Q3 2022 Rover Group Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good day, and thank you for standing by and welcome to the Rover third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session SaaS as a question. During this session you will need to press star one.
One on your telephone please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Walter already VP capital markets and Investor Relations. Please go ahead.
Good afternoon. Thank you for joining us to discuss brokers third quarter 2022 of our 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 <unk> Dot com.
As a reminder, this call is being webcast live from our 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's Arab Israeli Chief Executive Officer, and co founder, Brent Turner, President and Chief operating Officer, and Charlie <unk>, Chief Financial Officer, Robert before we begin I'd like to remind everyone that management will make certain forward looking statements within the safe Harbor provisions of the Securities litigation.
Format of 1995.
On this call identified by the words anticipate expect believe will may assume continue plan ongoing and similar expression.
Forward looking statements are based on <unk> current expectations estimates forecast and projections beliefs and assumptions of management and relate to our future financial performance, such as our fourth quarter and full year 2022 financial guidance.
Trends for our GAAP and non-GAAP expenses as a percentage of revenue marketing and product investments and initiatives Covid and macroeconomic impact partnership and expansion opportunities market share other future events and industry and market conditions and forward looking statements about rover its platform.
Domestic and international market opportunity.
Forward looking statements are subject to known and unknown risks.
Uncertainties and assumptions that could cause actual results or performance to differ materially from those expressed or implied in the forward looking statements.
We strongly encourage you to review the information that we're over files with the SEC regarding specific risks and uncertainties. In particular those that are described in the risk factors section of growers second quarter 2022, 10-Q filed on August 12 2022.
That will be disclosed in our third quarter 2022 Form 10-Q.
These forward looking statements speak only as of today.
<unk> undertakes no obligation to update these statements to reflect subsequent events or circumstances, except as required by law.
You should not place undue reliance on our forward looking statements as they are not guarantees of future performance.
Certain information referenced in the presentation is derived from third party publications and sources.
We have not independently verified such information.
During today's call, we will discuss unaudited GAAP and non-GAAP financial measures.
We provide a reconciliation of the historical non-GAAP measures to the most comparable GAAP measures in our Q3 2022 earnings release and the non-GAAP reconciliation supplement which is posted under the news and events presentations.
On the Investor relations portion of our website.
As indicated and those reconciliations and discussed in the earnings release, beginning with the third quarter of 2022, our calculations of adjusted EBITDA and non-GAAP General and administrative expenses exclude the amount of our recently announced legal settlement.
non-GAAP financial measures provided should not be considered as a substitute for or superior to GAAP financial measures.
Unless otherwise noted we will compare all Q3 2022 metrics to Q3 2021 metrics in this call.
With that let's get started.
I'll now turn the call over to Aaron He's truly cofounder and CEO Aaron.
Thanks, Walter and thank you everyone for joining us today I will start by outlining our high level third quarter 2022 earnings results give a few highlights and then provide some comments on the balance of the year.
I'll, then turn it over to Brent to provide further details on our bookings and investments.
Charlie will then conclude the prepared remarks by walking through the financials and our detailed guidance before we take questions.
We had a great quarter Rover with both revenue and adjusted EBITDA up nicely year over year and above the high end of our guidance range.
Third quarter revenue of $50 $9 million was up 45%.
Gross booking value of $213 $7 million was up 36%.
Total bookings were $1 5 million a growth rate of 18% year over year, and adjusted EBITDA was $10 $2 million or a 20% margin up from $6 6 million in the prior year.
This outcome is even more impressive when considering the context to the third quarter comparison in 2021, that's an extremely large bump on the back of vaccine rollouts and the surge in pandemic pet adoptions.
In addition to driving solid financial performance during the quarter. The team's strong execution also drove a number of key business accomplishments.
First expected lifetime values continued their record setting trend initial data from customers acquired during the quarter shows them on pace to beat all of our prior Q3 cohorts and the customers acquired during the first half of the year continue their respective record pacing.
Second our international business extended its impressive growth trajectory, despite economic uncertainty in Europe with GBP, increasing approximately 100% over Q3 2021 levels.
CAD bookings in Europe continued their explosive growth with cat only GBP over seven times higher than the prior year period.
We continue to see opportunities to invest in marketing across our international markets.
Third we're starting to see our strong brand and market position and drive additional category growth at <unk>.
According to a recent survey of pet parent customers, 16% have come directly to rover to solve their pet care needs before even having tried another solution, including friends family and neighbors.
Finally, we have signed and implemented a new type of a distribution deal with bright horizons in the employer sponsored backup care space.
This partnership provides employees, who have employer sponsored childcare benefits the option to use those benefits to booker over services.
As an excellent incentive for both new and repeat bookings and marks the first time, we have utilized this type of partnership.
Initial traction is encouraging we've always thought as Rover became the clear category leader and had near Universal geographic coverage, we will be increasingly attractive as a commercial partner.
We will continue to look at additional opportunities in this area.
As we look towards the balance of the year I am pleased to report the signs of caution we are observing at our last earnings call, including an elevated cancellation trajectory in June and July have moderated.
Our assessment that Covid was the primary driver of these increased levels appears to be borne out.
Cancellations mentions of Covid and platform communication public data on Covid prevalence in wastewater data have all trended downward together during the second half of Q3.
Our preferred measures of category demand have indicated an improved operating environment in the back half of Q3 and into Q4.
As such we feel more confident in the remainder of 2022, and thus our raising our guidance.
Rover's growth combined with excellent unit economics creates an exciting opportunity in the periods ahead.
By continuing to judiciously invest in marketing, while managing our fixed cost we expect a substantial portion of incremental revenue will fall to the bottom line.
With this increasing profitability, we anticipate funding incremental investments in product, where operating cash flows while concurrently scaling our profitability margins.
And now I'd like to hand over the call to Brent to provide more detail on our bookings operational performance and marketing spend.
Thanks, Aaron and Hello to everyone on the call.
First I'd like to provide a bit more color regarding the performance of the business in Q3.
As Aaron mentioned total bookings increased 18% year over year to one 5 million. This was another all time record quarter for Rover.
Q3 worldwide, new customer were approximately 270000.
This result exceeded last year's peak of pent up demand when pandemic fears he's in the U S and drove a surge of new customers to the platform.
With this continued performance we're on track to exceed our 2022, new customer targets underpinning our projections from a process of going public.
Our non U S business was also a significant contributor to new customer acquisitions, including very strong performance out of Europe .
Turning now to marketing expenses in Q3, 2022, non-GAAP marketing expense was 16% of revenue down.
Down from 18% in Q3, 2021, and 24% in Q2 2022.
This decrease was partially driven by a reduction in cancellation rates during the quarter.
We also pulled back non search marketing spending meaningfully at the start of the quarter in response to the pandemic wave.
Towards the end of the quarter as we observe the improvement in cancellation rates, we resumed a number of marketing tests.
The results continue to be encouraging we.
We see solid results on video social and similar channels based on this success, we plan to increase our marketing investment in these longer time to return channels during the fourth quarter.
As a result, we expect non-GAAP marketing as a percentage of revenue to trend higher in Q4.
However, it is still on track to be towards the lower half of our previously stated 18% to 25% target for.
For the fourth quarter and full year.
We will continue to dynamically adjust our marketing spend based on our observations of overall category demand in cancellation rate ebbs and flows due to COVID-19.
We remain confident in our ability to perform within our long term margin target.
Further we continue to invest in product features that add platform value for care providers and increase the loyalty of pet parents, the roku platform.
This quarter, we invested significantly in improving the usability of tools with which the care providers manage their calendar and book business through the App.
We also added help videos to guide new providers on how to be most effective on the platform.
Finally, we are enhancing our messaging to providers and parents to help them fully understand the increasing value of the rover offering.
We are pleased with the progress and are proud of our results this quarter.
Rover team continues to execute well driving both new and repeat customer bookings and building scale now I'll hand, the call over to Charlie to provide further detail on our financial performance.
Thanks, Brad.
I'll begin by providing an overview of our financial results for the third quarter of 2022, followed by guidance on the balance of the year.
Revenue in the third quarter was $51 million up 45% third quarter <unk> was $214 million up 36%.
The increase in revenue was primarily driven by growth of bookings as well as an increase in average booking values.
Our third quarter, Adv was $142 up 15% year over year.
The core drivers of this growth were increases in average price per service with overnight services being a significant contributor.
This growth in <unk>, along with more predictable repeat behavior.
Increased expected lifetime values for all cohorts.
non-GAAP contribution increased to $41 million in Q3, 2022 from $29 million in Q3, 2021, driven by growth in revenue, while staying roughly flat on a percentage of revenue basis at 81%.
Moving to expenses.
Third quarter, non-GAAP operations, and support expenses were <unk> 7 million or 14% of revenue.
Flat compared to the second quarter of 2022 and up from 12% of revenue in Q3 2021.
The increase compared to the prior year as a result of the scaling of personnel in order to provide an appropriate level of staffing.
As we continue to drive increasing demand on the platform.
We expect non-GAAP operations and support as a percentage of revenue to remain.
Our below Q3 levels in the medium term.
We continue to deleverage in non-GAAP product development expenses.
Which were $6 million or 11% of revenue compared to $5 million or 14% of revenue in Q3 2021.
Third quarter, non-GAAP general and administrative expenses were $10 million or 19% of revenue compared to $8 million or 24% of revenue in Q3 2021.
The increase year over year in expense as a result of the investment needed to support our transition into the public markets, coupled with expected growth of the business.
Although a decline on a percentage basis is due to our scaling of revenues from Q3 of 2021.
Adjusted EBITDA was $10 2 million for a margin of 20% up from the adjusted EBITDA of $6 6 million or margin of 19% in Q3 of last year.
The improvement in adjusted EBITDA resulted from strong revenue paired with moderated marketing expense due to the initial caution we had at the beginning of the quarter.
As we normalize our fixed costs post going public we are increasingly able to demonstrate how our profitability is positively impacted.
In recent periods, we have seen incremental revenue to adjusted EBITDA at a substantial rate and given our limited capex requirements contribute significantly to cash flow.
From a liquidity perspective, our total cash cash equivalents and investments was $266 million down from $288 million in Q2.
This balance was impacted by the timing of payments between us and our payment processor at the end of Q2 and the seasonal impact of working capital due to the fourth of July holiday.
In summary, our business delivered strong top and bottom line results during the quarter.
Now turning to guidance.
Given the positive context, Erin and Brent discussed and our over performance in Q3, we are updating our full year guidance for 2022 to increase the revenue and adjusted EBITDA ranges.
When we spoke to you last quarter that picture of the back half of the year, especially cancellation rates gave us pause and we adjusted guidance Accordingly.
Since that time, we have seen improvement in key metrics, such as cancellation rates, which while sales governance elevated from pre COVID-19 levels have come down since peaking at 15% in July to 13, 8% in September.
Our forward macro assumptions layered into our guidance are as follows.
Both the low and the high end of our revenue guidance continues to assume the full year impact related to omicron as discussed in Q1.
And the recent macroeconomic headwinds inclusive of elevated cancellation rates relative to pre COVID-19 norms.
The high end of our guidance assumes cancellation rates remained steady to September those seasonally adjusted for the remainder of the year.
While the low end assumes higher cancellation rates and lower booking demand.
For the full year 2022, we are updating our prior guidance and now expect revenue of $171 million to $173 million, which at the midpoint would be a 57% increase in revenue over 2021.
And adjusted EBITDA of $16 million to $18 million up from $12 4 million of adjusted EBITDA in 2021.
For the fourth quarter, we expect $49 million to $51 million in revenue.
$6 million to $8 million, and adjusted EBITDA or a 12% to 16% margin driven by our anticipated continue ramp in marketing investment.
In summary, we are excited about the overall performance of the company and remain on track to drive both top and bottom line growth as we head into the end of the year.
We look forward to connecting with you early next year to wrap 2022 and discuss the year ahead.
With that ill now turn it to questions.
Operator can you open it up to Q&A.
And thank you.
As a reminder to ask a question Youll need to press star one on your telephone please.
Please standby, we compile the Q&A roster and once again that is star one one to ask a question and one moment for our first question.
And our first question comes from Andrew Boone from JMP. Your line is now open.
Hi, guys. Thanks, so much for taking my questions. Two please one just on macro I'd love to hear what you guys are seeing on that and whether there is any any change in length of stay or any change in providers. As you guys are seeing changes in the macro impact and then secondly, as we think about 2023 and I'm not looking for <unk>.
Greek guidance here, but rather should the macro impact should the macro environment weaken as we think about next year can you talk about how youre thinking about various cost levers.
And what you guys might be able to pull should things deteriorate faster than than we're all thinking thanks. So much.
Hey, Andrew it's Eric.
Thank you for your question.
Generally we have seen versus pre pandemic norms, a mixed shift overnight services.
And with that slightly higher units.
More recently, though that that mix shift has been fairly constant.
So we haven't seen much additional mix shift so daytime and overnights growing roughly equivalent levels.
We haven't seen any notable changes beyond seasonal trends more recently.
We continue to see the benefits of some of the changes we made to the platform.
Designed to increase stay duration like the partial day billing and we expect to continue to see that benefit over time.
With regards to the broader macroeconomic situation as a reminder, hope it hits the business pretty hard and we've made some really difficult decisions.
When the pandemic first hit.
We generally think we are right sized as a business.
Going forward.
We may moderate our incremental head count hiring.
May pull back on marketing if we don't think the environment is conducive to that spend.
But in general we think the business from a fixed cost perspective as appropriate.
Okay. Thank you so much.
And thank you.
And one moment our next question.
And our next question comes from Maria Rich from Canaccord. Your line is now open.
Great. Thanks, so much for taking my questions.
First is I think last quarter, you talked about some early evidence of a sort of a.
Slowdown in consumer demand can you just maybe talk about what are you seeing both from new customer acquisition standpoint, and in terms of existing clients of engagement on the platform.
Hi, Maria really good to hear premiered sprint.
From the.
From the standpoint of new customer.
We did we did enter Q3 in the middle of what we saw with thought with a.
Part of our pandemic wave.
Kicked up into Q2, although we saw.
Begin to abate as the quarter went on and we saw.
Demand strengthened.
We're hoping that that will continue to carry into <unk>.
Q4, we're pretty happy with how Q3 wound up from a new customer standpoint, and in the sense that.
Not only were we able to.
<unk>.
Exceed last year's.
Sort of a huge wave of demand is.
As the pandemic last year has subsided and we saw a big.
Global travel demand, but but also we're really excited too.
To see that we are staying in line with targets that we put together back in 2020. When we were originally planning to to go public or excited about that in terms of the repeat engagement of the customers are coming on it continues to be from a unit standpoint, similar to what we've seen in the past and from a from a revenue.
Endpoint to be the strongest that we've seen and so we're excited to see that.
We are continuing to build momentum on those fronts.
Great. That's very helpful. Thanks, Brent and then secondly have you seen any uptick in daytime service just as most people kind of returning to the office and then how have your other investments and platform services and progressing including Europe sort of integration of the Doc training platform that you acquired last quarter.
Alright, good to hear from you this is Aaron.
We saw a mix shift with.
With the reopening of the economy and vaccine rollout where the overnight services.
As a percentage of our overall mix.
After the first.
Several months or a quarter, so we come out.
Relatively proportional growth rates across service lines the year over year mix on the daytime side Hasnt changed much. So that's kind of consistent with.
Steady growth across so the high level. There is we are seeing growth in the daytime services.
But not.
Faster.
Then the overnight services and we will continue to monitor that to see how that.
Plays out over time.
With regards to our.
Our dog training assets, we had purchased.
A small early stage company in that area. We're pleased with the initial results. We think that it makes sense to have that service as part of the mix of Rover group.
And we're excited about the progress that they're making with regards to building relationships with.
That adoption agencies in animal shelters. So it's early.
Early but positive so far.
Alright, thanks, so much for the color.
And thank you.
And one moment for our next question.
And our next question comes from Ralph <unk> from William Blair. Your line is now open.
Good afternoon, and thanks for taking the question first question on cancellation rates and Paul I think you had mentioned that peaked at about 15% in July and they were around 13, 8% in September I think you maybe use the term sort of stubbornly high versus pre COVID-19 levels minus.
Remind us just sort of a range of what cancellation rates looked like pre COVID-19 is there still.
Covid impact that are keeping these cancellation rates at this level I think sometimes you can see sort of observer read the messaging that's going on.
Between.
Supply side and the pet owners.
Curious, where you think that cancellation rate well trained.
Im sorry.
Post COVID-19 waning when combined with the macro and a tough question, but love your thoughts thanks.
Hi, Ralph this is Charlie good to hear from you.
Pre pandemic the cancellation rate norms, we are in the 8% to 10% range that fluctuated based on seasonality.
Since COVID-19 impacted the world.
It started impact Rover, we've just remained at an elevated level.
The words that I chose are accurate it is stubbornly elevated.
With regards to longer term.
There's a couple of dynamics that we're looking at one COVID-19 as we know has impacted cancellation rates negatively <unk> kept them elevated.
As the pandemic itself is lessened from a direct impact the other thing that we're seeing is just sickness generally has been trending up I think RSV is the latest viral dynamic that is starting to have some elevated dynamics and the reality for our platform is that we think that we are more susceptible.
<unk>.
To sickness because of the dynamic of our marketplace, having both a provider and a pet owner susceptible to illness. So on a go forward basis, our baseline assumption is that the cancellation rates will remain elevated for some period of time.
But we do.
Hope and.
I have not yet incorporated any.
Ticked down in those cancellation rates for the foreseeable future.
Okay, Great and then maybe just kind of shifting gears on the new commercial agreement with bright horizons.
Just curious if you could provide maybe a little bit more color on that.
This significant opportunity, particularly if you are able to add more partnerships over time seems fairly encouraging.
Thank you.
Okay.
Hi, Ralph.
Thanks for the question Yeah. We are really excited about the possibility of doing more of these types of deals in the future.
Although partners that have the scale of bright horizons don't come along every day.
Our high level of belief is that Rover.
Unique as a business our market position is unique our geographic coverage is unique.
Lot of companies in the pet services space are inherently.
Geographic based it's very fragmented space, there just arent opportunities for.
National brands or people with a wide geographic coverage to find partners in this space. So we thought that as our coverage geographically filled out.
As our category leadership became very clear that these opportunities.
Well come out and we're excited about this one.
It's early but.
So far.
Solid traction and.
And we will looking at doing more of these types of deals in the future.
Okay, great. Thanks, I appreciate it.
Sure. Thank you.
And one moment for our next question.
And our next question comes from Cory Carpenter from Jpmorgan. Your line is now open.
Hey, Thanks for the questions first wanted to ask about international <unk> grew over from around 100% year over year again could you just talk about what's working so low there and how we should think about that.
Continued opportunity for growth going forward.
Maybe just a specific question for Charlie anything to call out in terms of impact you saw from hurricane Ian or just anything in terms of timing of the holidays in synergies this year versus last year. Thank you.
Hey, there.
With regards to the international piece, so we've been really positively surprised by how much growth we've seen there Corey.
It's been pretty inspiring.
Our baseline assumption, though is that.
A lot of countries outside the U S and maybe the U K were a little bit later with their vaccine rollouts.
And given the differences in seasonal travel and some of those markets.
May have missed some of that benefit last year from Continental Europe .
Summer travel is really important.
And if the vacuum rollouts are a little bit later than some of what we're seeing this year in the international markets.
Maybe similar to what we saw last year in the U S.
So we're optimistic about the growth rates going forward there.
But we would expect them to moderate versus the current level and the macro risks seem to be a little bit more heavily stacked with Europe as well.
Hi, Cory it's Charlie with regards to your question Hurricane Ian.
Softness for about two weeks on the new customer front, but quickly adjusted back to the trend that we are anticipating and with regards to the holiday timing booking trends in Q4.
Just as a reminder, our booking window is about three weeks in front of any particular period and we're just about at that rate now for Thanksgiving. So with regards to our air any additional visibility or color not much more to share other than.
The guidance that we're putting out today is just based on the trends that we see up until this point.
Thank you Ross.
Thank you.
And one moment for our next question.
And our next question comes from Lauren Chung from Morgan Stanley . Your line is now open.
Great. Thank you I'm just you are guiding questions if I can.
What's sort of the underlying travel demand backdrop that you're assuming in the in the fourth quarter Guide and then maybe how are you thinking about that heading into 'twenty three and then just any more color on sort of the magnitude of the higher cancellation rate that's implied at the bottom end of the guide and then one bigger picture one if I can you mentioned 16.
Percentage of people came straight to <unk> are there any similar demographic factors are characteristics among that group. Thanks, so much.
Hi, Lauren I'll take the first question with regards to travel demand as Charlie mentioned.
We probably have a little bit less visibility for future travel than other companies in the travel space. So we feel.
So confident about the current quarter, but we'll be looking at.
Broader trends, including what other companies are reporting now as well as what we see in travel intent data and other third parties such as TSA data.
So feel good about the fourth quarter.
Next year, we're still putting together our plans generally with regards to our business heading into next year. There's a couple of things we think about the first is that the.
That industry is generally pretty resilient two recessions.
Generally the category overall still grows.
But travel can be impacted by macroeconomic trends and so we are at the intersection of about <unk>.
Our base case is that if there is marge macroeconomic winds, we will feel that but probably less so than the travel industry in general.
When recessions happen.
Our travel slows down there's kind of two ways that travel revenue slows down the first as people make travel last the second is people.
May budget money forward their trips so staying at less expensive resort hotel Airbnb.
Maybe less likely to upgrade to first class things like that.
We would expect that people traveling less would have some impact on our business.
But we expect to be impacted.
Laughs over to some degree maybe not at all by people trading down.
The price that people pay for their pet care is such a small portion of the trip that even if people decide to spend less on a hotel that's been lepton a resort.
Unlikely.
Our average booking value.
So in that sense, we're not sure exactly what's in store for next year.
But that's our baseline cases.
If there are macroeconomic winds will feel it.
But maybe a little bit less than the rest of the travel sector.
Hi, Lauren this is Charlie I'll jump in and talk about cancellation rate and then pass it back to Aaron to talk about the 16%.
With regards to guidance and the cancellation rate on the low end one of the things that we looked at was the.
The behaviors and cancellation rates in Q3 late in Q4 of last year.
During that period of time that we're at kind of the tail end of Delta and then during Q4, there was the impact of omicron and so at the low low end of our guidance range.
Estimated a cancellation rate that's kind of a blend of those two dynamics impacting the customer base.
And then with regards to the 16% of Neil I'll pass it back to Aaron.
Yes, with regard to the 16% new.
Our suspicion is that probably skews.
<unk> generation.
We don't have data sufficiency, yet to say that for certainty.
But if you think about the pet owner population.
Storage really our assumption has been that people that user over for the first time are either going to be coming from the shadow market people, who use friends family neighbors or take their pets with them on trips or would be coming from the commercial market.
Boarding facility Doggy daycare.
Ken all things like that.
So we don't even have kind of a baseline historically to track this metric because pretty much all of our customers who are either coming from commercial the shadow market.
As the younger generation is starting to adopt pets in general we decided to start tracking this a little bit more closely and we were surprised that how high the number was which is a strong indication.
By category creation and growth.
If I rewind the clock, a little bit and talk about the initial investment Pcs related to launching brokers business.
When investors would ask us well what does success look like in terms of Tam and category creation.
Our response to the timeline, Okay, a couple of decades from now.
Success would look like people actually just defaulting to Rover and this is what you do when you have a pet.
This is how you go about providing for you Pat when you are away from home.
And so that was our thoughts so it's really exciting to start to see that show up in the data.
And suggest that.
The Tam as we've always thought is a lot bigger.
And the existing commercial market, we hope to share more in the future about specific demographic breakouts of that 16%, though.
Great. Thank you very much.
Thank you.
And one moment our next question.
And our next question comes from <unk> <unk> from Stifel. Your line is now open.
Alright, Thank you for taking my questions.
Wanted to touch touch base, a little bit on the average.
<unk> per bookings how much of that is.
Coming from price increases as we start to lap price increases from last year and do you think you can get to a level, where there could be some consumer pushback in terms of the level of prices that.
Suppliers are asking for.
<unk>. This is Charlie with regards to the Abv's Youre right to point out that they are up again year over year of about 15%.
One of the trends that we have been seeing is that they have been slowing down on their year over year growth.
The peak growth rate was really about Q4 of last year, but they've been trending down.
With regards to the splits on the price per units and the number of units.
Within the ABV dynamic about.
Two thirds of the increase was really driven by price per unit and about one third is about is driven by the number of units there with regards to whether or not there's going to be a consumer pushback on the pricing dynamics, we touched on this a little bit last quarter, we werent really seeing any impacts in.
In terms of conversion rates or the propensity for somebody to book with regards to price being a hurdle.
I haven't seen much of an update on that.
And longer term from an inflationary standpoint, we would expect the price per unit growth to continue to slow down like we have been seeing and probably get back to kind of a normalized year over year growth that we're experiencing pre pandemic, but don't really have visibility on.
The perspective that they would go backwards on a year over year basis. Aaron did you have something else you'd like to add there.
Yes, thanks for the question Lamont.
We have.
Look at our demographic mix were surprisingly broad, but one of the areas. We under index a little bit is in the lowest income segment.
I think our baseline assumption is that.
If there is pushed back.
Probably going to be more for people with less disposable income, which we are somewhat underrepresented and at least at the very low end of the income bracket.
So our baseline case has that.
Slowing down.
We think that inflation.
With me.
It come down a decent amount before we saw I would see it go backwards in an absolute sense, but we will keep you apprised.
Okay, great. Thank you.
Thank you.
And one moment our next question.
And our next question comes from Tom White from D. A Davidson <unk> company. Your line is now open.
Hey, this is why at Swanton on for Tom.
Could you guys talk about your upper upper funnel traffic trends and what they've looked like in recent weeks and then maybe give us some early sense about how youre thinking about your marketing tactics heading into next year.
And to what extent, you think your marketing efficiency or conversion rates could be impacted by the macro.
Okay.
Hi, Thanks for the question it's Brent.
Without specific metrics that we talk about publicly I would say, it's our upper funnel is strengthening we are doing things.
From a marketing standpoint, right now to strengthen it and that we are easing back down on our.
Funnel marketing, particularly.
Youtube streaming in linear television.
And the <unk>.
In social and in the case of.
The more digital channels.
Doing those.
In Canada, and Europe as well.
In terms of how they are going to be impacted by the macro I mean, we feel pretty good about the rest of the year in terms of how we're trending.
And we're putting together our own opinions about how next year will probably play out and we'll keep you apprised.
Yeah.
The one thing I'll add to that is.
One of the benefits of having a strong balance sheet that we have the ability to kind of look at it.
The value of a customer over a longer period of time.
And so we want to sustain our marketing efforts and building the category.
If we think the returns over time or not.
And not be.
Get too focused on just the near term.
Got it thanks guys.
Thank you.
And one moment for our.
Last question.
And our last question comes from Eric Sheridan from Goldman Sachs. Your line is now open.
Thanks, So much for taking my question, maybe I'll try to add another big picture. One you know as you guys look forward to 2023 I know, it's a little early to talk about it from a forecast standpoint, but can you refresh folks in terms of what your highest priorities items are in terms of investing in the business building product for growth and how we should be thinking about the yield or the output of that.
Investments over the next couple of years. Thanks, so much.
Yes.
Hey, Eric it's really good to hear from you it's Brent.
And I Love this question.
Our priorities as we're moving into next year.
Probably in this order, but we're trying to make investments that add platform value for our care providers. We're.
We are trying to make investments to make it easier for new customers to find and book with a care provider on our platform.
We are making investments to try to.
Makes sense.
Extensions to existing.
Marketplace with.
New business lines that we are either considering or or building or are currently integrating.
And we are especially interested in enrolling features to our international business to try to accelerate growth and build on the momentum that we've got there.
From an investment standpoint, that's within our hit at least from a product standpoint.
Okay.
And thank you.
And I am showing no further questions I would now like to turn the call back over to Aaron easterly for closing remarks.
Well. Thank you everyone for taking the time to hear about Rovers third quarter.
Exciting quarter and read and more excited about the town.
Right.
You on 2023, and our next call.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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