Hey, everybody. Thanks for joining us. My name is Kaumil Gajrawala. I'm the new Jefferies Consumer Staples, Wellness, and Pet Analyst. I'm happy here to have Charlie Wickers, CFO of the Rover Group. Charlie, nice to see you, man. Why don't we kick off with, you know, just a brief introduction of your business and business philosophy? Kaumil, good to see you. Thanks for having us. So for those on the call, a little bit of a background about Rover. Like most successful businesses, Rover really began with a single individual's personal experience. In our case, it was a single pet owner who was frustrated with the options for pet care, and at that time, Airbnb was not really rolling like it is today. But it was clear that one of the byproducts of the ubiquitous mobile devices was the opportunity to build a business where the responsiveness of individuals was at least as good as it was for small businesses. So when you fast-forward today, Rover is an Airbnb-style marketplace for pet services. The app allows pet parents to browse, book, and manage care. It also allows people who want to provide pet services for largely side income to enter the business basically with zero startup costs. The core of Rover is five services operating at scale, including overnight services like boarding for your pet or house-sitting at your home for your pets, and then daytime services like walking and drop-ins. We operate in the U.S., Canada, and Western Europe, and our primary competitors are friends, family, and neighbors in all of those geographies that we operate, who, for the most part, really don't want the business anyway. So it's a great competition to have. When it comes to commercial competition, we are by far the largest player in the U.S. and Canada. In Europe, we do have competition at the individual market level, but not really at the Pan-European level at which we operate and scale. Okay. Can you maybe talk about the kind of key occasions, use cases, you know, that, that most of the customers will, you know, that they... The, the maybe the biggest pieces of your business and biggest sort of occasions and uses? Yeah. Our primary competition, like I said previously, is friends, family, and neighbors. And it's really when people are looking for services and one of those are not available. So we are the commercial replacement solution for that. We see that in our overnight services, which make up about 75% of our GBV. And similarly, when pet parents are away from their home for a long stretch during the day, like while they're at work, we see them turn to Rover. Daytime services were a larger part of our business prior to COVID and took a step back as many people began working from home. For the first half of 2023, though, both our daytime and overnight services were growing well. However, during the same period, we have not seen the full mix shift back to the pre-pandemic norms. Mm. More time at home, as we, as we think about this, more time at home when people are there, working remote, we see it that there's an increased likelihood that people are going to take vacations. So we think it's. Mm. Highly likely that people will continue to use our services on a go-forward basis. We also see. Mm T hat the return to office might accelerate the use of daytime services. So we're interested in continuing to monitor that and see how it plays out. However, there's a couple of dynamics that are in the background. We did see that pet adoptions were pulled forward a little bit during 2021 and 2022, so we would expect a little bit of headwind on that front. And in addition, we see that our business is also partly correlated to housing and specifically when people are moving from geography to geography. In the case where the housing market slowdown continues, that would be something that is a temporary headwind for us. Oh, interesting. You mentioned who your competition was, but can you maybe just talk about the advantages of Rover versus that competition? Yeah. The main drivers of searching on both sides of the marketplace are the same, ones that we've had from about 12 years ago. Right W hich is massive dissatisfaction with alternatives. It's actually still fun to talk to people- That helps. Yeah, it does. It's really fun to continue to talk to people about Rover who have never heard of it. A lot of the time we just hear, "Okay, I'm definitely signing up for it." And when we talk to people who are interested in providing pet care, we also get people that say, "Hey, I would actually pay you to play with pets. Mm. So it's kind of a really interesting and fun dynamic. But starting with providers, the vast majority of our providers choose to sit pets, as they are pet lovers themselves, and then it's just a bonus that they're side income. Mm. As such, we've had no difficulty attracting and retaining supply. The sitters often have another main role, whether it's a full-time job or stay-at-home parent. Mm. As such, we're not typically competing with other gig platforms, which have a set of different time requirements. Right. With regards to pet parents, oftentimes, they already have a solution, such as a friend, family, or a neighbor. Mm O r they are new pet parents. But the primary reason they come to Rover when their normal solution is unavailable or falls through is the ongoing concerns with the quality of the care from the second. There are notable others, like, I mentioned previously, when moving to a new city or getting a new pet, people look to Rover for the first time. Ultimately, we feel really good about the way that the business has been growing over time, and we feel like we're providing a really good solution for both sides of the marketplace. Okay. Can you talk a bit about your business mix? You mentioned the 75% before, but, you know, particularly within services.... and maybe the margins between the two, dollar percent margins between the two? Yeah, from a service mix perspective, we're about 75% overnight, 25% daytime. However, within the daytime, we typically group the service line drop-in as a daytime service. But often we see about half of the drop-in use cases as a substitute for overnight. An example of that being people using Rover for cat care. When they need cat care, they're not necessarily boarding their cat, but they want somebody to drop by, change the litter box, add food, et cetera. So a substitute of being away. Yeah. From a margin perspective, margins are very similar across all service lines. The take rate structure that we have is exactly the same by service line. The only reason it differentiates is by geography: U.S. versus Canada versus Europe. Got it. You've got to do that with cat be cause they get mad at you, and will very carefully make sure you know that. Oh, definitely so. Somewhere around the house. Definitely so. Can you discuss marketing and how, you know, your key initiatives for building brand awareness or particularly converting people, you know, onto the platform? Yeah. In general, we're trying to use marketing to accelerate category growth in a way that really just makes financial sense for the business. We hold all of our marketing spend to an earn back framework, and by all, I really mean all. We don't have a carve-out for brand marketing that doesn't have a target associated with it. We think that our up-funnel marketing investments are working really well. This includes things like YouTube, streaming, linear TV, as well as social channels. That does not mean that we will see a huge immediate spike from those as we continue to invest in them, because we do expect those returns to come in over time. You build the awareness. We still hold them accountable, but we would expect the return and the conversion to come in with time. It's also worth remembering that as this business scales, the percentage of revenue coming from our repeat customers is continuing to grow. Because we hold all of our marketing spend accountable for new customers, the business model increases our marketing efficiency as a virtue of its design. It's a pretty great leverage capability of the business model. All right. Oh, sorry. Go ahead. Yeah. Oh, no, go ahead. What was the measurement question? Yeah, just how you measure the effectiveness. You just mentioned the effectiveness. I'm curious how you measure the effectiveness of that spend. Yeah. So for the most part, we think about it from a ROAS standpoint or a return on ad spend. Mm-hmm. We use methods like geographic test over control or just test over control type frameworks, so we can see the effectiveness and the efficiency of our marketing spend. Mm-hmm. Ultimately, that helps us chart the efficiency of a marketing spend on a curve. And with that, we're able to measure how many customers we're acquiring over time from the point of spend. And it's been pretty consistent with how we did it with our SEM, which is more direct response. We've been able to carry that forward and use a similar methodology with more top of funnel that isn't as measurable as, say, SEM through Google. I see. Got it. How about the data? Obviously, you have huge amounts of data. Yeah F rom use of your platform. Can you talk about how you use it, and perhaps, you know, any developing network effects as you continue to grow? Yeah. Rover's had millions of customers over the years and hundreds and hundreds of thousands of pet care providers. One of the things about that is the data specifically on the pet care providers isn't available anywhere else other than with Rover. You can't go to Yelp and find the quantity of data on providers that we have. And so really from the early days, Rover has been focused on the data science to drive a competitive advantage for our marketplace. We've incorporated various forms of machine learning into how we operate the business, such as analyzing our large data sets. Mm-hmm. We have, on that, it allows us to understand what makes a good match with a pet parent. Mm-hmm A nd with that continues to improve our matching algorithm. Regarding the more recent generative AI tools, we currently use some of them to improve our productivity with our engineering efforts, and we expect to leverage their capabilities more and more in the future. But Rover has always been about leveraging AI in some form, and machine learning has been the way that we've done that, through the use. Right. A nd the investment in the data science. Okay, great. How about future growth vectors as your business continues to grow and you look to add products and services? Yeah. Our major growth driver is, and probably will always be a very, strong word-of-mouth dynamic. Mm-hmm. People who have a very good experience with Rover cannot help but share about it, and I hear about it within my own neighborhood myself, and a lot of my neighbors still don't know that I work at Rover. I don't walk around with a Rover T-shirt on all the time, even though I probably should. You know, sometimes we get the question of, you know, why do they love us? And it's because the types of services that are booked through the Rover platform are typically frustrating to find and book, and we really do make it easy for that to happen. You can find dog boarding, you can find drop-in visits for your cat. People even use us for drop-in visits for birds, reptiles, and other pets that you keep at home, guinea pigs, et cetera. I think at one point we even had a drop-in visit for a horse. So things do happen. Cool. Yeah. With regards to that, we shipped the overnight services on a peer-to-peer basis, not because we love the Airbnb model, but because we really do think peer-to-peer for pet care services is the winning model. Mm. Over time, though, our plan is to add more services into the marketplace. So you could expect to see us to add those, when we think it's appropriate. Got it. Maybe we move, you know, for the last 10 minutes or so, to some more financial questions. Let's start with a rough long-term growth algorithm for the, you know, coming, let's say, three to five years. Yeah. Our stated long-term targets are continue to grow revenue 20%-25% and achieve Adjusted EBITDA margins in excess of 30%. We've been saying that for a couple of years now, and that's our current view as well. I believe that the flow-through rates or the incremental margins that we've been demonstrating over the last couple of quarters clearly demonstrate our path to those greater than 30% margins. Those incremental margins have been in excess of 30%. With that, we're really excited about the growth that we have within international. We also continue to see really strong growth across all of our non-US markets, which all leverage and benefit from our US product investment. Mm-hmm. Those lead to increasing word-of-mouth. With the word-of-mouth and people having a better experience, we see an improving retention. With retention comes higher repeat bookings, and with that becomes more and more leverage for the P&L. Right. We do expect to continue to grow well in Europe and maintain our strong position in Canada. Mm. In Q2, the GBV growth in Europe alone was 59%, so- Mm S till really, really strong growth there. We do think there's growth potentials in countries that we currently operate in, as well as additional countries within Europe that we don't currently operate in. Mm. We're really just in Western Europe, but there's a number of other geographies that we haven't scaled or entered yet. Mm-hmm. But over time, we think that the international business will continue to be a tailwind for the business and potentially grow to be about a third of the total GBV. Right. Okay, great. So if I, you just gave your long-term growth algorithm, how much does international contribute if it's, it's gonna grow to a third? Is that, I don't know, is that 50% of your growth, a third of your growth? I don't know. Yeah. Uh. Currently, our international business is mid- to high-single digits of the business, and we expect it over the long term to be about a third. Mm. With time, you know, back-of-the-napkin estimate would be about 50% or more of growth- Mm. Okay I n order for it to get to that, that level. That's not bad for doing it in my head. Yeah. Well, it was more of a guess than math, but - Especially with all of your back-to-back conversations today. Yeah, exactly. Yeah. So, let's talk to sort of there's a couple key areas of focus these days, and one of the biggest is the balance between revenue and profitability. Mm-hmm. You just mentioned some of the sort of trajectory on your margins, but can you maybe talk about how you're working that balance? Yeah, that, that balance has been top of mind for me since I joined Rover over six years ago. I was never one to chase profitability, and I've never been one to chase free cash flow. Mm. To me, it's always been appropriate to keep the two balanced, and that's the philosophy that I have and how we operate here at Rover. So I'm generally confident that we can continue to grow the top and bottom line together, just like we've been demonstrating. To go in a little bit more specifics there, we have a really good handle on our gross margins, our operations and support, and our marketing spend. Those three are variable with either revenue or new bookings volume, so really good visibility and control over those costs. Mm. And then our product investments in G&A are relatively fixed in nature, and especially on the product side, we hold those to an ROI framework. They need to hit ROI guardrails that we've put in place. Mm. So the combination of those things give me pretty good confidence. Today in the U.S., we are the largest digital provider of peer-to-peer pet services by far. That gives us a really strong base to grow off of and invest off of. It's also important to remember that we're a transactional business with an episodic use case. And so for overnight services, the most common use case is when the whole family unit is traveling for leisure. And seeing a Rover ad might help them find the right solution for pet care when they plan to travel. Mm B ut it's not likely to cause them to decide to travel. Mm. So from a marketing framework perspective, it is very important for us to think about it as a or to hold all of our marketing spend accountable for new bookings. Mm Rather than an awareness goal. Mm I s not as helpful as driving new customers and increasing the business. And on top of that, within our marketing spend, we focus on the marginal earn back. A lot of companies think about CAC spend as an average spend for acquiring all customers. That really means that the long-tail customers that you're acquiring in that average are probably not profitable. Right. That's not how Rover operates. We are focused on the profitability of the marginal customer that we acquired. And so, in short, with all of those things in mind, I really see Rover as a long-term, steady, high growth and margin expansion story. Right. Got it. You, I was gonna go into, next, and you mentioned it, is the unit economics of a transaction. So that profitable marginal customer, can you maybe just walk us through the unit economics? Sure. So the first part of the story is really on the per transaction side. So let me just give you an example. Assuming a pet parent and a pet care provider agree on a service that costs $100. Mm-hmm. At the time of that booking, that pet parent is gonna deposit $111 with Rover. That's $100 for the service, plus $11 for the 11% pet parent transaction fee that we charge. That $111 is what represents our GBV. Mm-hmm. At the time the service starts, Rover is gonna recognize $31 of revenue from that transaction. That's 20% of the $100, so $20 there, and that $11 from the pet parent fee. That translates to about a 27.9% take rate. Right. When you think about all of the transactions crossing the platform, there is a cancellation rate dynamic. So if you were to assume a cancellation of about 10%, or a cancellation rate of about 10%, the recognized take rate of all of those transactions reduces by about 2.8%, absolute. Mm-hmm G iving a recognized take rate of about 25%. So- Yeah W ith all of that in mind, that gives us the visibility of the per transaction costs. We have really predictable cohort, curves- Mm-hmm A nd we include those in our investor presentation. Mm-hmm. What you'll see on there is that, our cohorts continue to go up and up, and what we're targeting from a unit economic perspective is somewhere between a five and seven to one LTV to CAC framework. Okay. You can see how those have been progressing over time within our investor presentation. Mm-hmm. But it really allows us to have confidence in our margin expansion story as a result. Yeah. Well, first of all, thank you for including that, 'cause it's one of the biggest areas of focus I know across a series of different businesses like yours, that we're always. You know, that we're tend to be looking at. As we come on to the end, can you maybe, if you want to share your, your views on what the biggest value drivers are of the business, what they're going to be over time? And then, of course, you know I'm gonna follow up with how the, how are they trending? Yeah. Yeah, over time, I think the stickiness, stickiness of the platform is gonna be incredibly important. Mm-hmm. What we continue to see is cohorts stacking over time, which gives us a really large base of repeat booking activity that is predictable and steady. It's great to see, and all of our cohorts back to the beginning of the business have continued to go up. None of them have flatlined, so there's transactions still flowing through from each and every cohort. Mm-hmm. In addition to that, we're gonna be hyper-focused on creating even better matches between pet parents and pet care providers. We know that the higher quality matches results in a better experience. Mm-hmm. With that better experience, results in more repeat booking behavior and a higher likelihood that word-of-mouth is gonna continue to grow. We've seen word-of-mouth as a percentage of our total bookings continue to grow for years, and we think that is primarily driven by just a great user experience. I mentioned the stacking effect, just briefly on the cohorts. Yeah. Again, it's hard not to overemphasize that. Since the business was founded 2012, and 2013 being really the first cohort of size, Mm-hmm We still see transactions from those cohorts, and we see the stacking, as a result, giving us leverage in the business. And then, with all of that combined, the other biggest value driver, really from an investor standpoint, is that that increases the percentage of our total business that is repeat. Mm-hmm. With all of our marketing spend focused on new, repeat just results in more and more leverage for the business, allowing us to reach our long-term margin goal of greater than 30%. Right. Great. That was fantastic. We have just a couple seconds left. Is there anything you wanted to, do or say or share as we close it up? Yeah. In, in short, Rover has been an exciting story for me the last six years. We think it's a, an exciting story for the public markets. We do have our long-term goals that we think are achievable, and we believe that the last couple of quarters of incremental margin expansion have really demonstrated that. Yeah. Awesome. Thank you very much. It was good having you here. We'll keep chatting and be in touch. Appreciate it. Thank you. Awesome. Thank you, man. Bye. Bye, everybody.