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As a belvedere for pet casework such as dog boarding and cat sitting, Rover has fabricated a name for itself amid a growing cardinal of pet parents above the United States. But does this baby aggregation accept what it takes to accomplish it as a accessible investment?

In this adventure of Industry Focus: Chump Goods, host Emily Flippen is abutting by Motley Fool analyst Asit Sharma to breach bottomward this business afore it hits markets.

To bolt abounding episodes of all The Motley Fool's chargeless podcasts, analysis out our podcast center. To get started investing, analysis out our quick-start adviser to advance in stock. A abounding archetype follows the video.

Asit Sharma has no position in any of the stocks mentioned. Emily Flippen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a acknowledgment policy.

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This video was recorded on February 23, 2021.

Emily Flippen: Welcome to Industry Focus. Today is Tuesday, February 23rd, and I'm your host, Emily Flippen. Today, I am abutting by Motley Fool Analyst, Asit Sharma, as we allocution about the abutting pet-focused business to hit the market, Rover. Asit, as I said that sentence, it occurred to me that aback I heard this business was action public, I anon jumped on it for Industry Focus afterwards absolutely cerebration about whether or not this is a chump appurtenances company. Would allocate Rover as tech or chump goods? Now I feel like maybe I allegation to accelerate Dylan an acknowledgment note.

Asit Sharma: I anticipate this is absolutely chump goods, Emily. Commodity in me has confused since, let's say aftermost year pre-COVID. There are a lot of companies that are absolutely consumer-focused, but they appear at it with a lot of tech. So I accept my own pet name for this category, tech-infused CG. That gives us a little bit of amplitude to becloud some boundaries.

Flippen: I was acutely way too aflame about pet trend, the constancy of the chewy barrier here, if you'll alarm it that. So hopefully our admirers won't get a added adventure over Rover on Friday aback Dylan comes on. But alike if you do, what I will say is that this is a business that I anticipate deserves two episodes of Industry Focus because it is such an oddity. I anticipate you and I -- I'm basing this appraisal off of your addendum that I've apprehend -- I anticipate you and I acquainted abnormally about this company. We fell on two altered ends of the spectrum here. So I'm absolutely absorbed to allocution about it in a bit added detail.

Sharma: Emily, [laughs] you apperceive how to punch up the artifice because I'm apprehensive aback I conveyed my notes. I anticipate we absolutely fell in the aforementioned side. We're action to accretion out. I accept no abstraction now and you apparently accept no abstraction what I anticipate about this company, so let's do this.

Flippen: I'm so excited. I accept to say, afore we get into the details, accept you anytime acclimated Rover before?

Sharma: I haven't, Emily. At the present time, I don't accept a cat or a dog, but I spent some time on the belvedere aftermost night apperception that I bare accession to accommodate a account on this belvedere for me today because I was active in the one o'clock hour while we were action to almanac Motley Fool Industry Focus. So I became appealing accustomed with accepting about the platform. Appealing absorbing interface. How about you? Accept you acclimated Rover?

Flippen: I have, and maybe that is allotment of the acumen why anxiety my appraisal here. I'm a fan. I've acclimated it a lot in the past. I wouldn't say in their ambition demographic, which is burghal areas. I'm on the outskirts of an burghal area, but I biking a appropriate amount, at atomic pre-COVID, obviously, I was accomplishing beneath of that in 2020. But whenever I would travel, I would accretion bodies on Rover to appear and do circadian check-ins on my absolute baby cats. It was consistently a acceptable experience. It was absolutely smooth. I never had an affair and I apprehend that's absolutely anecdotal, everybody will accept their own stories. But aback I heard that this aggregation was action public, I was like, oh, wow, I've acclimated that before. So I'm aflame to allocution about it in a bit added detail. What I will say is, with all companies nowadays, this is a aggregation that's action accessible through a SPAC. We can allocution about some of its SPACy details, if I can alarm it that, afore we allocution about the business itself because it's consistently account advertence aloof some of the added accident that exists with affairs shares of a SPAC adjoin a aggregation that is anon listing.

Sharma: Yeah, absolutely. This is one affair that I appetite to aloof bound accent here. For those of you who are acclimated to affairs IPOs, afterwards they price, maybe you're not able to get in on the action beforehand, which is altogether OK. Abounding of us, I anticipate at The Motley Fool, those who are abbreviate actuality on Fool Live accept a mantra to not feel that you are action to absence out. You can delay a analysis or two with an IPO afore you buy it, see how they accomplish as anon as they're accessible in those aboriginal brace of anniversary reports. The aforementioned with SPACs. I feel they accept a lot of fizz at the moment and there are abounding of them that are action beeline up afterwards the mergers happened. But you've got time as investor, and time's on your side, both in agreement of a captivation period, but afresh time to evaluate. You should never feel too pressured to get in on what seems like a acceptable accord at the outset.

Flippen: That's a absolutely acceptable point and to added accent that, they're bringing accessible through accord with Nebula Caravel Accretion Corp. It trades beneath the ticker NEPC appropriate now. But at announcement, and agenda that it's up 6% or 7% aback announcement, but at announcement, the SPAC had admired Rover at aloof over $1.5 billion in disinterestedness value. While that sounds abate than a lot of the added SPACs, we'll allocution about why it ability be hardly added favorable appraisal based on the acquirement that the businesses accomplishing today. I accede with your appraisal there also. Don't feel the allegation to jump in aloof because commodity is accepting a lot of advertising or a lot of attention. 1.5 billion doesn't complete like a lot, but aback you're attractive at the business's size, it is already entering the markets, apparently [laughs] action to be appealing bubbling valued. Although, I guess, that's par for the advance these days.

Sharma: Sure.

Flippen: What can you acquaint us about accomplishments and administration here? I advised to add addendum here, and the alone affair I wrote is that their architect came from Microsoft and you absolute affably abounding in the rest.

Sharma: That's a abundant point. We accept a architect who's an industry adept of the tech industry. That's important to the adventure because at the end of the day, I feel that this is a exchange business. Emily, and we've talked about a few in contempo weeks. You appetite to accept a aggregation that has a abundant interface and has an able belvedere on the tech side, we'll get into that. Aaron Easterly, the founder, had several fund-raising circuit as he brought this aggregation into its present size. This latest abundance happened afterwards COVID. The aggregation hit a asperous application during 2020. Their latest funder comes on the scene, as you mentioned, Nebula Caravel Accretion Corp. Aback they merge, it will be alleged Rover. Rover is absolutely the accepting entity. We'll get into the nitty-gritty of how the SPACs work. But at the end of the day, the company, which is Rover now, is action to be the absolute commodity and they will accept a bigger antithesis sheet. The bodies who are abetment the bare analysis company, Nebula Caravel Accretion Corp, are appealing experienced. They appear from a clandestine disinterestedness firm, which is alleged Accurate Wind. The CEO of that company, Adam Clammer, has been in the business for a while. For those of you who are accustomed with the bloodthirsty clandestine disinterestedness firm, KKR, he formed in the technology analysis of that. The the allotment of KKR that was focused on affairs up technology companies. They've got several projects beneath way that are action to end up the SPACs. They additionally had a history of allotment some companies that accept appear to bazaar as a technology company. There's a acceptable aspect of, watch over your financials that's advancing from the funder, and Adam Clammer is action to break on board, with the CEO, Aaron Easterly. He's action to break on lath as a director. Afterwards this merger, Easterly, the CEO, is action to accept about 5% of the company, amid 4% and 5%, I think. Abutting to 5%. Nebula Caravel is action to own amid 4% and 5% itself depending on shares that are redeemed. Now, interestingly enough, Emily, you acicular out in our addendum that alfresco broker or accepted investors are action to own a whopping 80% of the company. That's because several adventure basic funds that alternating in the aboriginal allotment circuit of Rover are blockage on board, and I anticipate that's a appealing acceptable sign. There are three funds in particular, which anniversary accept a pale alignment from 10-16%. That's consistently absolute aback your antecedent funders aren't aloof aggravating to accept an avenue with the IPO. That's a bit of accomplishments about the administration aggregation and the funders abaft them. Emily, what can you acquaint us about the absolute business?

Flippen: I apparently should accept led with this. I anticipate I started the chat aloof talking about how aflame I was to accretion accession to bead it on my cat while I was out of town. But Rover is a belvedere that offers a array of casework for pet parents, mostly in the United States appropriate now. The casework accommodate boarding, abode sitting, day care, dog walking, drop-in visits, and they're alike testing in-home admonishment in some markets. The way it works is you can brainstorm it like Airbnb, but for pets. That was the affinity that lots of added bodies accept used. I'm not abiding if it works absolutely the aforementioned here. But the account that the prices are set by the providers themselves. Independent providers assurance up on the platform. They say, oh, I appetite to be a dog walker. Oh, I can accept a dog break at my abode over the weekend. That's breadth the Airbnb aspects comes in [laughs] , I think. Afresh they set their own prices for what a day or nightly bulk would be for altered services. Afresh bodies who are pet parents appear assimilate the platform, browse through the altered providers at they're altered bulk points, and aces accession to serve whatever their allegation is. The ante absolutely alter based up what account you get. I anticipate the cheapest ones, they are $5-10 on the low-end per visit, or aloof simple drop-in visits. Somebody advancing by your house, blockage in that your cat is still animate while [laughs] you're out of town, Emily. Or as aerial as $70-100 in case of in-home grooming, which is what they're testing in a few markets. So instead of bookings yourself about to stay, you can book your pet about to stay, I guess.

Sharma: Emily, what absolutely afraid me about the belvedere aback I was attractive at it aftermost night, it's so user-friendly. Basically, I anticipation Airbnb is absolutely abundant example. I additionally anticipation about commodity like Fiverr [laughs] as a platform. Fiverr is the freelance exchange breadth freelancers can acquaint themselves to buyers who allegation services. The affair that addled me action through aftermost night is aback you put in a search, so putting in search, of course, for today, I bare a dog walker, you get a account of absolute affable attractive people. The top ones accept abundant reviews and they all attending absolute compassionate. If someone's action to booty my dog for a walk, I appetite to accomplish abiding that they attending compassionate and friendly. A lot depends on that beheld cue, and they've got that in spades. They additionally promote, I think, well-rated bodies on their platform. So those acknowledgment aboriginal in the results. The Airbnb aspect is appealing absorbing because what you get is a console on your screen, which shows you the burning of map credibility and you can zoom out and see how abutting the bodies on that chase are. I anticipate the aboriginal set of after-effects you get are the bodies abutting to you. The platform, as I'd mentioned, it's advised to be adaptable first, and it is absolutely capital-light. They run this arrangement on Amazon Web Services, that's their technology stack. While they've got bulk on their antithesis breadth that are basically centralized software development capitalized costs, acceptation they've spent some money to advance software internally, they're not spending on a agglomeration of servers, and they don't accept this aerial bulk to advance things in-house, which I anticipate is acute because that's absolutely not the action of this business. It's absolutely to affiliate these buyers and sellers of these pet services. They accept a appealing acceptable abstracts aggregation and tech team. Out of about 250 employees, 92 of them are abstracts scientists, software programmers, engineers.

You can see that's admission from the CEO advancing from Microsoft. He fabricated abiding that this would be a absolutely accessible to use platform. I anticipate that's apparently helped them calibration to the admeasurement they are. Now, I accept to point [laughs] out commodity that I didn't like. You apperceive what, I'm action to be pointing out a couple, maybe two or three things that I didn't like about this company. I'm hasty myself that I'm interested, actually, I'm absorbed in potentially advance [laughs] in this. So I'm a little bit of a acknowledge here. But the alms announcement didn't accept any age, assets or sex demographics provided. They do acknowledgment that millennials and Gen Zers are arch this movement to academy pet ownership, which will account the aggregation in the continued run. But this is absolute abnormal for a exchange business. That's a key focus in the alms certificate to appearance for a marketplace. Hey, who are the buyers, who are the sellers? Do they angle added male? Do they angle added female? How do we ambition them? I had to do a little browse of my own. So allocution about [laughs] anecdotal and aloof a little bit of abstracts here. But I looked at several altered cities and I did the aforementioned chase for this time slot. Emily, you can apparently allege to this because you use the platform. About 85% in best cities, sometimes 90% of my chase results, at atomic the aboriginal 60 or 80 that I looked at were women. There are hardly any men represented, and aback they are, they're absolute affable attractive men. [laughs] I don't apperceive what this says. There's commodity to be analyzed here. I'm abiding the aggregation is utilizing this in how they ambition what they alarm providers, the bodies who are there to airing your dog or to attending afterwards your cat. But they didn't absolutely accord us acceptable advice on what it agency to them. This is commodity that companies like Etsy or Poshmark, we talked about, Fiverr. All these are exchange businesses excel in their alms abstracts and in their 10-K anniversary report, that apparent you, who buyers and sellers are, and what it agency in agreement of age groups or incomes or what not. A aboriginal address artifice here, but is that your experience, Emily, aback you attending for somebody to booty affliction of your cat? Are best of your after-effects females? They attending like to be adolescent females to me.

Flippen: Yeah, this is absolutely absolutely interesting. I'm blessed you acicular it out, because I apprehend through their alms perspectives, their broker presentation. It didn't alike action to me that this was missing. But it would accept been such an absorbing accession if they had alleged to add it. Because I anticipate I accept the aforementioned affair as you. Alike if it were the case, majority of providers or alike pet parents did skew changeable or a assertive age, that's admired agency that we can analyze a ambition bazaar here. But it's funny, my acquaintance was absolute agnate to yours. The aboriginal time I acclimated Rover, opened up the app. I was attractive for somebody to do drop-in visits on my cat while I was out of town. I knew I'd be handing over my keys to my accommodation to whoever I picked. I don't own annihilation valuable. I'm not a acquisitive person, so I wasn't decidedly worried. But I did advisedly attending for somebody who looked compassionate. I best a adolescent female. I anticipation it had commodity to do with the actuality that I'm appealing abutting to the University of Maryland. I ample there was a fair cardinal of academy acceptance that were accomplishing this on the side, to accomplish some money while they were studying. I best a adolescent changeable I assume, academy apprentice who alone in, I rebooked with her abundant times. Afresh she confused to Louisiana. The abutting time I got on the app, I was devastated and I concluded up acrimonious addition woman, absolutely an beforehand woman this time. But I based it absolutely off of reviews, the cardinal of echo bookings. If you attending at their metrics, well, they don't accommodate demographic metrics, they accommodate some metrics about performance, I assumption from their pet account providers. 87% of bookings on Rover are echo bookings, and 70% of new barter rebook. So appealing impressive. Aback somebody is on the belvedere itself, appealing absorbing assimilation there. 97% of those reviews are best reviews. Abundantly because if you assurance up for the platform, it's absolutely like you're accepting graded too, agnate to the Airbnb effect. I knew that I basic this abundant pet babysitter that I had for the aboriginal time to appetite to appear aback aback I was out of boondocks again. I was afraid my cat wasn't action to be on its best behavior. She did antecedent drop-in appointment to accomplish abiding that the cat wasn't distempered or something, so absolutely interesting. They provided a lot of capacity about booking metrics, but about annihilation about the bodies who are application the platform. That's odd.

Sharma: Yeah, it is. Maybe it's aloof added of a absent opportunity. It's so absorbing because what you aloof declared is commodity that I anticipation ability be the case that there's action to be a band that you set immediately, altered than transacting. Again, let's go aback to Fiverr. You commissioned me, Emily, to do some bright design. Now, I don't apperceive what bright architecture needs you have. I'm abhorrent at it, but let's aloof accept here. It's a abundant assignment product. You'd like it, that's all good. Abutting time I accept some need, I will bethink that guy, Asit, the freelancer, and I will use them again. But if it's about your pet, this is a actuality who's advancing into your home, as you said. There are all kinds of affecting bonds that are in comedy actuality because you appetite the actuality to booty affliction of your cat. You feel adequate aback they do a acceptable job. They acutely are adequate to accretion a new chump who is nice and bolt about easily. It's abundant altered than, let's say, alike in Etsy acquaintance breadth you're buying, affairs crafts, good. There's some sellers on Etsy that I absolutely like, that reviews added than once. But this is commodity that is decidedly adhesive for that reason. That's the backbone of the platform, the attributes of this business. Booty affliction of my pet, agency if it works out the aboriginal time for both parties, it's acceptable to be alternating revenue.

Flippen: I apperceive that you've mentioned the addendum a little bit added bottomward about how that is potentially a risk. We'll get to the risks associated with the attributes of the casework that Rover provides. But afore I move on to some of their metrics, I anticipate it's account breaking out their acquirement segments. Aback you anticipate about the altered casework that Rover provides, 54% of their acquirement absolutely comes from boarding services. These are apparently bodies who are dog owners who are abrogation town, who don't appetite to booty their dog with them wherever they're action or can't booty the dogs with them, but additionally don't appetite to leave them at a apartment or not shelter, it's not the appropriate word. I'm not a dog buyer clearly. At a boarding house.

Sharma: Kennel.

Flippen: Kennel, that's the word, at a kennel. They appetite to leave them with somebody who they accept is action to do a acceptable job of demography affliction of them the aforementioned way they would. They accretion somebody on Rover with abundant reviews and they board, and that's over 50% of their revenue. But their added aspects are abode sitting at 14%. This is somebody advancing in, blockage in the house, active in that residence, demography affliction of the beastly on-premise for a assertive bulk of time. 5% for active day care, 12% dog walking, and afresh 14% drop-in visits. So somebody aloof advancing in, blockage up, and afresh leaving. Admonishment is beneath than 1%, but they're alone aloof testing that so that could potentially abound in the future.

Sharma: That admonishment is, I'm academic some of your high-margin account because they declared it as actuality a account about to the added services, some added acquirement or incremental acquirement adjoin let's say dog walking.

Flippen: Briefly actuality afore we move assimilate their metrics, or I should say their financials, it's account demography a attending at how they accomplish money. This is one of the things that I anticipation was absolutely missing from their angle documents, which was while they allegation a anchored fee to both the provider and the pet parents, they're not cellophane about what's that fee is. They accommodate an archetype central their broker presentation, that seems to betoken it's commodity like 25% of the gross booking value, of which 75% of that it's actuality taken from the provider, 25% taken from the pet owner. But there's no association that, that absolutely is the case. It's artlessly an example. It could be an archetype of what they appetite to do in the future, it could be an archetype of what they've done in the past, but there's absolutely no accuracy about what that fee is, in agreement of boarding, abode sitting, day care, how it differs from the altered services. That was one of the things that I anticipation was absolutely missing.

Sharma: It's commodity that you accept to accede as a administration team, the first-time you action abstracts to the accessible and afresh absolutely in your 10-K anniversary report, you get an befalling already during the year to absolutely fix those metrics. If you acknowledge it, you can fix metrics alternating the way or add new ones in your anniversary reports. Obviously, you can allocution about them on appointment calls. But this is important because sometimes companies will authority aback a little bit because they apperceive that our fees apparently aren't breadth we should accept them so we're aloof action to bulletin about our fees for now and we'll bang them up and apparently acknowledge them after on. But actuality cellophane is in your absorption as a administration aggregation because the broker community, be it retail investors like you and me, Emily, or the institutional investors that sit in on the appointment calls and ask the questions. Those questions are acceptable for you. They appearance you breadth broker affect is, what's captivation bodies aback from affairs added of the stock. It's because you're not giving maybe abundant detail or the detail that investors appetite to be able to accomplish decisions. I wasn't a fan of that, the archetype was nice. But I'm hopeful that in these first-quarter maybe that's commodity that they allocution about on the calls or alpha putting into the anniversary and anniversary reports.

Flippen: One of the things they did appetite investors to focus on, maybe beneath though, than what their absolute booty bulk is, is the bazaar befalling and Rover, as with every pet aggregation that's action accessible appropriate now, absolutely accent what a transformational year 2020 was, abnormally on the aback of a accepted transformation in the way that bodies accept been alleviative their pets. While 2020 in accurate wasn't abundant for Rover because bodies weren't defective to lath their pets or airing their pets as generally because they're at home. They did still say that there was a huge admission in pet affairs over the advance of 2020. So that aural itself is potentially interesting. I can't bethink the exact cardinal that it grew year-over-year, but it was appealing substantial, and Rover believes that they can absolutely alleviate a ample bulk of bulk in the bazaar opportunity, adopting that from about $9 billion today to over $70 billion, which is a huge admission and we can bother that later. But about they're adage they can get to $70 billion in annual bazaar befalling aloof off the abject of accretion the cardinal of households with pets, added biting the U.S. bazaar as pet households grow, and afresh additionally continuing M&A action in new all-embracing markets and accretion there as well. So there's definitely, I think, absolute absolute tailwinds that exists for pet businesses appropriate now. I will say they did adduce one study, and absolutely it's from the American Pet Products Association, so booty it with a atom of salt. But that abstraction begin that 32% of dog owners and 28% of cat owners would accent their pet's medical needs over their own [laughs]. While that may not anon accuse sales for Rover, I anticipate it does altogether highlight the trend of pet humanization that has aloof artlessly taken the pet industry by storm over the accomplished decade or so.

Sharma: For sure. Anyone who knows a pet buyer whose cat or dog has gotten ailing or maybe you've been in these shoes yourself, you accept [laughs] that apparently the absolute accuracy abaft that study, I am academic that's not too far off. I appetite to say a brace of things absolutely bound about that opportunity. They don't accept ascendancy over the allotment of households that are action to admission in agreement of accepting pets. Although they are appropriate to point out there's a growing trend for that and that spearhead by adolescent people. They additionally allegation this agitator accident to get customers. What they allocution about in the alms announcement is that best of the time you're action to ability out aboriginal to accompany and ancestors aback you accept a pet affliction need, do you allegation a ambler or accession to watch your pet overnight. Aback you can't get that, that's the aboriginal time you array of attending out of that boundary. So potentially some bluff business and we'll allocution about they've got a absolutely nice affair action on with their marketing, we'll get to in aloof a second. But conceivably some targeted business to accomplish abiding that that cast awareness, which is, I anticipate appealing big, it keeps growing, so that they don't accept to delay for the aboriginal time you've got this brief need. Afterwards that, aggregate break open, afresh you feel adequate with accepting a ambler or accession to benedict your pet. They allegation to move above the agitator that's helped them so far.

Flippen: Yeah. Allotment of the acumen why I anticipate Rover is such an absorbing comedy is about with companies this small, we see them bore a ton of money into business expenses. While Rover has absolutely spent money on marketing, it wasn't about as abundant as I accepted aback account this announcement abundantly because of the chat of aperture aspect of the business. They're business the expense, abnormally as a allotment of their gross booking value. That may not be the best I assumption top cardinal there, we could allocution about what gross booking bulk affectionate of lacks a little bit later. But the abstraction actuality that business costs as the business has developed has appear bottomward as a allotment of that acquirement over advance of time. The aftereffect is abundantly because of bodies like myself who acclimated Rover and afresh approved to cat sit her accompany cat, had an abominable time accomplishing it and afresh recommended that my acquaintance try Rover abutting time. It's those sorts of accustomed business adventures that accept helped accumulate this business in a hardly bigger banking position than I accepted branch into this report.

Sharma: For sure, Emily. You apperceive that the bulk to bazaar is one of the absolutely big drags on best of these [...] companies that are application technology platforms. You accept to admission barter so if chat of aperture is accomplishing on both abandon of the belvedere allotment of the job for you, that is a aisle of atomic resistance, and I was afflicted that not alone is it from the bodies who are purchasing the service, but chat of aperture spreads to the bodies who are accouterment the service. So obviously, if I accept a acknowledged brace of outings walking pet, I'm action to acquaint my accompany who are pet lovers too, "Hey, I fabricated $20 an hour accomplishing commodity I love," and that seems to be addition allotment or advantage of this platform. I will point out that for the business archetypal to work, Rover absolutely needs an crowd bearings in anniversary city breadth it enters. So it needs this abutting arrangement of accessible sitters so that aback accession like me takes a look, he is shocked. I was abashed aftermost night, it looked like from the zip-code, I mean, are all my neighbors on this belvedere because in my zip cipher I saw so abounding bodies advancing up that were alms for $15 or $20 bucks to watch my allegorical dog or fabricated up dog during The Motley Fool Industry Focused podcast. So they allegation this. It agency that some of those bodies are action to bead off, afterwards anytime accepting any work. So they're action to accept a lot of churn, if you will, on the provider side. But aback the chat of aperture is so incredible, they're not spending a ton to draw that allotment of the belvedere over. So appealing absorbing there.

Flippen: Aback I attending at their banking picture, I anticipate it's account maybe absence 2020 as a whole, and we could altercate whether or not that's silly, but I anticipate 2020 was such a awe-inspiring year for pet services, that attractive at 2019 numbers is apparently added adumbrative of what you can apprehend a business like Rover to do in the future. So aback you attending at the 2019 financials for this business... Aback you attending at the 2019 financials for this business, they did aloof over $400 actor in gross booking value, so that's the bulk of affairs that happened on their platform, not including cancellations. There is a fair bulk of cancellations that aren't included in that number. I anticipate historically, it's hovered about 9%. But they did over $400 actor bare 9% in 2019, that was a 31% admission year-over-year and represented over 4 actor altered bookings, additionally a 30% admission year-over-year. 2020 was harder, but 2021, it looks like the advance is action to reaccelerate. Although it's account acquainted that administration still doesn't apperceive what appulse COVID is action to accept on their abiding need. If bodies assignment remotely, 2021, 2022 it could attending essentially added like 2020 than 2019. I'm not abiding if I'd buy into that absolutely yet but 2019 by itself in agreement of advance and year-over-year numbers, looked appealing solid.

Sharma: It did. They're attractive for the biking industry to aces up. That's one of the key indicators for Rover that biking picks up again, so when, Emily starts traveling for business, she is action to acutely use the account more. Action aback to that business bulk that you mentioned earlier, Emily. If we attending at the aboriginal nine months of 2020, as you said, they are not acceptable nine months to abject what the approaching of this business looks like, acquirement about got cut in half. But that business absorb alone from about $37 actor bottomward to beneath than $14 million, as a consequence, aback you attending at the basal band because that bulk and some bulk control, they absolutely had a annular of layoffs during COVID, they took a PPP accommodation of about $8 million. But comparing the two basal lines, the operating accident was not that abundant altered alike admitting revenue, as I said, about got cut in half. The operating accident in the aboriginal nine months of 2020 was about $45 actor adjoin $40.5 actor in 2019. I absolutely like that because it shows the ability of that chat of mouth. I was action to acknowledgment this, and those of you who are watching today on Motley Fool Live can put this in the comments, they apparently accept a air-conditioned blog that has millions of altered angle every month. It's alleged The Dog People, and I'm attractive at it now. [laughs] It's got a air-conditioned beautiful cat with blooming eyes beneath a rug aloof peeking out and it says, this is the advance on the top bend of the website, the commodity is Why is My Cat Hiding From Me? There's about a coercion to bang on, apprehend that adventure about this beautiful cat so I can see why [laughs] this is addition way that they don't accept to absorb on business because the accountable bulk of this belvedere has such an affecting pool. I like those numbers. But Emily, let's booty aloof a minute and allocution about what's a little capricious on that gross booking aggregate metric. Maybe you can alpha and afresh I'll bell in.

Flippen: Definitely. I apperceive that's what's apparently in a lot of people's minds are like, "Okay, we see how abundant they're accomplishing in gross booking volume, but how does that construe to absolute revenue?" In 2019, while they did over $400 actor in gross booking volume, they did about 95 actor in revenue. If you aloof took the acquirement over gross bookings aggregate in air value, and you can booty that bottomward by 9$, booty out for those absolute cancellations, you're attractive at a booty bulk amid 20-25%. That ability accomplish you anticipate this is a business that's able to allegation absolutely aerial fees, but there's absolutely a time lag amid aback a account is appointed and aback Rover recognizes the acquirement on its assets statement. Acquirement is alone accustomed aback the account is absolutely provided, not aback it's booked. There's this awe-inspiring time lag. If I apperceive I'm action to be out for Christmas this year, maybe I book accession absolutely far advanced of time, while gross bookings bulk may represent a assertive cardinal in booking bulk that I've fabricated on the platform, acquirement is a altered story. It can booty a few abode if not best for investors to see a abeyant declivity in things like antithesis or things like revenue, like belvedere advance because of this lag.

Sharma: Absolutely. The little beef I accept with this metric, in general, is that it's a acceptable indicator of potential. What they see in their announcement is that we anticipate this tells us commodity about our business, the absolute bulk that was appointed on our platform, let's say in a business quarter, it agency that if no one had canceled, our absolute bulk of dollars transacted would've been X. That's able-bodied and good, but it makes it acutely adamantine to clue aloof what you're talking about Emily. What is the absolute booty rate? They don't broadcast that. The gold accepted in these types of businesses to me is apparently PayPal. They clue this metric every quarter, the booty bulk of what they're authoritative off anniversary transaction. Of course, PayPal's a payments business, not absolutely a exchange business and they accept their gross transaction value. I balloon what their acronym is, they're all hardly different. But the abstraction is you almanac aggregate that absolutely happened on your platform. Don't anguish about cancellations, and in abounding cases, don't accommodate taxes which this aggregation does, but I don't appetite to artifice any added because I like the aggregation [...] I apperceive I'm aural like what are they doing? But what you appetite to do is to appearance investors actuality was the gross casework value. I would alarm it account bulk because it's not merchandise. This is the gross account value, this is every dollar that absolutely went amid acclaim cards on our platform, and here's our booty rate. That's the best-case scenario. The acumen is you can trend those two analysis and analysis out, and there are abounding companies that accommodate that. If the trend is accelerating, it can assignment adjoin Rover's favor because investors can't see that advance clearly. They see that the gross booking bulk is accretion but afresh they are attractive for cancellations allotment and they are ambiguous about the future. Bigger not alike to focus on that, aloof appearance me the volume, appearance me the booty rate, and afresh as I see it increase, I'm action to buy added shares. It's addition bulk of transparency. But I'm not absolutely action to beating on administration yet because they're not public, I'm hopeful. Again, aboriginal quarter, maybe alike during the appointment call, they gave the numbers that abounding investors who are into these exchange appearance businesses are action to be attractive for.

Flippen: And to your point about maybe not it been absent to advance this accountable of cancellations in agreement of metrics, you would anticipate 2020 would be a acceptable acumen for them to potentially change their metric focus because cancellations in 2020, were upwards of over 20% of gross booking value. It is an annoying metric for investors to accept to breakout. But I consistently salivate, I get absolutely aflame whenever I see a aggregation that break bottomward its chump accretion costs and the lifetime bulk of its chump and I anticipation Rover did both those things absolutely well. In fact, I acknowledge the actuality that they were absolute upfront about their advice for aftereffect in agreement of the bulk of money they absorb to admission a chump adjoin the bulk of money that they get on the chump while they're on the belvedere and management's centralized projections are to accumulate a 1-2 analysis targets on aftereffect for chump accretion costs. Alike if business absorb increases, abnormally as its business tries to move internationally if that is what they adjudge to do, befitting a attenuated focus about what the bulk of that chump is, I anticipate it's critical. I like the actuality that they accept these centralized metrics that they are captivation their teams to. Appropriate now, that is about a four-month aftereffect aeon for absolute barter on boilerplate from anniversary of the cohorts that they've tracked. I like the actuality that they are appealing on par with their own projections there as well.

Sharma: They accept a absolutely nice aftereffect period. Anytime you're beneath a year, you're in acceptable shape. I like those as well.

Flippen: Although consistently account acquainted that this is an accepted industry breadth it's accessible for bodies to blooper aback to what friends, families, move to altered platforms. It's great, although apparently not as adhesive as say a Chewy [laughs] which absolutely has a abundant best aftereffect period, but what I apperceive to be a abundant stickier platform.

Sharma: Sure.

Flippen: You acclaimed commodity absorbing here. Afore we move on to the risks in this investment, because as always, there are affluence of risks. You noticed commodity actuality that I absolutely absent that is absolutely absolutely cool.

Sharma: Yeah. The aggregation has a affiliation that they appear in November with Walmart, which I anticipate is action to be absolutely acceptable for them. In this partnership, if you chase Walmart, they're additionally aggravating to get it on this exceptional pet business and pet casework business. They absolutely action Walmart pet allowance now. They are action to accommodate their adaptation of the new pet sitting account through Rover. They've done this with so abounding companies. They co-brand the casework and basically, they will animate you to use Rover. They will accord you, if you are a Walmart customer, a $20 Walmart Gift Card for your aboriginal completed service. If you accept bristles casework aural six months, you get addition $20 Walmart Gift Card. I don't apperceive which of the companies has absolutely best up the tab [laughs] for this. I'm academic it's Walmart, but maybe they are agreeable the bulk that it wasn't bright in either columnist release. But this is a absolutely nice tailwind for them on the business side. Again, they're leveraging commodity afterwards accepting to absorb a lot of their own adamantine dollars and who abroad would you appetite to be with but a aggregation that is an every above city breadth and has millions and millions of customers. I anticipation that was appealing neat. They did not put it in their alms prospectus, which was post-November and it really, if you attending on their website, they haven't fabricated a big accord about it. It's commodity that I anticipate I absent too, and I was aloof cloudburst the aftermost minute over actuality and I saw it. We'll see. If you happened to be watching today and you've apparent this already in play, let us know.

Flippen: Aback you attending at the risks for this business, acutely the affiliation with Walmart, it's accident mitigating aural itself. Aback you cull on a big accomplice like that, you apperceive you at atomic accept some big abetment there and this is a business that's been about for a while and has abundant executives, but it is still a business that's unprofitable. I accept a brace of big risks. I'll highlight one that I of course, accept to alarm out at the absolute alpha because it's authoritative me absolutely catechism my behavior as an broker is that, Rover has actual weaknesses in their centralized controls. I'm assuming a akin of affectation actuality that I try not to appearance aback I attending at investments, but I'm about accommodating to absolve it because with a lot of these SPACs, these are businesses that never anticipation they were action to be accessible companies, abnormally multi-billion-dollar accessible companies on such a quick cast of a dime, but aback the befalling exposes itself, I mean, they allegation time to get their centralized controls up to par to be accessible to retail investors. That actuality said, I will say [laughs] this ability be the affliction actual weaknesses in centralized controls I accept anytime seen. I administer a Cannabis portfolio, so sometimes I feel like I've apparent it all. But they had issues that included no ascendancy environment, not abundant cadre with accounting knowledge, no academic procedures for banking advertisement and no IT controls, which is abominable because how abounding IT bodies they accept alive at their headquarters. I said it afore that I would not buy a aggregation that had abundant actual weaknesses. I absolutely like this one. Now I absolutely like it and I don't know, I'm action aback and alternating with myself here.

Sharma: Well, again, we go aback to the abstraction of cat-and-mouse for a few quarters. Now that you accept to delay Emily, your division than about anybody alert today, including myself who's participating. Maybe you're the actuality who could accomplish a acumen and aloof buy aback it becomes public. But for abounding of us, it could be account the wait, like I said, a brace of quarters. To accord aloof some absorbing addendum on the situation. Emily acicular out in our notes, what you're talking about, not abundant cadre on the accounting ancillary and absolutely the adverse able-bodied banking procedures aback you abutting out a ages and abridgement of allegory of duties, that's in the centralized control. To me, that's a artifice signal. If you don't appropriately choose duties, that agency I've got admission to passwords and user data, but I additionally accept a way to abstract commodity admired out of that. Or if you're in the accounting department, I accept admission to advantageous vendors, but I additionally accept checkbook admission and I can actualize altered documents. If you're a baby company, you may not accept had to accord with this, although I should say, they accept the size, they should accept had bigger procedures than this. Account amid the curve on the report, basically, the auditors who came in and did the auditing for the SPAC, they had to do a lot of closeout entries. This is commodity that's absolute absorbing aback a aggregation gets audited, a lot of times the auditors are charwoman up the books and administration is signing off on the account entries. They say that this is not absolutely in an auditable state. You allegation to accept these account entries to accomplish the antithesis breadth and assets account conditioning together. But we've looked at the transaction, we don't see artifice actuality and we're not action to armpit it in our report. If you've noticed in their report, they say, administration begin these [laughs] abridgement of centralized controls and actual weaknesses. Well, management's been active the aggregation so what do you beggarly they begin it? [laughs] Because the accountant told them, "Look, you've got to allocution about these," and we got to fix them. Emily, they don't accept an approaching SEC claim to fix those, but they do accept a Sarbanes Oxley requirements, so they got to hop on it. They acclaimed that we're alive on it. We're action to absorb a lot of money on this. We're action to try to fix it soon, so let's accumulate that at the top of the account aback you're attractive in at that first-quarter, what's accident with assignment on those centralized controls, but yeah, they were ugly, I charge say.

Flippen: They were ugly. Candidly your accounting accomplishments is so useful. You told me a lot of actuality I did not apperceive there.

Sharma: Yeah. It's so absorbing additionally Emily to accretion accession who loves this actuality because I apperceive abounding analysts, aloof their eyes coat over aback you get to that allotment of the auditor's report, but you consistently apprehend it and I'm abiding it's action to save you some affliction after on by advantageous absorption to that stuff.

Flippen: Well, let's achievement so. There accept been a cardinal of companies that I anesthetized on because of apropos such as centralized controls that accept gone on to be amazing investments. But alike I accept my accident limits, I suppose.

Sharma: I'll go with a quick one actuality and these are abate risks and afresh maybe we'll aloof alternating and afresh we'll annular out of here. But there is a abate accident of deplatforming of affairs and what I beggarly by that, commodity I alluded to earlier, that affecting band and accession advancing to your abode to do the services. It's absolute accessible for two bodies say, "Look, let's aloof do this anon that way neither of us will accept to pay the fees and I like you, you are absolutely abundant with our pet. I don't appetite you to accept to pay a fee. I'll pay that $20 anon and carnality versa." Rover has developed some algorithms that they anticipate could advice them atom providers that are accomplishing this. I'm not abiding how they do it, but they afresh bench those bodies in chase after-effects and try to accumulate announcement bodies that are, to them or their algorithms, aloof application the platform, honestly. But as time goes on, that could be a little bit of a risk. Afresh I aloof basic to go aback to my little botheration with their gross booking aggregate metric. That disability to accurately apperceive what the booty bulk is, and tend to put those things on a trend. Plus what Emily brought up about the acquirement acceptance not demography abode until that account is assuming and therefore, what you've got is a bearings breadth the metrics could abatement appealing quickly. But you ability not necessarily see that. As Emily acicular out on the acquirement acceptance ancillary for a few quarters, amalgamate that with the abridgement of afterimage into accurate aggregate on the belvedere and a accurate booty rate, I could see a bearings breadth you accept two or three quarters, breadth actuality is absolutely slipping, but you aloof don't see it aback you're attractive over those anniversary reports.

Flippen: Afore we abutting out here, I'll highlight a brace of added big apropos that I have. I'd say the aboriginal one is aloof affair that as added bodies bought pets during the pandemic, I anticipate a lot of bodies who maybe fabricated that advance were additionally bodies who took on a added alien or distributed, added basic affairs that will acceptable abide alike column pandemic. I anguish a little bit about the growing allegation for things like dog walking if somebody's home all day. I anticipate that's somewhat mitigated by the actuality that boarding in accurate represents over bisected of Rover's income, were over bisected of the casework that the business provides. Vacations, I don't anticipate those things in decidedly are action away. At atomic that I anticipate they're action to retain. But I admiration a little bit about what accurate advance looks like, which brings into my better accident here, which is, this is a business that did $95 actor in acquirement in 2019, beneath in 2020, but let's be acceptable $95 actor in 2019 and is accepting over $1.5 billion valuation. Administration alike addendum that advance is slowing and that abiding projections accept them about 20-25% advance with 30% adapted EBITDA margins. This is not a absolutely aerial allowance SaaS company. This isn't alike a aggregation that's growing 50, 60, 70%. This is a abiding but hardly slower agriculturalist with a absolute accustomed advantage picture. They're not assisting appropriate now, but long-term, hopefully a somewhat normalized advantage account that I'm not abiding justifies the appraisal that the SPAC has accustomed it. I abhorrence authoritative calls based off appraisal because 99% of the time they're wrong, abnormally in the bazaar that we're active in today. But this akin makes me a little bit concerned.

Sharma: Yeah, it's not cheap. The addition of that is, if you attending at your SPAC-type investments as their own adapted portfolio, here's an absorbing aggregation that would be a abiding agriculturalist and over time I anticipate it's action to accept a appealing aerial acknowledgment on invested capital. It's debt-free appropriate now. They've got a banknote infusion, so they'll accept some money to comedy with. They accept been an acquirer, but haven't consistently bought companies that succeed. I anticipate one of their best contempo investments they basically had to sell. I anticipate it was alleged DogHero. But over time, you can see this business, Emily, bit-by-bit up on your results, aloof array of stealth [laughs] because it is such a adhesive platform. I anticipate that market, while maybe it's not that huge, huge bazaar abeyant they're talking about, but if it is $7 or $8 billion, appropriate now, all-embracing sales are 5% of the business, it's action to booty some time for them to aggrandize globally. The added pet markets are hardly altered in the U.S., they're action to accept to prove their brand. But they've got some audible advantages on their side. So it's odd because I'm affection this. I appetite to chase it for the abutting brace of quarters. I could see demography an absorption in this company, aforementioned way we've talked about some slower advance stocks [laughs] like Dollar General. It's intriguing. I don't apperceive how you concluded up affection this company. [laughs]

Flippen: I adulation the actuality that you like it because this is a business that I appetite to be assertive on. I anticipate I appear in from a artlessly agnostic abode and I like aback there is addition actuality I'm talking to, has that academy akin of confidence because you're cogent me aggregate I appetite to apprehend appropriate now, Asit. But definitely, I'm putting this on my watch list. I achievement that in the somewhat abreast future, by abreast future, I mean, not the abutting analysis but with the abutting four abode or so this is one that if administration executes, if we see some backlash in 2021 in allegory to 2020, that hopefully this one ends up in my portfolio. I'm absolutely absorbed in it.

Sharma: Perfect.

Flippen: Well, Asit, as always, acknowledge you so abundant for advancing on and accommodating me while I organized addition adventure focused on pet trends. I absolutely acknowledge it.

Sharma: Emily, this was abundant fun and I apperceive in the approaching if I anytime appetite to angle a business for you to advance in, it's action to accept commodity to do with pets.

Flippen: [laughs] I can't help, but I acutely accept a blazon actuality [laughs]. But listeners, that does it for this adventure of Industry Focus. If you accept any questions or aloof appetite to ability out, shoot us an email at industryfocus@fool.com or cheep at us @MFindustryfocus. As always, bodies on the affairs may own companies discussed on the appearance and The Motley Fool may accept academic recommendations for or adjoin any stocks mentioned. Don't buy or advertise annihilation based alone on what you hear. Thanks to Tim Sparks for his assignment appropriate abaft the awning today. For Asit Sharma, I'm Emily Flippen. Thanks for alert and Fool on!

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