It's not a surprise to see shares of Rover Group (ROVR) howling again after another blowout report. The leading online platform that pairs up pet owners with dog walkers and pet sitters keeps cranking out "beat and raise" performances. It was more of the same after Monday's market close.
Revenue rose 30% to $66.2 million, comfortably ahead of the $61 million to $63 million that Rover was targeting for the quarter back in early August. Net income clocks in at $10.5 million or $0.05 a share, reversing a year-ago loss. Rover doesn't put out bottom-line guidance, but analysts were holding out for a profit of just $0.03 a share.
It's raining dogs and cats
Shuttling through the results shows the scalability and pricing power that comes with Rover's niche dominance. There were 1.8 million total bookings on the platform in the three months ending in September, a 20% increase. The gross booking value of those reservations was $266.4 million, a 25% improvement. Then we go back to the 30% year-over-year gain on the top line.
It's a ladder of success. The 20% jump in bookings shows that dog and cat owners are trusting Rover with their furry companions. The 25% pop in the dollar value of those bookings shows -- climbing faster than the actual number of ressies -- illustrates how customers are willing to pay service providers more for taking care of their pets. This brings us to the recognized take rate, the percentage of revenue that Rover keeps from the gross bookings. Revenue is growing faster than gross booking value as a result of Rover's take rate rising to a record 23.4%.
The model works, and it's clicking perfectly. There are plenty of tailwinds driving customers to Rover's hub. Folks are traveling again. Companies are calling employees back to in-office work. Young adults are moving back out of their parents' place after moving in early in the pandemic. All of these casual life events separate pet owners from their four-legged family members. Rover's there for the service request.
Image source: Getty Images.
A common bearish argument is that pet owners will establish direct relationships with service providers after making an initial booking, but that ignores the incentives for both parties to stay on the platform. Dog and cat parents receive insurance, support, and other protections that can't secured by off-platform transactions. Service providers are rewarded with greater visibility on the platform's search algorithm for driving repeat business. The metrics prove Rover's stickiness. Repeat bookings have risen 23% to 1.5 million -- or 83% of total bookings -- over the past year.
Rover's strong third quarter wouldn't be complete without a rosier outlook, and once again it's boosting its full-year guidance. It now sees $230 million to $232 million in revenue for all of 2023, a roughly 33% increase. It was targeting just $222 million to $227 million three months ago, so the "raise" here is for a lot more than the "beat" in the third quarter. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) full-year forecast is getting an even bigger boost, lifted from $37 million to $41 million up to a range of $46 million to $48 million. The adjusted EBITDA margin is going from 17% to 20% in 2023 at the midpoint in just three months.
It shouldn't surprise you that Rover's been crushing the market this year as an investment. The stock is up 79% in 2023 through Monday's close, and it won't take much for it double from here. Rover keeps buying back its stock despite the upticks. It has repurchased more than 9 million shares since March, and this week the board is increasing its buyback authorization. It's another "beat and raise" from Rover, I guess. You may not be able to teach an old dog some new tricks, but as a growth investor you may want to keep an eye on these neat tricks that Rover keeps executing so well.
