Shares of Rover Group (ROVR), the digital pet-care marketplace, were moving higher today after the company delivered a strong third-quarter earnings report, beating estimates on the top and bottom lines.
As of 11:44 a.m. ET, the stock was up 19.9%.
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Rover investors are wagging their tails
Rover, which functions like Airbnb for pet care, matching pet owners with caretakers, delivered revenue growth of 30% to $66.2 million, which beat estimates of $62.2 million. Gross booking value was up 25% in the quarter to $266.4 million, and total bookings were up 20% to 1.8 million, with solid growth in new customer bookings, which rose from 267,000 to 290,000. Repeat customer bookings increased 23% to 1.5 million, showing that existing customers continue to be happy with the service.
On the bottom line, Rover also saw a strong improvement in profitability with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $17.5 million, up from $10.2 million in the quarter a year ago, and its EBITDA margin improved from 20% to 26%.
It also reported a generally accepted accounting principles (GAAP) profit of $10.5 million or $0.05 per share, up from a loss of $0.08 per share in the quarter a year ago, and better than the consensus at a profit of $0.03 per share.
CEO Aaron Easterly said, "We continue to build on our priorities of driving operating leverage in the business, increasing new customer bookings, expanding revenue from our non-U.S. markets, and improving our product offering."
Can Rover keep moving higher?
The company expects revenue of $64 million to $66 million in the fourth quarter, representing 25% growth at the midpoint, and above the average analyst estimate of $63.1 million. It also sees adjusted EBITDA margin continuing to ramp up, calling for a 28% margin, or $17 million to $19 million in adjusted EBITDA.
Rover stock had struggled in its early history after going public through a special purpose acquisition company (SPAC), but the solid third-quarter performance and GAAP profit show the business is getting on track.
The two-sided marketplace model has proven to be a winner for peers like Airbnb and Rover looks poised to follow the same path, especially now that it's GAAP profitable. If the company can maintain its growth rate and continue to expand margins, the stock should keep moving higher.
