Rover is the largest peer-to-peer marketplace business that connects pet parents with pet service providers. The platform handles everything from search, booking, chat, and payments. It generates revenue by charging a booking fee to pet parents and a take-rate to service providers. The company has grown massively with a Gross Booking Value (GBV) CAGR of 63% since 2014 and has reached $798 million in 2022. Since its creation, over 4M pet parents have booked where 82% of booking are repeated booking compare to 17% for new booking for the year 2022. Rover positions itself in a niche where more and more households have pets and therefore represent a growing part of customer.

The platform offers various pet-related services, with overnight bookings constituting over 70% of the GBV. The company experienced challenges due to the impact of Covid on business, operating results, and financial condition, driven by the rise in remote work, quarantines, and travel restrictions. Nevertheless, it benefited significantly from the reopening of hotels and the easing of travel restrictions, as increased travel resulted in a higher demand for pet care services.

Seasonal trends impact the company's bookings where there’s a peak in the third quarter, a slight dip in the fourth, and relative stability in the first before a rise in the second quarter. Stronger bookings, especially for boarding and house sitting, occur in June, July, August, November, and December, aligning with increased travel demand.

Rover operates within a highly fragmented supplier and user network. As of 2022, the platform has linked over 1 million pet parents with more than 320,000 service providers. Notably, 98% of these providers are non-professionals engaging in pet care to supplement their income, earning an average of approximately $2,200 per year. For pet parents, It serves as the equivalent of an AirBnB for pets. The improved and expanded offering drives customer usage with more than 93 million services booked to date. To underline the group's continued development, Rover agreed to a $2.3 billion privatization deal with Blackstone at the end of 2023.

Since inception, the company has struggled to achieve sustained annual profitability, accumulating a deficit of $342.3 million as of December 31, 2023. Significant investments in network improvement, marketing, expanded operations, and additional staffing have been major areas of expenditure for the group.

However, Q3 2023 marked a notable turnaround. Bookings increased by 20% YoY to 1.8 million, resulting in a 25% YoY growth in GBV to $266 million, while revenue saw a 30% increase to $66 million.

Analyzing past performance reveals a positive trajectory, with net sales rising from $110 million in 2021 to $174 million in 2022. Consensus estimates project figures of $232 million for 2023 and a robust $335 million for 2025, representing a significant 92.5% increase. EBITDA is anticipated to mirror this growth, with projections leaping from $12 million in 2021 to an expected $81 million in 2025, a remarkable 575% rise. Net income for the 2024-2025 period is anticipated to reach $30 million and $45 million, resulting in net margins of 10.6% and 13.6%, respectively. However, the current valuation appears steep, with analysts projecting multiples of 113x for 2023, 68x for 2024, and 46.6x for 2025.

Rover has been active with share repurchases, buying back approximately $49 million in shares year-to-date within a $150 million authorization through 2024.

A significant trend for the company is the increasing frequency of repeat bookings among active users, showcasing strong retention. The premise is straightforward: once a pet owner experiences the system, there's a likelihood of continued reliance on Rover for future needs, contributing to the company's lifetime customer value.

In simpler terms, regular users are increasingly relying on Rover, coupled with providers setting higher average prices, aligning with global inflationary patterns. This dynamic presents a robust pathway for future growth, underscoring the intrinsic value of the stock.

Moving forward, there's a clear recognition of a substantial market opportunity not only for expanding within the U.S. and Canada to reach more pet owners but also for venturing into the European market.

Since its nationwide launch in April 2012, the company has successfully secured bookings from over 4 million households, constituting approximately 5% of pet-owning households. The U.S., boasting 87 million pet-owning households, stands as the primary market. Following closely, Europe emerges as the second most significant market for the group, with 64 million pet-owning households. However, the company's presence is currently limited to eight countries: the UK, Spain, France, Germany, Norway, Sweden, the Netherlands, and Italy. While the group has predominantly focused on Western countries thus far, there's potential for future development in Asia or Oceania.

Given the rising demand for pet care services, Rover Group appears well-positioned compared to its competitors. Given its recent growth trajectory, it's worth keeping a look on the stock.