Rover Group [NASDAQ:ROVR], an online marketplace for pet services, is actively evaluating potential targets in hopes of expanding its offerings, even as private market valuations have remained stubbornly high, co-founder and CEO Aaron Easterly told this news service.
The Seattle-based firm – which does business online as Rover.com – pairs pet owners with local businesses and on-demand gig providers of services like pet sitting, walking and training.
Speaking on the sidelines of the Goldman Sachs Communacopia + Technology Conference in San Francisco last week, Easterly said the company is looking for targets where there are clear synergies with Rover’s core business.
“That’s more likely to be in pet services than physical product or retail,” he said.
Ideally, the business would be somewhere beyond the Series A stage, with a demonstrated ability to acquire customers, the executive explained.
A target might also be self-funded, though should have been operated for a sufficient amount of time to show consistency. “We’d like to have something where the fundamental investment thesis has been proven out,” Easterly said.
Prospects could be cash-flow positive but the bidder is not opposed to situations where there is still some investment required, he said.
Rover is also open to acquiring a larger, later-stage asset, though the upside of the opportunity must account for the increased risk and tougher integration challenges, he said.
“We have a lot of assets that we bring to bear and we want that business that we can accelerate, as well as can accelerate us,” Easterly said.
The company has set up an in-house corporate development team to explore M&A and also regularly receives tips about opportunities from banking partners. “In the case where we were to look at something a little bigger, I could imagine that we would enter agreements with advisors or partners specific to those transactions,” he said.
Rover has about USD 270m in cash on the balance sheet, has healthy cash flows and saw a step-function increase in operating margins this year, investors were told during a presentation at the event.
In recent quarters, the expected returns have not justified closing a transaction, Easterly told the gathering.
“We just haven’t seen a lot of opportunities that we’re excited about betting on yet, but we want to keep cash on the balance sheet for that purpose,” he said.
It will also consider returning some of the growing pile of cash to shareholders, investors were told.
Rover went public in July of 2021 via a SPAC deal with Nebula Caravel Acquisition Corp., in a transaction that valued the company at approximately USD 1.35bn, as reported.
During an earnings call for the quarter ended 30 June, the company raised guidance and now anticipates full-year revenue of USD 222m to USD 227m, and adjusted EBITDA in the range of USD 37m to USD 41m, according to a press release.
The company has made four acquisitions, including the purchase of competitors, Santa Monica, California-based DogVacay in 2017, and UK-based DogBuddy in 2018, as reported.
Rover has a market cap shy of USD 1.2bn. Its stock was trading midday Thursday (14 September) above USD 6.40.