Q3 2021 Rover Group Inc Earnings Call
Good day, and thank you for standing by and welcome to the Rover third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during this session you will need to press star one on your telephone if you require any further assistance. Please press star zero.
Now I'd like to hand, the conference over to Brent <unk> Johnson of the Blue shirt group. Thank you. Please go ahead.
Good afternoon. Thank you for joining us to discuss <unk> third.
Third quarter 2021 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 that Rover Dot Com as a reminder, this call is being webcast live from 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, Mike Turner T O O and Tracy Knox Chief Financial Officer of rubber before I begin I would like to remind everyone that management will make certain forward looking statements on this call that reflect our current views and expectations related to our future financial performance, such as our 2020 one final.
All guidance future events and industry and market conditions as well as forward looking statements about rover its platform and its market opportunity.
These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward looking statements. We strongly encourage you to review the information that <unk> filed with the SEC regarding specific risks and uncertainties in particular.
Those that are described in the risk factors section on reverse form S. One filed with the SEC on September 14th 2021, and in our Form 10-Q be filed in the third quarter. These forward looking statements apply as of today and we undertake no obligation to update these statements to reflect subsequent events or circumstances, except as required by law you should not place undue.
We rely on our forward looking statements as they are not guarantees of future performance.
Finally during the course of today's call, we will present unaudited GAAP and non-GAAP financial measures to provide information about adjusted EBITDA are non-GAAP measure and a reconciliation of historical GAAP to non-GAAP measures in the press release, we issued after the market close today, which is posted on the Investor Relations section of our website. These non-GAAP financial measures provided should not be considered.
As a substitute for or superior to GAAP financial measures and with that let's get started I'll turn the call over to Aaron easterly co founder and CEO.
Thank you Brandon and thank you everyone for participating in the Rovers first quarterly earnings call as a public company. Following the close of the fact transaction with Nebula Karabell on July 32021.
We have always believed that rover was destined to be a public company and we are truly proud to have accomplished this goal as we began trading on the NASDAQ on August two.
2021.
We have a strong balance sheet with $290 million in cash and are well positioned to take advantage of our opportunity to be the world's largest trusted marketplace for pet care.
For those new to the story I want to start by telling you more about Rover and cover our progress this quarter.
Now I'll turn it over to Brent Turner, our CFO to provide you with more details on our bookings marketing and operations.
A good place to start with the Rover story is understanding our mission.
At Rover, we believe that everyone deserves to experienced the unconditional love of a pet and we exist to make that possible.
Concerns about the logistics of care as one of the primary impediments to pet ownership.
Got home enough I travel a lot I work long hours I don't have a yard these concerns for carrying for a pet or barrier to people experiencing the joy that as pet ownership.
We believe that if we can solve the logistics of pet care make it trusted affordable convenient and high quality more people will opt into pet ownership and in addition to increasing our addressable market. We may just moved the needle on human happiness.
Rover has grown rapidly since inception.
During the period of 2014 to 2019, we grew GBP, 94% compounded annual growth rate. We've had 3 million households book here on the demand side and over 630000 service providers paid on the supply side of the marketplace.
The business is driven mostly by strong repeat bookings typically 80%, 90% of our bookings in any given month were made by repeat customers and the earn back on our marketing a short approximately one to two quarters.
But perhaps one of the most interesting things from our perspective is that the business is mainly about category expansion. Our business is not about standardizing pet care, it's the opposite.
Rover is about enabling mass customization of pet care.
Every pet like every human being is different our marketplace caters to those needs.
If somebody is looking for a provider that allows the dog to sleep on the bed because that's what the dog is used to they can find that on Rover.
Someone who's looking for a sitter that's home full time, because their dog has separation anxiety. They too can find that on the Rover. This ability to customize pet care and mass is what makes roper unique it is generally unavailable in today's commercial options.
Our business consists of both overnight and daytime services overall about 70% of our business is in our overnight services.
Modern pet parents, which span all ages income brackets and geographies wanted environment, where their pets still at home feel safe and fill stress free.
Werent contentment and reassurance that their pets are receiving not just excellent care, but the specific care that they requested technology helps enable that.
Our app enables care providers to shared maps of completed Dog-walker, let people know when they enter into exited the home and gifts photo and video updates highlighting activities during the day.
On the supply side of the marketplace providers want the flexibility and the empowerment to have pets in their life and make material side income.
There is no shortage of animal lovers in the U S and in most countries for that matter Rover allows people to meaningfully augment their income by doing something that they already love. So we bring together pet parents with pet care providers into the marketplace and the resorts all phenomenal, 97% I've reviewed bookings or five stars.
Before going deeper into how we operate the business, it's worth spending a couple of minutes talking about the pet care industry.
We estimate that we serve a $79 billion market opportunity in the U S alone.
Currently only 10% of pet owning households paper commercial services when they leave town.
And the reason for that is that many pet parents that are for the idea of taking their animal to a boarding facility.
This in home experience and regular human attention is consistent with the care that they desire for their animals. The pet care industry is becoming universal and about two thirds of U S households have pets.
Creasing Lee the relationship with People's animals is becoming more akin to a family relationship.
In the U S about 95% of pet parents can serve their pets as part of the family.
So the Humanization of pets is becoming the norm.
This drives a pet economy that perpetually grows faster than the real economy, and it's causing people to prioritize in some cases their pet care needs over there.
This is the opportunity that Rover saw at the beginning 90% of the opportunity is tied up in the shadow market. The friends family and neighbors that often perform services when pet parents are away from home.
But we can take market share also from existing commercial players the existing commercial market is incredibly fragmented and largely offline.
Because the pet care industry was associated with dotcom excess investment in tech in the pet industry lagged other categories for many years the.
The industry remains less penetrated from a technology perspective, even today.
Additionally, given the fragmentation of the industry millions of players do not have a financial incentive to invest in technology infrastructure.
This gives a rover unique advantage it is nearly impossible to book services online for many traditional service providers.
Full integration of technology into the power of the Pet services business has not happened and it is something that rover is bringing to bear.
Rover is indeed about technology, we use data to create a competitive advantage for our business.
With the bookings volume, we have going through the platform, we collect a tremendous amount of data on the marketplace participants and the needs of our customers.
That data is used for many different purposes, but one of the most important is to continue to make the marketplace function better providing better matches for our customers and better experiences.
This also creates a powerful network effect.
At a high level the way to think about it as more bookings happened on Rover, we collect more data, we understand which pet care providers are most responsive, which ones get repeat business, which ones do a good job of managing their calendars, which ones are prompt and effective with meeting rooms.
We collect all that data, we get better at understanding who are the ideal matches for pet parents.
With that we can make better matches when people come to Rover and as we make better matches. Our bookings go up and then we collect more data and the cycle repeats and our business continues to scale.
Which brings me to our third quarter earnings results.
As vaccination rates increase and travel restrictions lift we're seeing strength in North America, followed by encouraging recovery in Europe.
While our year over year comparison to 2020 shows a dramatic improvement, whereas most notable our results relative to pre COVID-19 levels.
Therefore, I will compare all Q3 2021 metrics to Q3 2019.
Q3 was a strong quarter for the business in terms of revenue GBP in bookings and adjusted EBITDA.
Across all key metrics, we exceeded our Q3 2019 performance.
Despite the debts delta very in depth COVID-19 continuing to weigh on our business <unk> was $157 million up 35% from $116 million in Q3 of 2019.
Revenue of $35 million increased 31% from Q3, 2019, and adjusted EBITDA improved to approximately $7 million.
Revenue growth was driven by total bookings of $1 3 million up 10% from Q3, 2019, as well as increasing average booking values.
In Q3, we invested in our product and engineering efforts to improve our customers' experience with the platform.
As a result, we recently rolled out two of the most requested features from providers tipping and extended care.
100% of the tips go straight to the pet care providers, increasing their earnings and allowing pet parents to incrementally recognized the quality care given to their pets by the provider.
Extended care give providers the ability to charge for partial days during overnight stays.
We also invest in the infrastructure by transitioning to strive for patients in the U S to match the rest of our global footprint we are continuing.
To implement a stripe for payouts to make it easier and quicker for providers to access their funds.
The feedback has been very positive and we anticipate completion in the next six months.
Given that trust and safety is at the heart of what we do we also continued to make investments in this area as well.
And we aren't just a dog people, where the pet people.
Cat related bookings are scaling quickly increasing 79% over Q3, 2019, and October which dramatically increased our cat specific content to help drive additional organic customer acquisition, we believe the opportunity in the cat care market expands well outside of U S borders.
Looking ahead, we are optimistic about rover's future prospects with multiple strong tailwind.
First the shift from offline to online is meaningful because of our substantial lead in the marketplace.
Second the increase in pet ownership and deeper emotional bonds will drive growth in the pet industry generally.
Third we believe that the services segment of the pet industry will outgrow physical products noticeably over the next decade.
And finally, we believe further recovery in the leisure travel market is likely to happen over time.
And now I'd like to hand over the call to Brent our CFO.
Ill provide more detail on our bookings and operational performance.
Thanks Aaron.
As you noted the third quarter has been a record center across many important metrics to further highlight this reality I'd like to walk through the exciting trends, we're seeing in new customer acquisitions, and our cost of acquisition.
In Q3 global new customer acquisitions increased to 259000 up 32% compared to Q3 2019, and the distribution of these customers across services roughly mirrored our normal historical mix.
While we acquired the vast majority of our new customers in the United States.
We did see customer acquisitions begin to grow again in Canada relative to 2019, roughly correlated to the increase in vaccination rates.
While new customer growth in Europe was flat with 2019, we did see acceleration in the U K and southern Europe during September as Lockdowns began to abate.
We are not sure that this momentum will continue and we expect the dynamic situation in Europe that we will be monitoring.
Our overall cost of customer acquisition, including both free and paid channels remained quite efficient at $10 compared with $36 in 2019, and only up $1 from Q2 2021.
We attribute this efficiency to the durable strength of our organic channels, primarily word of mouth and pre search listings even.
Even as we increase our paid marketing spending.
We believe that this strength is further evidence of the tailwind, we expect and new customer acquisition as the pandemic eases.
Further while we remain committed to disciplined and marketing to acquire new customers. We do expect to continue to increase spending as we invest carefully into the pandemic recovery.
While we are excited by Rover strength in new customer acquisition in Q3.
We are also pleased with the marketplace performance and driving repeats.
For the first time ever Rover drove over 1 million bookings from repeat customers in a single quarter in Q3.
Up 6% compared to Q3 2019.
While our momentum in new customer acquisitions drove the ratio of repeat customers to new down to 80% in Q3 compared to 83% in Q3 of 2019, we believe this ratio highlights the future potential of our existing customer base to return as the marketplace continues to scale and this ratio climbs back to a historical norm.
As our topline has recovered over the past few months, we have continued to stay laser focused on serving our customers, while managing our cost structure to effectively scale with the business.
Operations and support which is primarily made up of our frontline customer experience and trust and safety teams.
He has done an amazing job meeting the bookings demand with great cost control.
We anticipate the need to continue to grow these teams and we recently announced that we plan to open a contact center in San Antonio Texas.
To complement our existing location in Spokane, Washington.
We will continue to make strategic investments in these areas.
To ensure that we are providing the best possible customer service as the marketplace continues to scale.
With that I will turn it over to Tracy to talk more about the operations in our financial results.
Thanks Brent.
I'll begin today by providing an overview of our financial results for the third quarter followed by guidance.
Unless noted otherwise I'll be comparing our third quarter results to the third quarter of 2019 and more relevant comparable period in 2020 due to the impact of the global pandemic.
Starting with revenue.
Revenue in the third quarter was $35 2 million up 165% from the prior year and up 31% over 2019, while Q3 gross booking value increased 35% to $157 1 million.
This increase in <unk> was driven by a strong average booking value of $124 paired with almost one 3 million total bookings.
<unk> hundred 2000 active customers.
Each up 22%, 10% and 21% respectively.
We attribute most of the ABB change to increases in pricing by our care providers. However, a small amount of this change is also due to a take rate increase that we implemented for new customers that we acquired since January 2021.
As a reminder, <unk> and deferred revenue are recorded at the time of booking while revenue is recognized upon the actual start of the state or the time service depend.
Depending on the quarter and holiday timing. This can result in a quarterly timing difference for GBP and revenue. Therefore, we believe it is helpful to track our record nine take rate, which is defined as revenue plus the change in deferred revenue divided by GBP.
Our recognized take rate with 21% in Q3 down 90 basis points when compared to 2019.
Slight decline was driven by the increase in cancellation rate from nine 6% in Q3 2019 to 15, 3% in Q3 2021 correlated with the uptick in Covid cases to just the Delta there.
Moving on to expenses cost of revenue with $8 million or 23% of revenue compared to $6 $5 million or 24% of revenue in the prior period.
Marketing expenses were $6 $4 million down, 55%, while our new customers actually increased 32% over the third quarter of 2019.
As Brent mentioned, we have seen strengthen our organic marketing channels, primarily word of mouth and free search listing as a result, our marketing has remained very efficient at 18% of revenue compared to 53% of revenue in Q3 2019.
Operations and support expenses decreased to $4 2 million or 12% of revenue, while product development expenses decreased to $5 million or 14% of revenue.
These expenses have decreased as we have continued to leverage our improved cost structure. After streamlining the business in early 2020.
G&A expenses increased to $8 $9 million, primarily due to an increase in public company staffing and professional services as well as the $700000 increase in insurance expense related to the expanded coverage needed as we transitioned into a public company. Additionally.
Additionally, general and administrative expenses included approximately $1 $3 million of professional services related to non capitalized ball one time merger related costs.
In the near term, we expect our operating expenses, excluding stock compensation and onetime costs related to the <unk> merger to increase slightly as a percentage of revenue as we one fully utilize our scaled operations team from Q3 for a full quarter to better support increased activity throughout the.
Strong holiday period and beyond.
To invest in product and technology to further enhance our marketplace.
And three continue to drive more marketing campaigns, and our paid channels and three top of funnel testing.
Additionally, we expect improved collaboration and cost of revenue as a percentage of revenue related to the relatively fixed amortization of internally developed software and we expect G&A to remain roughly flat as a percentage of revenue as we operate as a public company for a full quarter.
Moving on to other income and expenses, we did have some unusually large non cash expenses during the quarter.
Following the close of the transaction with Nebula Caravel on July 30th we accounted for the change in the fair value of the earn out and warrant liabilities associated with the merger.
This change in fair value of $83 6 million flows through other expenses during the period, resulting in a total net loss of $84 $5 million compared to a net loss of $12 1 million in Q3 2019.
Without these noncash fair value charges, our Q3 net loss would have been approximately $1 million.
Looking forward. The first two tranches of the earn out liabilities have been triggered and the earn out liabilities will now be re classed into equity during Q4.
The remaining warrant liability will continue to be mark to market, each quarter with gains and ore losses flowing through other income and expense.
Adjusted EBITDA was $6 $6 million up significantly from negative $8 2 million.
The improvement in adjusted EBITDA resulted from the strong revenue during the quarter paired with ongoing operational expense efficiency.
With the completion of our business combination referred to earlier, we added approximately $240 million as net cash to our balance sheet.
After paying off all of the debt facilities, we ended the quarter with $290 million in cash and cash equivalents on our balance sheet.
Now turning to guidance, we are raising the midpoint of our full year 2021 revenue and adjusted EBITDA guidance ranges.
We now expect revenue of $106 million to $110 million compared to the previous range of $100 million to $210 million.
This implies fourth quarter revenue in the range of $34 million to $38 million.
34% increase over Q4 2019 at the midpoint.
In terms of adjusted EBITDA, We now expect a range of $6 million to $9 million compared to the previous range of breakeven to slightly positive.
This implies a fourth quarter adjusted EBITDA range of $1 million to $4 million.
Overall, the pandemic has persisted longer and varied more than we had originally anticipated at the start of the year and continues to bring uncertainty in the near and medium term and as a result, our guidance anticipates slightly elevated cancellation rates relative to 2019.
In summary, we are very excited about the growth in the business.
<unk> financial trajectory and the opportunity in front of us.
This concludes our prepared remarks, I will now turn the call back to the operator to take questions.
As a reminder, if you would like to ask a question at this time simply press Star then the number one on your telephone keypad to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Yes.
Your first question comes from the line of Maria <unk> with Canaccord.
Yeah.
Great. Congrats on the strong results and thanks for taking my questions. First is there anything you can share around sort of demand trends in different markets across the country and also can you talk about what are you seeing any new international markets. I think you mentioned Europe is improving.
He is the pace of reopening sort of different across some of your international geographies.
Yes, so we've seen different pace.
Recovery in re growth across all geographies, both within the U S and outside the U S. In general we've seen that Europe has had a more aggressive public health policy stance, which is.
The delay in kind of the markets we can lean.
But as the vaccine Rollouts happened, we saw some of those markets are to see positive growth in customer acquisition as well.
Got it. Thank you and just a quick follow up I think you mentioned that you anticipate slightly elevated cancellation rates relative to 19.
Can you just talk about how you're thinking about sort of constellation trends in Q4 compared to Q3.
Sure. Thanks Maria.
So in Q3 of the cancellation rate was just over 15% and in the second quarter. If you recall it was around 12%. So we are expecting that our Q4 cancellation rate will come somewhere in the middle of those numbers of course, assuming that you know the pandemic doesn't worsen during.
During the next month or so.
Got it that's very helpful. Thank you.
Thanks.
Your next question comes from the line of Andrew Boone with JMP Securities.
Hi, guys. Thanks for taking my questions. My question is kind of on a similar line.
As we think about.
The use cases for <unk> can you just go through kind of overnight bookings versus whether youre seeing anything with for trying to work as more officers go back can you just talk about the how would you people using the service today and then I'll, let Paul Thank you.
Sure.
Generally have seen relatively consistent service mix that we've seen in the past maybe a slight exception with dog walking we typically see dog walking this seasonally low.
Summer travel spikes and there we see more overnight. It may have been a tad lower than we've seen in past years in terms of service mix, but not wildly so.
In general the use cases are consistent with what we've seen historically.
Okay fair enough.
Then question number two on marketing.
It came in a little bit lower and clearly $10 is just a fantastic cash that you guys are putting up.
Can you talk about why not spend into the opportunity though today.
We think about <unk> and kind of the increased marketing and again in 2022 with a ton of new pet owners that are now available like why why why push on profitability today versus reinvesting that in a more aggressive marketing stance. Thanks, so much.
Hi, Andrew This is Brent I appreciate the question.
We are increasing our marketing spend.
And we are.
We've done it more quickly.
The channels like search affiliates and things that and marketing carloads are considered lower funnel, we did pull back.
Things like video.
Social marketing.
That are often harder too.
Harder to measure are harder to quantify and where the risks are.
The pandemic makes them a little harder to get reads on from a measurement standpoint or from a testing standpoint, we didn't feel good about it but we are easing back down on those again.
And I would I would just add this is Tracy I would just add that we're not optimizing for <unk>.
Driving the adjusted EBITDA number and were just trying to be very thoughtful about about returning to.
Returning investment into marketing spend and our other line items as well so we're continuing to ramp up in the product.
Area, our product development area to drive improvements to the marketplace and I think we ran a little bit light in ops and support in Q3, and so now we have a.
Fuller team there that will utilize for the holiday period and beyond.
Yeah.
Great. Thank you so much yes. Thank you Tracy I should jump in and say one more thing about that.
Our internal constructs are our unit economics are really it's a it's a marketing channel level.
Considerations.
Merely considerations about the overall financial performance.
Your next question comes from the line of Lauren snack with Morgan Stanley.
Thanks, So much this is megan on for Laurence So the outlook contemplates an increase in paid marketing can you talk about some of the puts and takes of this increased marketing spend or Tac in <unk> as well as your as well as whether you're seeing any impact from idea Fay.
Thanks for the Turkey go ahead.
I'll take the idea if any questions and pass their for brand for comments on marketing.
We haven't seen much of an impact on that I think historically, if you look at our marketing mix on the channels that are more likely to be heavily impacted on that we're just not super dependent upon those channels.
So it could be more of an issue go forward, but it hasnt been a big thing for us historically.
Due to our channel mix and our strong organic customer acquisition, Brent do you want to take the other question.
Thank you.
As we move into <unk>.
Q4.
As he said in a previous question we will begin.
Pushing harder as we get better reads on our.
Channels like video social marketing.
Marketing and things that fall more into the category development.
And creation bug.
Bucket versus strict.
Customer acquisition.
But we will follow our unit economics construct.
In deciding how those are going and deciding how to scale it.
As we spend.
Yeah, and I would just add we also model it as a percentage of revenue and we've said longer term, we expect marketing as a percentage of revenue will be around 25% as you can see it was just 18% in the third quarter and so as Brent said, well, we'll continue to move up to the top of funnel, which will increase.
That marketing spend as a percentage of revenue.
And as we do that.
Great. Thanks, so much and my.
My second question is more about the behaviors and new customers acquired thus far in 'twenty, one and how they may have differed from pre 2021 cohorts.
We're generally seeing that.
Cohorts of customers. We have acquired this year are our best ever and I say generally because it's just about every single month in those months that may not be technically a record or very close to it.
So we're very excited it's quite possible that the delta wave also suppress those numbers a little bit so there could be it could've been even better. So we feel great about the customer acquisition overall and the economics attached with it on a go forward basis.
Great. Thanks, so much.
Your next question comes from the line of Ralph <unk> with William Blair.
Yeah.
Hi, good afternoon. Thanks for taking the questions first question just curious just in terms of the highest new bookings that you saw in the quarter.
Any way you could sort of give a high level perspective or parse out. The drivers you know how much of that was just a really strong growth in pet ownership. The people saw our added during COVID-19 I guess compare to just pent up demand of people wanting to get out again, just love your high level thoughts on that and then I have a follow up.
Well I'd break down the highest new bookings into two categories first we have the highest new customers ever which was 259000 of those bookings and then we actually had the highest repeat bookings volume as well and so actually I'll, probably maybe Brent can speak to the new customers and Aaron can.
Talk about repeat customers and behavior.
Sure.
We have seen strong efficiencies out of our paid marketing, but the biggest indication that this is pent up demand with some increased pet ownership is the strong.
Performance of our organic word of mouth channels.
It's an indication for us.
The tailwind that we expected to see coming out of the pandemic and so that that does feel that does feel like it skews in that direction.
Great and just a follow up just on some of your newer services such as grooming I know, it's really early and there's testing I was just curious how that's going maybe relative to your expectations.
I think with grooming, we've been very excited about the opportunity to solve some pet parents pain points and the feedback on the demand side of that offer has been very positive that being said, we're not excited about the possibility of scaling the business overall and the profitability attached to that.
So we expect to be looking at alternatives to solving those customer pain points in the future.
Okay.
Yeah.
Okay. Thank you.
Yeah.
Your next question comes from the line of Tom White with D. A Davidson.
Thanks. So much this is Kevin on for Tom two if I may the first one I was wondering and I understand you're probably not in the position to provide any formal guidance for 2022, yet, but we are hoping if you could kind of buckets through how to think about the seasonality next year. It seems like maybe your business could return to a more traditional season.
But just curious to see what your latest thinking on that front and then I have a follow up question.
Okay.
We sure hope so.
Nice for humanity, if the pandemic was eventually put in the rearview mirror.
With regard towards trying to we're working through our plans right now and we look forward to updating you in the future quarter two.
2021 has been just a lot better than we thought even with the wave of Delta and so that's very exciting, but as Tracy mentioned the pandemic.
Not over and it's been longer and more varied than we had thought when we put our plans in place at the beginning of the year.
That being said looking past the short term gyrations of the pandemic, we expect 2022 and beyond to be great years for us and by far our best ever.
Primarily we look at the strength in the customer acquisition on an absolute level. We're looking at a repeat performance of those new customers, which are generally our best ever and the overall efficiency by which we're operating the business and if anything our optimism on the medium and long term has improved versus where we were at the beginning of the year.
<unk>, we're just very excited about what the future has in store.
Well the seasonality on the seasonality.
Just to give a little bit of a sense of what we have historically seen.
We have a high growth business. So you kind of have to untether.
Underlying growth from the seasonal dynamics.
Most of our business is tied up in travel seasonality travel seasonality really has a couple of peak periods with the biggest being the summer travel season and around key holidays, such as Thanksgiving and Christmas. The way that has traditionally played out for US is that we see that Q1 is roughly flat to Q.
For the prior year.
Q1 is not a high point in seasonal travel.
Then we see a step up to Q2, you start to see some summer bookings coming in June and maybe even.
For Memorial Day, we see another step up for Q3, which captures.
A large portion of summer travel and then we have historically I'll say another step up to Q4 with Thanksgiving and Christmas.
And then Q1 again is flat roughly to that Q4. So we would expect Q1 to be by far the seasonally lowest.
And then stepping up from there.
Great. Thank you that sort of leads into my next question because we've heard from.
Some of our online travel companies that we cover about strong growth in longer duration trips by travelers due to the pandemic like people can work from anywhere so we're wondering.
What that dynamic means for your business and whether it creates any increased risk of pet owners and providers taking transactions off the platform.
Yes.
Let me try and tease apart the two different questions. There. The first is with regards to changing working dynamics and what that May mean for travel and remote work I think in general it's a little too early to say, but we generally think that the more people work from home the more that they're going to want to leave their house and the board.
They're going to want to travel and since the vast majority of our business is in the overnight segment, we think.
That's probably a positive for our business overall, but could affect the Tam for daytime services, such as dog walking if people work from home more often but overall, we think it's probably net positive.
With regards to disintermediation, we have seen average booking values go up.
And with higher average booking values in a take rate model. There may be some risk of additional disintermediation that being said our cohorts have been performing the best ever so to the degree to which that's an effect its muted and outweighed by the other really positive developments in the marketplace.
Our approach to disintermediation has always been a combination of two things how do we add more and more value by continuing to transact through the platform. We have a rover guarantee we have a calendar and about 24 seven support.
We have.
Tools that make it easier to send photos and videos. If you go through the platform and as we mentioned we also added tipping and extend to say things that are done through the platform actually result in more pay going into the service provider and can be somewhat awkward to try and do offline for example, asking.
For May.
Make it less likely to happen.
So we think that we can continue to add more and more value by going through the platform and then the second strategy has been to use data science to help us identify and reward great behavior.
We've been in this business for 10 plus years now.
Cohorts have generally improved over time.
As we use data science to identify good actors and good behavior.
We generally expect us to get smarter and smarter about that as we collect more data.
So why so while higher average booking values may create additional risk.
At this point in time, we're not particularly worried about that dynamic affecting our business results.
Great. Thanks, so much for taking my question.
Sure.
Your next question comes from the line of Lamont Williams with Stifel.
Hi, good afternoon.
You mentioned an increase in pricing by providers.
Are you seeing that in any particular regions or services and what are you expecting for <unk>.
Higher pricing going forward or do you think this trend will continue or.
Somewhat level out.
So we've generally seen it relatively correlated with cost of living so as the cost of living in certain markets go up providers tend to charge a little bit more there are some micro dynamics as well where people after they establish a great reputation and have a lot of reviews may also increase their prices.
And so we view that as a generally a positive thing.
I think we've wanted to be competitive historically relative to the traditional commercial options.
But part of the <unk>.
<unk> is the price per neither part of it's other factors as well.
So we generally expect the prices to on a per unit basis to drift up in line with our cost of living or inflation.
Okay. Thank you and then and just on the booking window are you seeing any are you seeing that expand or shrink at all as we kind of start to come out of the <unk>.
So you get a bit further in the recovery.
Okay.
I think if you go back over the past several quarters, we've generally seen a normalization of that.
Current booking window is right about 16 days, which is relatively in line with our historical norms.
During.
The scariest times of pandemic in terms of people changing the behavior, we saw that shrink quite a bit.
If additional waves roll through that might shrink again as people delay, making decisions until they get a sense of their own risk.
Risk levels.
But we're close to the historical norms now.
Okay, great. Thank you.
As a reminder, ladies and gentlemen, if you would like to ask a question at this time simply press Star then the number one on your telephone keypad your next.
<unk> comes from the line of Robert <unk> with Gordon Haskett.
Or do you think you have the pricing power to bring that to the pre 2016 cohorts up to where our take rates are today. If so why not pull that lever now and then sticking with take rates do you think you have incremental pricing power on the 2016 and newer cohorts.
And then I have a follow up.
Well I think we operate in a competitive market and more broadly speaking there is.
Friends family and neighbours kind of represent the bulk of the opportunity.
We are always a very thoughtful.
Around what we do on take rate and historically I think the moves that we've made on take rate, we're very positive and produced additional value.
For our investors.
And so we'll continue to look at that with regards to the really early cohorts.
We've grown pretty fast and what that means is that.
If you go back to pre 2016 2017, it's largely immaterial.
Those cohorts are just a lot smaller than they are now.
So we could.
Could decide to do a change there, but any type of change may be disruptive to.
A loyal group of customers and it's a smaller portion of our business given the rate at which customer acquisition has grown.
When we started this back process, we said we had.
About $2 million or little bit over $2 million of customers that have used we've now said, it's over $3 million. So kind of gives you a sense for the rate of the accumulative customer base. If you go back in the early days.
And the cohorts could sometimes be counted on them.
Fingers in terms of the number of people in each monthly cohort if you had enough people in the room.
So it's a good question, but probably not.
Our biggest area of focus in terms of driving incremental value.
Got it and then Tracy on the tipping is that included in the gross booking value and if so how should we think about that impacting take rate it's not okay. Yes.
It is not excluded just a straight pass through Yep alright. Thank you.
Yep.
That does conclude the Q&A portion of today's call now I'll turn the call back over to Eric for closing remarks.
Well. Thank you everyone for the great questions and for listening to our quarterly earnings.
We remain excited about the strong tailwind in this business and if anything our optimism is increasing.
We look forward to giving you updates on how we progress in the coming quarters and again, thanks for your time.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
Yes.
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