Rover Group, Inc. (NASDAQ:ROVR) Q4 2022 Earnings Call Transcript

Rover Group, Inc. (NASDAQ:ROVR) Q4 2022 Earnings Call Transcript February 27, 2023

Operator: Good day. And thank you for standing by. And welcome to the Rover Fourth and Full Year 2022 Earnings Results Conference Call. As a reminder, today’s conference call is being recorded. I would now like to turn the call over to your host, Mr. Walter Ruddy, Investor Relations at VP Capital Markets. Please go ahead, sir.

Walter Ruddy: Good afternoon. Thank you for joining us to discuss Rover’s fourth quarter and full year 2022 earnings results. In this call, we will be discussing the results announced in our press release issued today after the market close, which is available on our Investor Relations website at investors.Rover.com. As a reminder, this call is being webcast live from our Investor Relations website and is being recorded and will be available for replay from our Investor Relations website shortly after this call. With me on the call this afternoon is Aaron Easterly, Chief Executive Officer and Co-Founder; Brent Turner, President and Chief Operating Officer; and Charlie Wickers, Chief Financial Officer at Rover. Before we begin, I’d like to remind everyone that management will make certain forward-looking statements within the Safe Harbor provisions of the Securities Litigation Reform Act of 1995 on this call including future GAAP and non-GAAP financial and operating results, business performance in 2023 guidance, marketing and other strategies, future growth, prospects, profitability and liquidity, expected investments and initiatives, macroeconomic, public health and travel factors and trends, partnership and expansion opportunities, statements regarding our share repurchase program, other future events, industry and market conditions in domestic and international market growth opportunity.

These forward-looking statements are subject to known and unknown risks, uncertainties that could cause actual results or performance to differ materially from those expressed or implied during the call, including the risks and uncertainties included under the caption risk factors and also in our Form 10-Q filed on November 10, 2022, and our upcoming Form 10-K. All forward-looking statements speak only as of today and based on current expectations, estimates, forecast and projections, and the beliefs and assumption of management. We undertake no duty to update these statements unless required by law. You should not place undue reliance on forward-looking statements as they are not guarantees of future performance. Certain information referenced in the presentation is derived from third-party publications and sources.

We have not independently verified such information. We also discuss certain non-GAAP measures to the most directly comparable GAAP financial measures in historical reconciliation to the most directly comparable measure can be found in the non-GAAP reconciliation supplement posted under News & Events Presentations section on our Investor Relations website. For the reasons disclosed in the non-GAAP reconciliation supplement we have not provided the most directly comparable forward looking GAAP measure or reconciliation of any forward-looking non-GAAP measures beginning in the third quarter of 2022, our adjusted EBITDA and non-GAAP general and administrative expense calculations exclude the amount of our previously announced legal settlement.

And our adjusted EBITDA calculations was updated to reflect the change in fair value of and amid the loss from an equity method investment. Non-GAAP financial measures provided should not be considered as a substitute for or superior to GAAP financial measures. Unless otherwise noted, we will compare all Q4 2022 metrics to Q4, 2021 and full year 2022 metrics to 2021 on this call. With that, let’s get started. I’ll now turn the call over to Aaron Easterly, Co-Founder and CEO. Aaron?

Aaron Easterly: Thanks, Walter. Thank you everyone for joining us today. I will start by outlining our high level fourth quarter and full year 22 earnings results, give a few highlights and then provide some comments on the year ahead. I will then turn the call to Brent to provide additional detail on our bookings and investments. Charlie will then wrap up the prepared remarks by walking through the financials and our detailed guidance before we take questions. Our fourth quarter cap off a great year at Rover with both revenue and adjusted EBITDA up year-over-year and above the high end of our guidance range. Full year gross booking value was just shy of $800 million while revenue was $174 million and adjusted EBITDA was $21 million or 12% margin.

Turning to the fourth quarter, we recorded revenue of $52 million, gross booking value of $218 million and adjusted EBITDA of $11.2 million or 22% margin. Of note, we had net income of $5.3 million in the quarter, a milestone I’m proud of, and look forward to repeating in the future. Behind these impressive results with the hard work of our team, who executed against several important focus areas. First, we attracted a record number of customers to Rover Group this year, in 2022, the Rover marketplace new customer bookings were 939,000, the highest level ever, up 17% year-over-year, we expanded our marketing mix, including opening up new distribution as a vehicle to drive customer acquisition. The Bright Horizons deal showed positive signs in Q4.

And we’re excited to continue this momentum in the employer sponsored care channel. We also added training as an offering with our acquisition of GoodPop, which we continue to integrate within the marketplace. GoodPop now obtains a significant percentage of its customers from the Rover ecosystem. And we expect the business to drive single digit millions in revenue in the coming year. Second, 2022’s cohorts have continued the record trajectory, resulting in our highest expected LTVs to date. This is a result of strong unit performance, take rate and ABVs. In the past year, we have focused on improving the booking experience, and we expect there to be opportunities for future gains. Third, we’re increasingly demonstrating the operating leverage in core business.

Adjusted EBITDA margins grew to 12% for the full year, but the effect was much more evident in the second half of the year as we near the end of our marketing and fixed cost normalization. Fourth quarter adjusted EBITDA margin was 22% compared to 20% in the year prior. Fourth, our international business continues to see strong GDP growth. Further evidence the Rover is not just a US phenomenon. Europe grew 78% year-over-year during Q4. Full year, GBV growth was particularly strong in the UK and France. If we look to 2023, we believe is prudent to plan for external economic and health related factors that could impact our business. While our 2023 base case includes impact from these potential external factors, we remain confident in our ability to grow profits, generate cash, and achieve our long term financial objectives.

In light of our strong operating results, and long term outlook, we’re also pleased to announce our board has authorized a $50 million buyback program. As stewards of the company’s assets we are committed to deploying capital strategically, in order to drive long-term value for stockholders. To do so, in general, our lean is to pursue opportunities to reinvest in our business through a combination of improvements in our technology, select expansions to our services, either organically or in organically, and calculate best accelerate new customer acquisition. As we concern our market opportunity, forward looking cash flow, strong balance sheet, needs for investment in the business in our current market valuation, we saw an opportunity to reinvest in our business and create value for stockholders.

We expect this program to commence shortly, but the overall execution will be dependent upon market dynamics. All-in-all, I’m proud of the team’s progress and the results Rover produced this year. As we look forward, there’s immense opportunity for Rover and we’re energized by our plans. Now I’ll hand the call over to Brent to provide more detail on our bookings and operational performance.

Photo by Karlo Tottoc on Unsplash

Brent Turner : Thanks, Aaron, and hello, everyone on the call. I’ll start by providing more color regarding the performance of the business and driving booking volumes. I’ll then turn to marketing expenses, both for the quarter and full year, and then provide a bit of an outline regarding what to expect from us in 2023. Finally, I’ll say a few things about our product investments during 2022 and our priorities for the coming year. With regard to bookings, in 2022, we continue to generate significant new and repeat business on the platform. Total bookings increased 32% year-over-year, including 939,000 new bookings. New bookings for Q4 specifically were up 9% year-over-year, demonstrating our continued growth as we passed the anniversary of 2021 peak of pent-up demand.

Turning now to marketing expenses, in Q4 2022, non-GAAP marketing expense was 18% of revenue, up from 16% in Q3, but still at the low end of our target range of 18% to 25%. This increase was consistent with our prior comments regarding our intention to accelerate marketing during Q4. For the full year, non-GAAP marketing expense was 20% as compared to 17% during 2021. This change reflected increased testing and implementation of up funnel channels such as YouTube, streaming video and linear television, as well as more forward linking approach during the year versus 2021. To provide a bit more color, in 2022, we reached conviction that committing to these videos enabled channels as ongoing parts of our marketing mix was the right move for Rover.

We made this conclusion after significant progress and understanding the value that video advertising can bring to our bookings growth over the short to medium term. We plan to build on this progress between in 2023 by converting our testing success into ongoing campaign spending. And we will continue testing additional media such as linear and streaming TV while further refining our measurement tools. One additional area I’m particularly excited about from 2022 is our expansion of partner channels. Our previously announced partnership with Bright Horizons is off to a promising start providing additional evidence that distribution channels generally, and the employer benefits space specifically, has solid potential. Our partnerships in this customer channel in the very earliest days, we’re excited about by the opportunity to generate value for our customers and accelerate our business in the future.

Turning to product development, in 2022, we continue to invest in improving the Rover platform experience for both care providers and pet parents. For pet parents, we focus on making our platform easier to use and more efficient in matching pet parents with care providers. We are particularly excited about the early success of our contact more sitters via mobile apps feature which allows pet parents to easily reach out to multiple care providers. We estimate that up to an additional 25,000 people will successfully book on Rover during 2023 with this product improvement. For care providers, we implemented a number of trust and safety improvements. In 2022 specifically, we expanded our monitoring capabilities on the platform, so we can spot and address potential problems more quickly.

As we look forward to product development in 2023, we remain focused on improving customer experience in several ways. We will continue to simplify the booking process to make it easier and more intuitive for pet parents to book with care providers. We will make appropriate further integrations of good stuff into the overall platform. And we will allow our customers to more naturally learn about and book all our services. And we will improve our effectiveness and helping care providers understanding how to unlock the value of the Rover platform. We’re proud of our progress and our results this quarter. The Rover team continues to execute well driving both new and repeat customer bookings in building scale. Now I’ll hand the call over to Charlie to provide further detail on our financial performance.

Charlie Wickers : Thanks, Brent. I’ll start by providing an overview of our financial results for the fourth quarter and full year 2022 followed by guidance. As Aaron and Brent have discussed, we have finished the year strong with Q4 results that exceeded our guidance on both the quarter and full year. And importantly, we finished the year with tremendous progress and showing our expense leverage including $5.3 million of net income in Q4. Further, as we continue to focus on achieving our goal of consistent GAAP profitability, we are already generating significant cash. For the full year, revenue was $174 million, up 58%. While adjusted EBITDA was $20.8 million both above our guidance range provided during our Q3 earnings call.

GBV was nearly $800 million, up 53% on the back of strong bookings and ABV growth. For the fourth quarter, revenue was $52 million, up 37% while GBV was $218 million, up 31%. The increase in revenue was primarily driven by the growth in bookings as Brent detailed and increase in average booking values and an improvement in cancellation rates. Our fourth quarter ABV was $150, up 10% year-over-year. This rate of growth has continued to moderate as expected since the peak increase in Q4, 2021. The core driver of ABV growth was an increase in average price per service with overnight services being the main contributor. Our fourth quarter cancellation rate was 14.6%, an improvement of 140 basis points year-over-year. Non-GAAP contribution increased to $43 million in Q4, 2022 from $32 million in Q4, 2021 driven by growth in revenue, partially offset by higher provider onboarding fees.

Moving to expenses. We believe our cost structure is generally right sized for the operating environment, and thus don’t anticipate significant changes. While labor costs in the market have trended upward, we have navigated that dynamic in our expenses through conscientious headcount management. However, as Aaron mentioned, our preferred investment path is in the core business and we will remain agile and consider incremental fixed cost investment if we expect they will produce attractive returns. For the fourth quarter, non-GAAP operations and support expenses were $7 million or 14% of revenue, flat compared to the third quarter of 2022 and up from 12% of revenue in Q4, 2021. The increase compared to the prior year is a result of the scaling of personnel in order to provide an appropriate level of staffing as we drive increasing demand on our platform.

We expect non-GAAP Operations and support as a percentage of revenue to remain at or below this level in the medium term. We continue to see leverage in non-GAAP product development expenses, which were $6 million or 11% of revenue, compared to $5 million or 14% of revenue in Q4, 2021. Fourth quarter non-GAAP general administrative expenses were $9.2 million or 18% of revenue compared to $9.8 million or 19% in Q3, and $10.1 million or 27% of revenue in Q4, 2021. As previously discussed, we ramped our public company cost during 2021 and into mid-2022. And we anticipate non-GAAP G&A to grow only modestly and absolute levels and decline as a percentage of revenue on a full year basis as the business scales. Adjusted EBITDA was $11.2 million or a margin of 22%, up from the adjusted EBITDA of $7.6 million, or a margin of 20% in Q4 of last year.

The improvement in adjusted EBITDA resulted from strong revenue paired with moderated fixed cost investments. In the recent periods, including Q4, since increasing our marketing spend to within our target range, and keeping an incremental fixed cost investments modest, we have demonstrated that incremental revenue can flow through to adjusted EBITDA. As discussed earlier, for the full year 2022, we achieved $20.8 million of adjusted EBITDA. We also generated $1.7 million of net cash from operating activities, and negative $6.5 million of free cash flow, which were inclusive of a $25 million impact due to our transition to a single payment processor, requiring it balance transfer from our cash and cash equivalents discussed on our Q3 call. Absent the payment processor transition, 2022 free cash flow would have been roughly in line with 2022 adjusted EBITDA.

In comparison, in 2021, we generated $12.4 million of adjusted EBITDA, $14.3 million of net cash from operating activities and $7.1 million of free cash flow. Moving to the balance sheet, our cash, cash equivalents and investments increased from $266 million at Q3, to $273 million at yearend 2022. As Aaron highlighted earlier, our strong balance sheet combined with our view of forward cash generation, gives us confidence in our ability to invest in the business, while also repurchasing shares at an attractive level. Additionally, at this time, we do not see a need to increase cash balances from current levels. As such, our board has authorized a 12-month $50 million share repurchase program that will be executed subject to our ongoing assessment of market conditions.

Alongside this authorization, we have made an adjustment from to cover to a net withhold mechanism for tax payments on employee RSU vesting. We believe both the buyback and this administrative change are the right investments for the business. In summary, our business delivered strong top and bottom line results during the quarter and year. And we are excited about the direction we are headed. Now turning to guidance. Given the positive context Aaron and Brent discussed and our overperformance for the full year and Q4, we are excited for the year to come. In 2023, we continue to balance growth of both the top and bottom line demonstrating progress toward our target adjusted EBITDA margin. as Aaron mentioned, we incorporated several factors that might impact our 2023 results into our guidance, such as a mild to moderate recession and other macro disruptions due to public health concerns or travel disruptions.

Our forward macro assumptions are layered into the guidance in both the top and bottom end of the range, the severity of each along with regular variations in the business performance guiding the spread. We also continue to assume elevated cancellation rates in line with Q4, 2022, adjusted for seasonality. Additionally, our cost structure for 2023 includes a full year marketing investment, more aligned with Q4 levels, which was in line with our target range, and our normalized G&A cost structure inclusive of modest annual growth that has been approximately flat since Q2 of last year. For the full year 2023, we expect revenue of $205 million to $215 million, which at the midpoint would be a 21% increase in revenue over 2022. And adjusted EBITDA of $25 million to $30 million, up from $20.8 million of adjusted EBITDA in 2022.

For the first quarter, we expect $37 million to $39 million in revenue, which at the midpoint would be a 37% increase in revenue over Q1, 2022 and negative $5 million to negative $3 million in adjusted EBITDA, reflecting the seasonally low nature of Q1. In summary, we are excited about the overall performance of the company in 2022. And look forward to executing against our priorities in 2023 to drive growth in the top line, while marching towards our long-term margin goals. We look forward to working with order to discuss our progress in Q1. With that, we will now turn to questions. Operator, can you open it up for Q&A?

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Q&A Session

Operator: Our first question comes from Maria Ripps of Canaccord.

Maria Ripps: Great, thanks so much for taking my questions. First, could you maybe share an update on any impact you’re seeing from the macro environment on either provider or customer behavior, anything sorts of in terms of pricing, stay, length of stay frequency, et cetera that’s what’s calling out.

Aaron Easterly: Hi, Maria, this is Aaron, good to hear your voice. Yes, on the macro side, we’re seeing a couple of things. Let me start with pricing. As Charlie mentioned, we are seeing the rate of price increases slowdown noticeably over the course of the last 12 months. We’ve also discovered through the process of experimentation, that we do see some price sensitivity in the marketplace. So prices have risen less quickly over the last 12 months, we would have seen a higher amount of rebooking and higher amount of new customer acquisition. With regards to the broader macro stuff, but it’s hard to say that there’s a large current impact, we are generally seeing relative strength in the travel sector. If you look at Expedia bookings in January, if you looked at TSA statistics, so we see positive signs there, although we may be a little bit sluggish, and just our own category growth.

Our modeling, our thinking is that the impact the macro side, we’ll probably hit peak in the second half of the year sometime.

Maria Ripps: Got it. That’s very helpful. Thank you. And then sort of given that you’re profitable, but the macro environment is uncertain. Could you maybe talk about some of the factors that could cause you to invest more or less aggressively in 2023? And then how are you thinking about prioritizing investments across product, marketing and international.

Aaron Easterly: So there are possibilities where we could invest both more or less. In the case that we see continued returns on our product investments that we think can be sustained over multiple engineering cycles of multiple years; we’d be inclined to up our fixed cost investment in the product side. In the case that we see our expansion in a new marketing channel continue to be effective, we could increase our spend there as well. We could see some attractive acquisition opportunities on the M&A side and go there and we could enter some new regions geographically, so enter new countries, for example. And finally, we could roll out just new product offering organically. Some things that could have us go slower if the macro environment is generally worse than what we’re planning for.

And we’re planning for mild to moderate recession. If we could pull back a little bit, if those distribution partnerships and the newer marketing channels are less effective, we could pull back a little bit. If we don’t see as much on the product side, we could continue to hold that pretty tight from a year-over-year perspective. Hope that’s helpful.

Operator: Our next question comes from the line of Ralph Schackart of William Blair.

Ralph Schackart: Good afternoon. And thanks for taking the question. First question just on the 2023 guide, I think Q1, some contemplate somewhere around the mid 30% range in terms revenue, and the full year is around 20% or so roughly speaking. So just curious sort of what’s implied in that guidance is the strong Q1 guide. Just sort of what you’re seeing now. And then that conservatism, perhaps for the full year that you called out potentially with a recessionary environment potentially just that’s the first question and I have a follow up.

Aaron Easterly: Sure. Sure. Hi, Ralph. It’s good to hear your voice. Yes, we definitely have intentionally modelled the business that way. When we look at the macro impact, we’re not seeing huge evidence of it hitting hard right now. So we’re assuming that there’ll be a general ramp into a more challenging macro environment towards the second half of the year. As a reminder, the Q1 this year is also a little bit weird, because we’re seeing some of the leftover effects of Omicron last year, says we kind of overlap a period that probably had a little bit of suppression in it, we would expect for the growth rates to be a little bit higher, but we are modeling and kind of increasing the impact as the year goes on for the macro piece.

Ralph Schackart: Great. And then in the prepared remarks you talked about the new distribution haven’t really strong impact for acquisition. And just if you could provide some more color around that is that Bright Horizons and the new deal, but anything get out, that’d be great. Thank you.

Brent Turner : Hi, Ralph, it’s Brent. It’s good to hear your voice. Yes, we are not allowed to say more beyond the prepared remarks. We are excited about the early returns on this partnership. And we think we’ve gotten not only some momentum in the marketplace as a result of it, but also a little bit of a roadmap to what successful partnerships can look like in the future. And so and we’re excited about Bright Horizons as a partner and what this year can look like.

Operator: Next question comes from the line of Andrew Boone of JMP Securities.

Andrew Boone: Good afternoon, and thanks for taking my questions. It sounds like one of the key investments for 2023 is more brand spend. Can you guys just double click in terms of what you guys have seen so far in terms of the test, and then talk a little bit more about the justification of ramping that brand spend around 2023, and maybe any thoughts on awareness?

Brent Turner : Hi, Andrew, it’s Brent. Thanks for being on the call. So going back to our philosophy around in the key challenge of the business on the brand side, now we are trying to build a category in this space, that compete with friends family neighbors with new concept. It’s not a not a new challenge for businesses like ours. On the other hand, we have made a philosophy decision internally that we will not spend money strictly to drive brand awareness that we are going to hold our spending accountable for demonstrable accelerations to new customer acquisition that we can see that we feel comfortable with from unit economic standpoint. What happened last year is we did a number of tests. YouTube, linear TV, streaming TV, we’re very interested in the video format and from advertising standpoint have felt that it offered us the best chance to tell our story and to do a combination of category development with new customer acquisition at the same time.

One of the reasons why those tests take a while was because the return of those channels takes longer to come in. Because a lot of the people that you’re hitting are not themselves in market so there’s quite a bit of creative learning, quite a bit of media source learning you have to do. But last year, we did get to conviction that we are seeing the unit economic performance we want; we are getting the category development that we want. And so those are the right decisions for us. So, in short, we’re doing it because we think it’s a good use of money when compared to other things that we can do. And it falls within our unit economic constructs.

Aaron Easterly: Andrew. This is Aaron. Just one additional comment, maybe summarizing that piece is we would lose the term brand spend there, pretty loosely. We are using some of the media channels more traditionally associated with brand marketers as a higher portion of our mix, but we’re still holding it accountable to our response metrics.

Andrew Boone: Just as a follow up to that, can we tie that into a little bit of Ralph’s question? So, new bookings. Looks like they kind of grew mid-single digits, if you go in the back half of 2022. As we think about the guide for 2023 and we think about the macro pressures that you guys have incorporated, is that then a step down in marketing efficiency in new bookings or should we think about that more on the repeat bookings line and the slowdown there? I’ll pass mike. Thanks so much.

Brent Turner : Can I take that last question? Yes. Andrew, let me pick that back up. It is worth remembering that it may, from a financial standpoint, look like a fall in efficiency, but it’s worth remembering that about half the bookings that we, new bookings that we drive every month are absolutely free. And so as we step up channels, that it is possible to step up channels that are performing quite well from an efficiency and from a unit economic standpoint, but for advertising expense divided by new bookings to also go up. So to appear that we’re falling in efficiency when we’re making sound marketing decisions on our side. One additional piece in terms of the second half impact, I think the question is a little bit about how we modeled it.

I would say we’re modeling it where it has an impact on both new and repeat, not dissimilar from like a COVID wave or something like that, where it has both an effect on the frequency going to see by which people come back to us as well as have some suppression of new demand.

Operator: Our next question comes from the line of Lamont Williams of Stifel.

Lamont Williams: Hi, thanks for taking the question. Just wanted to touch on the cancellation rate. I know we had some weather issues in December and there’s some seasonality, and we saw a little bit of an uptick in the cancellation rate. Have we seen that come off a little bit in the new year? And then how are you thinking about kind of the trend over?

Charlie Wickers : Hey, Lemon, it’s Charlie. With regards to the cancellation rate, we didn’t see that material of an impact from the weather event or the weather events that played out. What we did see was a little bit of trending down year-over-year, which we are anticipating. We had been at elevated levels for a while as it related to COVID. And so we’re starting to see that trend down a little bit. As we headed into Q1 of this year. And similar with our assumptions on the full year basis, we’re effectively thinking that we’re going to be flat plus or minus seasonality for Q4 levels with regards to the cancellation rate going forward.

Aaron Easterly: One additional comment on that to the longer term piece. We have over the past year; we have seen a reduction in the impact that a COVID wave has on our cancellation rates. So versus, compared to the prevalence of COVID and the population, the negative impact on our business has lessened. So if that trend were to continue, we’d view that as a positive thing in terms of cancellation rates a year out, half a year out. But we’ve been surprised a couple of times on the COVID front, so we’re taking more of a wait and see approach to that.

Lamont Williams: Okay, great. That’s helpful. And just secondly, is there anything to call out in terms of geographical differences domestically that you’ve seen? Urban, rural, anything of that sort.

Brent Turner : Hi, Lamont, it’s Brent. Not that we have noticed that is noticeably accelerating or decelerating the marketplace thus far.

Aaron Easterly: And with that, Lamont, was that question with regards to just the overall business or with cancellation rates specifically.

Lamont Williams: Oh, just with an overall business, sorry.

Operator: Our next question comes from the line of Lauren Schenk.

Lauren Schenk: Great, thank you. I guess how should we think about ABV for the year? Is it safe to assume that you’re expecting that growth to continue to slow throughout the year but remain positive? And then maybe this is sort of a tougher question to answer, but what sort of travel backdrop are you assuming in the guidance range? Is it fair to assume, if you’re assuming some sort of recession, that your sort of travel outlook for €˜22 is below sorry, €˜23 is below €˜22. Thank you.

Aaron Easterly: Hey, Lauren, this is Aaron. So, with regards to the, let me take the first, the second part first, the travel outlook, we’re assuming mild to moderate recession. And what the travel impact you would typically see with that type of economic environment. I think the assumptions for the most part right now is that would probably impact lower to middle income people more than higher income people in terms of decisions to travel as well as trading down, it’s worth noting that we’re probably only really impacted to the degree that people decide not to travel versus they decide to take a cheaper flight or stay at a cheaper hotel or Airbnb. With regards to the first piece, we are expecting the ABV growth to slow down, but there are some things that could happen that might change that overall blended average, if we see more of a mix shift back to daytime services and dog walking, that could pull that down.

If we run experiments where it makes sense to show a different profile of service provider, that could have a mix shift on prices, but that is our baseline assumption. Charlie, would you like to add anything to that?

Charlie Wickers : Yes, just to wrap that up with Aaron. With regards to ABVs, to think about it from a modeling perspective, the rate of growth, we continue to assume that it’s going to decelerate, and it’s been decelerating now for about six quarters. So we would expect that to continue.

Aaron Easterly: But we wouldn’t expect it to be zero or go backwards in the case that we’re still operating in an inflationary environment.

Lauren Schenk: Okay, understood. And then just any changes that you’re seeing on the supply side from their side? Thanks.

Brent Turner : No, we still feel really good about where we are, Lauren. The supply strategy that we’re doing across all the services, we continue to tweak it and refine it, but nothing fundamentally different. And no pressure.

Operator: Our next question comes from the line of Eric Sheridan with Goldman Sachs.

Eric Sheridan: Thank you for taking the questions. Maybe two that I think are follow ups to things that have been asked. But during the prepared remarks, you sort of teased out the idea of a broader set of potentially industry partnerships when you think about go to market strategies. Would you be, I know nothing to announce today, but would you be trying to attempt to sort of lower acquisition costs? Would this be attempted to try to a greater degree monetize the existing user base? How should we think about what the end goals would be of those types of partnerships so we can understand what you’re trying to solve for necessarily, that’s number one? And then you’ve referenced, as we have on prior calls, elements of the travel industry.

Have you seen anything with your own booking window where there could be either earlier or greater length of the booking window than you’ve seen before, where bookings are happening earlier in advance because of travel plans and/ or that the dates of bookings could actually be longer than you’ve seen in prior periods and might run counter to normal seasonality? Thanks.

Aaron Easterly: Hey, Eric, with regards to your first question, we generally view that one of the primary challenges with Rover’s business, and it has been for ten years, is educating the shadow market, which is the 90% of pet owners that historically use friends, family, neighbors when they need care for their dog when they’re out of town. So we look at these types of distribution partnerships or partnerships with people in or out of the industry as a way to have cost effective customer acquisition of that 90%. So kind of cost effectively educating the 90% of people that would otherwise not even be thinking about Rover as an option. So call it category building. Cost effectively is the primary goal. There can be some secondary or tertiary goals.

In some cases we may hope to see a little bit of increased repeat usage on a per customer basis to a degree, like something like an employer subsidizes it. We could be seeking to just make sure that we’re known as the standard and are partnered with key brands. But the primary thing is addressing a type of customer we are unlikely to get in front of directly in a very cost effective manner.

Charlie Wickers : And with regards to your questions regarding booking windows, we have seen year-to-date an increasing slightly of the booking windows, about 10%. That works out to about a day and a half to two days in terms of an increase, that puts us just above three weeks on average, from an average lead time perspective.

Operator: Our next question comes from the line of Cory Carpenter with JPMorgan.

Danny Pfeiffer: Hey, guys, this is Danny Pfeiffer on for Corey Carpenter. I just have two quick ones. The first is, have you seen any uptick in daytime services as more people are sort of returning back to the office. And second, on international, you grew Europe about 78%. Can you talk about any initiatives you’re planning there and maybe kind of what’s different versus US and maybe is that just starting out smaller or anything? Thanks.

Aaron Easterly: Sure. Danny the with regards to the service mix, we have seen a little bit of tick up in daytime services, but most of that gain has been in drop in, our drop in segment and our drop in service line is typically done during the day. Looks a lot like a dog walk, but can sometimes be used as a substitute for house sitting or boarding. So yes, there has been a slight notch up in what we call daytime services, but I think based on the fact that most of it’s happening in drop in, it would probably be not appropriate to say it’s a result of some massive return to work within our customer base.

Brent Turner : Do you want to talk about international? Hi, with respect to international, I think what you are seeing is probably best understood as the scaling dynamics of a pretty early stage footprint sort of growing along with the continued acceleration of travel behavior in Europe. We’ve been pretty happy with what we think is our trajectory relative to the category there and we actually think the presence of a category in Europe versus in the United States where we’re sort of going it alone, maybe helping us drive awareness and maybe a tailwind to grow for us there, more to say later as we get more conviction around that.

Operator: Our next question comes from the line of Tony White at DA Davison.

Tony White: Great, thanks for taking my question. Two, if I could on international one. Could you maybe just frame for us a bit how international in calendar €˜23 is kind of going to affect consolidated EBITDA profitability of the company? And then secondly, can you maybe just talk a little bit about how your international operations, how they’re tracking relative to the US at sort of the comparable point in time for the US as it relates to things like marketing efficiencies, unit economics, profitability. Thanks.

Charlie Wickers : Hey, Tom, this is Charlie. I’ll take the first and Brent will take the second. With regards to consolidated impact, I’ll just start with the top line. As we exited last year, international had moved from about 5% of GBV to about 8% of GBV. And so with that, it’s just kind of implied there that international business is growing pretty fast. And so from contribution to the business and contribution to EBITDA here in 2023, we still expect international to grow at a faster rate. And therefore, we’ll have a bit more of its share of marketing dollars as a result, because new bookings are on the faster pace. With that, the international business really leverages a lot of the core marketplace. And so it’s, the way to really think about it is how much are we putting against marketing for international and then what do we need from an operations perspective to support that business?

So, on a go forward basis, we’re excited about the opportunity ahead and we’re continuing to put the pedal down with regards to investment.

Brent Turner : Hey, Tom, it’s Brent. I just wanted to wrap that up by saying when we went particularly to Europe, we had a hypothesis that we could leverage a lot of the same tech investments. Operate the business in a very similar way from a unit economic standpoint, and that we would see similar levels of loyalty, similar evolutions of our market — our critical marketplace metrics, similar economies of scale. And that has played out a lot more or less exactly as we thought. There are some variances. Our international business is ahead of where we were in the US and SEO right now, I think at this time, because they’re leveraging our existing assets, they’re able to drive awareness a little bit more efficiently because our publishing asset, our blog asset, is a lot more mature and we’re able to push it.

We were able to leverage learning that we picked up during this time to share with our international operation. But growth rates are similar, unit economic profile is similar. So we’re quite pleased with the way this has played out for us.

Tony White: Okay, great. Maybe one follow up if I could, follow up on the earlier question on supply. I thought maybe I heard in the prepared remarks something about raising I don’t know if it was onboarding fees for caregivers. Forgive me if I misread that. But just curious whether that reflects maybe you guys seeing an influx of caregivers from just kind of the macro and inflationary pressures and just generally how you’re thinking about or feeling about supply in the marketplace, or rather marketplace balance, I should say kind of the balance between demand and supply. Thanks.

Charlie Wickers : Yes, Tom, I’ll try to hit that right on for you. With regards to the prepared remarks, I was referring to our provider onboarding fee, which is substantially made up of the background check cost. And beginning of last year, we switched everybody to an enhanced background check versus that being an additional optional choice that a provider could make. And with that, just the overall cost of the background checks has stepped up as a result. We think this is the right move for the business. We think it provides a layer of trust that was incremental to what we had before, and that was the primary goal there. With regards to supply demand balance, we feel like we’re in a great spot there. We don’t have any micro level marketplace dynamic that is suggesting that we’re undersupplied. Thank you. I’m showing no further questions at this time. I will turn the call back over to Aaron Easterly for any closing remarks.

Aaron Easterly: Thank you all for joining us today. We wrapped up a great 2022. And we’re excited about the year ahead. We appreciate you taking the time to continue to get updates on Rover and hear more of our story.

Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.