblin (Senior Research Analyst)

Wow. Okay, great. Thanks for taking all the questions. Best wishes.

Garrett Smallwood (CEO and Chairman)

Thanks, Jeremy.

Operator (participant)

Thank you. The next question comes from Tom White with D.A. Davidson. Please proceed.

Tom White (Managing Director)

Great. Thanks for taking my questions, guys. Walking dogs in nice weather, in a nice neighborhood, sounds like a gig I need, right about now. If I could, just, I guess, first on the fourth quarter revenue outlook. So it looks like you beat the high end of the third quarter guide, but you're holding the full year kind of unchanged, and I guess at the midpoint, kind of implies the fourth quarter could be down a little bit sequentially. Is that just kinda seasonality or some of the weather kinda implications that you touched on, Alec? Or is there, you know, something else about the fourth quarter that maybe you're thinking a little bit differently about than you were a few months ago? And then I have a quick follow-up.

Garrett Smallwood (CEO and Chairman)

Hey, Tom. Great to hear from you. We love to have you. So, to answer your question on Q4, I don't know if you're following, but we expect a lot of inclement weather this quarter. I think California is already expecting, like, catastrophic storming next week, which obviously is a headwind in terms of some of the services business. Second thing is, we certainly saw a really strong Q3 in our wellness business as a function of pet insurance products, wellness plans, and other premium healthcare products. We're unclear if that trend will stay, although we've certainly been excited about their initial Q4 results that we've seen. But just to be really clear, we're really just thinking about 2024 and 2025 at this point.

Most of our focus is on next year and making sure we're growing profitably with strong margins.

Tom White (Managing Director)

Okay, that makes sense. And I guess just to follow up on the wellness piece and specifically like the, you know, the pet insurers, I'm just curious whether you're seeing any kinda change of behavior on the part of those advertiser partners that, you know, maybe could be related to the macro, like in terms of, you know, bid levels for leads or any volatility in the bidding. I'm just—I guess I'm just trying to see whether, you know, the macro, you know, might be having any kinda influence there. It doesn't seem from the numbers, but I guess maybe just kind of looking ahead, are you seeing anything different?

Garrett Smallwood (CEO and Chairman)

No, yeah, I think we're seeing strong demand. I think you saw on Q3, actually, people were leaning in further, asking if there was more they could be doing in partnership with us. I watched something, I think on CNBC this morning, around a Progressive CEO saying they're gonna be leaning back in aggressively in 2024. I think it's a good sign broadly for insurers. So we're seeing strong demand. We expect to see continued strong demand. I think the macro's cooling a bit. I don't know if that was true two quarters ago. Maybe we felt a little more volatility, but I think that's certainly calmed, and people certainly do seem to be in a better place.

Tom White (Managing Director)

Okay, great, guys. Thanks. That does it for me.

Garrett Smallwood (CEO and Chairman)

Thank you.

Operator (participant)

The next question comes from Matt Koranda with Roth Capital. Please proceed.

Matt Koranda (Managing Director)

Hey, guys. Good afternoon. So two questions. I guess, first one is just more near term in nature. In the services platform specifically, have you observed any change in behavior with your customer set, in response to any of the macro crosscurrents that have happened in the last couple of months? Just curious what you've seen quarter to date in terms of behavior, maybe just mix of services. If you could unpack sort of how to think about that, if there's any discernible change.

Adam Storm (President and Chief Product Officer)

Hey, Matt, this is Adam. Yeah, I think that, you know, our daytime services, as we've said, is a function of occupancy, which is, you know, challenged relative to, let's say, 2019, but no, you know, no real change there quarter over quarter. That's something that we've kinda been, you know, pretty open and honest about. Whereas the sitting and boarding segment, the overnight segment is more so a function of travel, and travel is doing great. Travel is actually above 2019 levels for the TSA data. So, you know, the services mix is probably gonna be a little bit more overnight as we think about Q4, which is seasonal, than 2024 generally. But we're really just letting the consumer lead us to what they want and then kind of investing behind them.

Matt Koranda (Managing Director)

Okay, yeah, that's fair. And then the other question was on Platform Participants. Nice growth this quarter, whether you look at it sequentially or year-over-year. Curious if maybe you could unpack for us sort of where, like maybe the split of Platform Participants by the segment. And I guess the other question that I had for you, which may be harder to answer, is how many of the Platform Participants that you cite are attaching to more than one of your segments? Just curious to get a sense for cross-sell between the segments that you have.

Garrett Smallwood (CEO and Chairman)

Yep. Hey, Matt, it's Garrett here. I wish you wanted to walk dogs like Tom, so I gotta say. No, we don't really talk about the Platform Participants by the revenue group because there's so much happening dynamically in a given quarter, whether that's less caregivers doing, you know, daytime or doing overnight. So that leads to that to be a different number or more people cross-selling in a given quarter because seasonality to things like, let's say, buying wellness plans or insurance products or talking to a vet. But I generally think that you should look at two things. One would be revenue divided by Platform Participants to get a good sense of ARPU, kind of how that trend is going. Obviously, want to see that continue to stay going up, frankly.

Like, that means we're doing a good job of cross-selling and monetizing the consumer base. The second thing would just be kind of revenue split by, you know, Platform Participants. Probably a good way to think about it. I mean, all these products are premium products. They're all somewhat expensive. Like, you know, I don't know if you've looked at maxbone recently, but Rompers are $90. So, generally, I think two things. One is there's certainly strong cross-sell happening, and that's something we expect to even lean into further as we broaden our, you know, our bench of products and services. The second thing would just be to think about, revenue divided by Platform Participants to get a healthy understanding of how we think about monetizing those customers.

Matt Koranda (Managing Director)

Okay, helpful, guys. I'll leave it there. Thank you.

Operator (participant)

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Garrett Smallwood (CEO and Chairman)

Thanks, all. Two things I wanna add that we didn't talk about in the management presentation. One is, just kind of we've gotten a lot of questions around the impact of AI and how we think about its efficacy in the Wag! organization. We're really very excited about AI and its potential. We think it's been a great tool for employees to accelerate their efficiency, their tasks, and ability to just put, you know, create more, frankly, like, do more with less. As a result, we're really thinking about headcount and SG&A efficiency in 2024 as a function of AI and automation. We don't expect much headcount changes. We think we're gonna see an operating leverage in the business. The second thing is, we're very excited about the future for Wag! and 2024 specifically.

I think you'll continue to see us leaning into long-term profitable growth. We think it's. We're still very early on this journey. So if you have any two takeaways today, other than the fact that we just did record revenue and record EBITDA for the seventh consecutive quarter, it's that, we're very excited about 2024 and the opportunity for new technology to improve our customers' lives and, shareholder value.

Operator (participant)

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.