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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-39774
_________________________________
Rover Group, Inc.
_________________________________
(Exact name of registrant as specified in its charter)
Delaware
85-3147201
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
720 Olive Way, 19th Floor
Seattle, WA

98101
(Address of Principal Executive Offices)
(Zip Code)
(888) 453-7889
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareROVRThe Nasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  x  No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes        No  x
The registrant had 179,432,117 shares outstanding of Class A Common Stock, par value $0.0001 per share, as of November 3, 2023.


Table of Contents
Page
5
Item 1A.
2


Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q of Rover Group, Inc. (the “Company,” “Rover,” “we,” “us” or “our”) contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “possible,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “project,” “consider,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “forecast,” “assume,” “would,” “focus,” “increase,” “deliver,” “drive,” “achieve,” “sustain,” “improve,” “expand,” “further,” “remain,” “outlook,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this report include, but are not limited to, statements about:

general macroeconomic and geopolitical conditions, including health-related events, political instability, sustained levels of increased inflation, rising interest rates, significant U.S. dollar and foreign currency fluctuations, lower consumer confidence, depressed consumer spending, higher levels of consumer debt, lower pet adoption levels, the number of pet owning households, a reduction in the volume of home sales and its impact on relocating households, monetary and fiscal policy changes, stock market volatility, any U.S. government shutdown, any further downgrades in the U.S. credit rating, and the resumption of payments on federally-held student loans, geopolitical conflicts, slower economic growth and economic downturns, and their impact on consumer spending and travel patterns, demand for and pricing on our platform, and our business, operating results and financial condition, including potential impairments;
the effects of the COVID-19 pandemic, including as a result of new strains or variants of the virus and non-COVID illnesses that may result from reduced immunity caused by social distancing during the pandemic, and other geopolitical events like the current armed conflicts between Ukraine and Russia and between Israel and Hamas on customer demand and our business, key business metrics, operating results and financial condition and on our ability to forecast our financial and operating results, the travel industry, travel trends, and the global economy generally;
our ability to retain existing and acquire new pet parents and pet care providers and keep bookings on our platform;
our expectations about, our ability to successfully defend, and the outcome of, any known and unknown litigation and regulatory proceedings, including with respect to the classification of pet care providers on our platform, and the potential impact on our business operations and financial performance if we are not successful or resulting from changes to our business practices and platform to bolster the classification of pet care providers who use the Rover platform as independent contractors;
our expectations regarding our future operating and financial performance, including bookings, gross booking value, or GBV, average booking value, or ABV, booking mix, cancellation rates, revenue and expenses, and the timing of payment obligations;
the strength of our network, effectiveness of our technology, and quality of the offerings provided through our platform;
our opportunities and strategies for growth, including investments and product improvements, new offerings, partnerships, distribution channels, acquisitions and international markets;
the success of our marketing strategies and investments;
our investments in product improvements, new products, initiatives and offerings and new geographies, market effects thereof, and the effect of these investments on our results of operations;
our ability to successfully close and integrate acquisitions into our operations;
our ability to introduce new products and offerings and enhance existing products and offerings;
our ability to match pet parents with high quality and well-priced offerings;
our assessment of and strategies to compete with existing and new competitors in existing and new markets and offerings;
our assessment of our trust and safety practices;
our ability to maintain the security and availability of our platform;
our ability to accurately and effectively use data and engage in predictive analytics;
our ability to attract and retain talent and the effectiveness of our compensation strategies and leadership;
seasonal fluctuations in bookings, GBV, ABV, revenue, marketing, operating expenses, net income (loss), and Adjusted EBITDA;
3

our future capital requirements and sources and uses of cash;
the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs;
our ability to execute our publicly announced share repurchase program;
changes in applicable laws or regulations, including with respect to the classification of pet care providers on our platform, taxation, privacy, data protection and information security;
our ability to stay in compliance with laws and regulations, including with respect to the classification of pet care providers on our platform, taxation, privacy, data protection and information security, that currently apply or may become applicable to our business both in the United States and internationally and our expectations regarding the effects of various existing and developing laws and restrictions that relate to our business;
our ability to identify, recruit, and retain skilled personnel, including key members of senior management;
our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates and interest rates;
the increased expenses associated with being a public company;
our ability to maintain and protect our brand and reputation;
our ability to effectively manage our growth and maintain our corporate culture;
our current plans, considerations, expectations and determinations regarding future compensation programs; and
other risks and uncertainties described under Part II. Item 1A of this report titled “Risk Factors.”

We caution you that the foregoing list does not contain all of the forward-looking statements made in this report.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this report primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other important factors, including those described under Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Part II, Item 1A “Risk Factors, and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The forward-looking statements made in this report relate only to events as of the date on which the statements are made available. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this report, and the documents that we reference in this report and have filed as exhibits to this report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this report by these cautionary statements.

4

Risk Factors Summary

Our business is subject to numerous risks. The following is a summary of the principal risks we face that could materially adversely affect our business, operating results, financial condition and prospects, all of which are more fully described in the section of this report titled “Risk Factors.” This summary is not complete and the risks summarized below are not the only risks we face. You should review and consider carefully the risks and uncertainties described in more detail in “Risk Factors,” and should not rely upon the following as an exhaustive summary of the material risks facing our business.
Risks Related to our Business and Industry
Any decline or disruption in the travel and pet care services industries or an economic downturn could materially adversely affect our business, results of operations, and financial condition.
We have incurred net losses in each year since inception and may not be able to achieve or sustain annual net income.
Our revenue may not continue to grow over time and may slow or reverse again in the future.
Our Adjusted EBITDA may not continue to grow over time and may slow or reverse again in the future.
The COVID-19 pandemic and the impact of actions to mitigate the COVID-19 pandemic have materially adversely impacted and may continue to materially adversely impact our business, operating results, and financial condition.
Online marketplaces for pet care are still in relatively early stages of growth and if demand for them does not continue to grow, grows slower than expected, or fails to grow as large as expected, our business, financial condition, and operating results could be materially adversely affected.
Our marketing efforts to help grow the business may not be effective.
Off-platform bookings and payments have had and may continue to have a material adverse effect on our business, operating results and financial condition.
If we fail to retain existing pet care providers and pet parents on our platform or attract new pet care providers and pet parents to our platform, or if pet care providers fail to provide high-quality offerings, or if pet parents fail to receive high-quality offerings, our business, operating results, and financial condition would be materially adversely affected.
Our business and users are subject to tax information reporting requirements in a number of jurisdictions, which could increase our operational costs and negatively impact the user experience and bookings on our platform.
The success of our platform relies on our matching algorithms and other proprietary technology and any failure to operate and improve our algorithms or to develop other innovative proprietary technology effectively could materially adversely affect our business, financial condition, and operating results.
The business and industry in which we participate are highly competitive and we may be unable to compete successfully with our current or future competitors.
New offerings and initiatives can be costly and if we unsuccessfully pursue such offerings and initiatives, we may fail to grow and our business, operating results, financial condition and prospects would be materially adversely affected.
Maintaining and enhancing our brand reputation is critical to our growth and negative publicity could damage the Rover brand, thereby harming our ability to compete effectively.
Actions by pet care providers or pet parents that are criminal, violent, inappropriate, dangerous, or fraudulent may undermine the safety or the perception of safety of our platform and materially adversely affect our reputation, our ability to attract and retain pet care providers and pet parents, business, operating results and financial condition.
We may experience significant fluctuations in our operating results and key business metrics, which make it difficult to forecast future results and could cause our stock price to decline.
Risks Related to Regulation and Taxes
If pet care providers are reclassified as employees under applicable law or new laws are passed causing the reclassification of pet care providers as employees or otherwise adopting employment-like restrictions with regard to pet care providers who use our platform, our business would be materially adversely affected.
Our business is subject to a variety of laws and regulations, many of which are unsettled and still developing and failure to comply with such laws and regulations could subject us to claims or otherwise materially adversely affect our business, financial condition, or operating results.
We are subject to regulatory inquiries, claims, lawsuits, investigations, various proceedings and other disputes and face potential liability and expenses for legal claims, which could materially adversely affect our business, operating results, and financial condition.
5

Taxing authorities may successfully assert that we have not properly collected, or in the future should collect, sales and use, gross receipts, value added, or similar taxes and may successfully impose additional obligations on us.
Risks Related to Privacy and Technology
We have been subject to cybersecurity attacks in the past and anticipate being the target of future attacks. Any actual or perceived breach of security or security incident or privacy or data protection breach or violation could interrupt our operations, harm our brand and reputation and adversely affect our business, financial condition, and operating results.
Changes in laws or regulations relating to privacy, data protection, or the protection or transfer of data relating to individuals, or any actual or perceived failure by us to comply with such laws and regulations or any other regulations or any other obligations relating to privacy, data protection or the protection or transfer of data relating to individuals, could adversely affect our business.
Systems defects and failures and resulting interruptions in the availability of our website, mobile applications, or platform could adversely affect our business, financial condition and operating results.
We rely on third-party payment service providers to process payments on our platform. If these third-party payment service providers become unavailable or insolvent, are subject to cybersecurity attacks, or we are subject to increased fees, our business, operating results, and financial condition could be materially adversely affected.
We rely on mobile operating systems and application marketplaces to make our applications available and if they modify their policies, or if we do not effectively operate with or receive favorable placements within such application marketplaces and maintain high user reviews, the usage of our platform or brand recognition could decline and our business, financial results and operating results could be materially adversely affected.
We use and may continue to use artificial intelligence in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.
Risks Related to Our Intellectual Property
Failure to adequately protect our intellectual property could adversely affect our business, financial condition and operating results.
Risks Related to our Operations
We depend on our highly skilled employees to grow and operate our business and if we are unable to hire, retain, manage and motivate our employees, or if our new employees do not perform as anticipated, we may not be able to grow effectively and our business, financial condition, and operating results could be materially adversely affected.
Our support function is critical to the success of our platform and any failure, or perceived failure, to provide high-quality service could affect our ability to retain our existing pet care providers and pet parents and attract new ones.
We may face difficulties as we expand our operations into new local markets in which we have limited or no prior operating experience.
Our presence outside the United States and any future international expansion strategy will subject us to additional costs and risks and our plans may not be successful.
Failure to successfully execute and integrate acquisitions or receive a favorable return on acquisitions or strategic investments could materially adversely affect our business, operating results and financial condition.
Risks Related to Our Financial Reporting and Disclosure
Because we recognize revenue upon the start of a booked service and not at booking, upticks or downturns in bookings are not immediately reflected in our operating results.
Our management has limited experience in operating a public company.
We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain effective internal control over financial reporting, which may result in material misstatements of our consolidated financial statements, cause us to fail to meet our periodic reporting obligations, and subject us to litigation and other risks.
Risks Related to Ownership of Class A Common Stock
The market price of our Class A Common Stock has been, and may continue to be, volatile and may decline.
Insiders currently have and may continue to possess substantial influence over us, which could limit investors’ ability to affect the outcome of key transactions, including a change of control.
Our stockholders may experience significant dilution in the future.
6

Part I - Financial Information
Item 1. Financial Statements
ROVER GROUP, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
September 30,
2023
December 31,
2022
Assets
Current assets
Cash and cash equivalents$129,142 $58,875 
Short-term investments74,822 191,347 
Accounts receivable, net76,473 53,181 
Notes receivable from related parties 1,810 
Prepaid expenses and other current assets7,868 6,829 
Total current assets288,305 312,042 
Restricted cash3,675  
Property and equipment, net19,261 19,518 
Operating lease right-of-use assets17,211 18,871 
Intangible assets, net2,511 6,865 
Goodwill33,159 36,915 
Deferred tax asset, net1,361 1,306 
Long-term investments26,918 22,463 
Investment in equity securities in related parties3,444  
Other noncurrent assets1,045 281 
Total assets$396,890 $418,261 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$5,914 $5,354 
Accrued compensation and related expenses6,239 6,644 
Accrued expenses and other current liabilities6,491 22,694 
Deferred revenue13,112 5,544 
Pet parent deposits50,195 40,783 
Pet care provider liabilities2,155 3,319 
Operating lease liabilities, current portion2,613 2,727 
Total current liabilities86,719 87,065 
Operating lease liabilities, net of current portion19,943 22,208 
Other noncurrent liabilities409 714 
Total liabilities107,071 109,987 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued and outstanding as of September 30, 2023 and December 31, 2022
  
Class A common stock, $0.0001 par value, 990,000 shares authorized as of September 30, 2023 and December 31, 2022; 180,836 and 184,526 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
18 18 
Additional paid-in capital667,007 651,659 
Accumulated other comprehensive loss(157)(1,098)
Accumulated deficit(377,049)(342,305)
Total stockholders’ equity289,819 308,274 
Total liabilities and stockholders’ equity$396,890 $418,261 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ROVER GROUP, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenue$66,203 $50,864 $165,852 $122,059 
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)
13,634 11,607 37,022 29,976 
Operations and support8,156 7,425 22,985 19,265 
Marketing12,684 8,686 35,401 27,044 
Product development8,566 7,100 24,164 20,380 
General and administrative13,599 30,599 39,640 53,616 
Depreciation and amortization1,189 1,561 4,143 4,432 
Impairment loss on intangible assets and goodwill  6,916  
Total costs and expenses57,828 66,978 170,271 154,713 
Income (loss) from operations8,375 (16,114)(4,419)(32,654)
Other income (expense), net:
Interest income3,152 1,287 8,566 2,084 
Interest expense(15)(19)(51)(61)
Change in fair value of other investments  1,115  
Change in fair value of derivative warrant liabilities   4,579 
Other (expense) income, net(568)(257)1,560 (1,045)
Total other income (expense), net2,569 1,011 11,190 5,557 
Income (loss) before income taxes and equity method investments10,944 (15,103)6,771 (27,097)
(Provision for) benefit from income taxes(128)(44)(199)172 
Loss from equity method investments, net of tax(316)(325)(981)(325)
Net income (loss)$10,500 $(15,472)$5,591 $(27,250)
Net income (loss) per share attributable to common stockholders:
Basic $0.06 $(0.08)$0.03 $(0.15)
Diluted$0.05 $(0.08)$0.03 $(0.15)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:
Basic181,423 182,493 183,126 181,309 
Diluted192,977 182,493 193,704 181,309 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

ROVER GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net income (loss)$10,500 $(15,472)$5,591 $(27,250)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(78)(164)13 (389)
Unrealized gain (loss) on available-for-sale debt securities125 (543)928 (1,539)
Other comprehensive income (loss), net of tax47 (707)941 (1,928)
Comprehensive income (loss)$10,547 $(16,179)$6,532 $(29,178)
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

ROVER GROUP, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2022
184,526 $18 $651,659 $(1,098)$(342,305)$308,274 
Issuance of common stock upon exercise of stock options1,039 1 1,846 — — 1,847 
Issuance of common stock upon release of restricted stock units308 — — — — — 
Taxes paid related to settlement of equity awards— — (1,129)— — (1,129)
Repurchase and retirement of common stock(632)— — — (3,056)(3,056)
Stock-based compensation— — 4,979 — — 4,979 
Foreign currency translation adjustments— — — 57 — 57 
Unrealized gain on available-for-sale debt securities— — — 594 — 594 
Net loss— — — — (4,656)(4,656)
Balance as of March 31, 2023185,241 $19 $657,355 $(447)$(350,017)$306,910 
Issuance of common stock upon exercise of stock options533 — 1,153 — — 1,153 
Issuance of common stock upon release of restricted stock units879 — — — — — 
Taxes paid related to settlement of equity awards— — (2,245)— — (2,245)
Repurchase and retirement of common stock(3,495)(1)— — (16,683)(16,684)
Stock-based compensation— — 6,427 — — 6,427 
Foreign currency translation adjustments— — — 34 — 34 
Unrealized gain on available-for-sale debt securities— — — 209 — 209 
Net loss— — — — (253)(253)
Balance as of June 30, 2023183,158 $18 $662,690 $(204)$(366,953)$295,551 
Issuance of common stock upon exercise of stock options387 — 931 — — 931 
Issuance of common stock upon release of restricted stock units746 — — — — — 
Taxes paid related to settlement of equity awards— — (3,100)— — (3,100)
Repurchase and retirement of common stock(3,455)— — — (20,596)(20,596)
Stock-based compensation— — 6,486 — — 6,486 
Foreign currency translation adjustments— — — (78)— (78)
Unrealized gain on available-for-sale debt securities— — — 125 — 125 
Net income— — — — 10,500 10,500 
Balance as of September 30, 2023180,836 18 667,007 (157)(377,049)289,819 

The accompanying notes are an integral part of these condensed consolidated financial statements.

10




ROVER GROUP, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)

Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2021177,342 $18 $612,680 $220 $(320,326)$292,592 
Reclassification of derivative warrant liability and issuance of common stock from exercises of warrants2,046 — 15,356 — — 15,356 
Issuance of common stock upon exercise of stock options2,242 — 2,005 — — 2,005 
Issuance of common stock upon release of restricted stock units200 — 348 — — 348 
Taxes paid related to settlement of equity awards— — (393)— — (393)
Stock-based compensation— — 4,447 — — 4,447 
Foreign currency translation adjustments— — — (61)— (61)
Unrealized loss on available-for-sale debt securities— — — (410)— (410)
Net loss— — — — (8,146)(8,146)
Balance as of March 31, 2022181,830 $18 $634,443 $(251)$(328,472)$305,738 
Issuance of common stock upon exercise of stock options504 — 674 — — 674 
Issuance of common stock upon release of restricted stock units442 — 764 — — 764 
Taxes paid related to settlement of equity awards— — (908)— — (908)
Stock-based compensation— — 5,099 — — 5,099 
Foreign currency translation adjustments— — — (164)— (164)
Unrealized loss on available-for-sale debt securities— — — (586)— (586)
Net loss— — — — (3,632)(3,632)
Balance as of June 30, 2022182,776 $18 $640,072 $(1,001)$(332,104)$306,985 
Issuance of common stock upon exercise of stock options141 — 273 — — 273 
Issuance of common stock upon release of restricted stock units650 — 908 — — 908 
Taxes paid related to settlement of equity awards— — (923)— — (923)
Stock-based compensation— — 5,253 — — 5,253 
Foreign currency translation adjustments— — — (164)— (164)
Unrealized loss on available-for-sale debt securities— — — (543)— (543)
Net loss— — — — (15,472)(15,472)
Balance as of September 30, 2022183,567 $18 $645,583 $(1,708)$(347,576)$296,317 

The accompanying notes are an integral part of these condensed consolidated financial statements.
11

ROVER GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
20232022
OPERATING ACTIVITIES
Net income (loss)$5,591 $(27,250)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation16,436 14,025 
Depreciation and amortization9,642 9,634 
Non-cash operating lease costs1,659 2,065 
Impairment loss on intangible assets and goodwill6,916  
Change in fair value of other investments(1,115) 
Change in fair value of derivative warrant liabilities (4,579)
Net accretion of investment discounts(2,896)(523)
Deferred income taxes(45)(225)
Loss on disposal of property and equipment102 30 
Loss from equity method investments981 325 
Changes in operating assets and liabilities:
Accounts receivable(23,292)(23,480)
Prepaid expenses and other current assets(1,039)(753)
Other noncurrent assets(764)(10)
Accounts payable560 (373)
Accrued expenses and other current liabilities(16,796)17,799 
Deferred revenue and pet parent deposits16,980 16,807 
Pet care provider liabilities(1,164)(7,104)
Operating lease liabilities(2,379)(2,358)
Other noncurrent liabilities(305)132 
Net cash provided by (used in) operating activities9,072 (5,838)
INVESTING ACTIVITIES
Purchases of property and equipment(550)(443)
Capitalization of internal-use software(6,288)(5,751)
Proceeds from disposal of property and equipment 2 
Acquisition of businesses, net of cash acquired (5,711)
Purchases of convertible notes (1,310)
Purchases of equity securities in related parties(1,500) 
Purchases of available-for-sale securities(112,035)(252,282)
Proceeds from sales of available-for-sale securities57,775  
Maturities of available-for-sale securities170,153 55,383 
Net cash provided by (used in) investing activities107,555 (210,112)
FINANCING ACTIVITIES
Proceeds from exercise of stock options and issuance of common stock 3,930 4,972 
Redemption of common stock warrants (7)
Repurchases of common stock(40,136) 
Taxes paid related to settlement of equity awards(6,474)(2,224)
Net cash (used in) provided by financing activities(42,680)2,741 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(5)(177)
Net increase (decrease) in cash, cash equivalents, and restricted cash73,942 (213,386)
Cash, cash equivalents, and restricted cash, beginning of period58,875 278,904 
Cash, cash equivalents, and restricted cash, end of period$132,817 $65,518 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes$550 $45 
12

Nine Months Ended September 30,
20232022
Cash paid for interest4 7 
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchases of property and equipment in accounts payable and accrued liabilities$ $138 
Right-of-use assets obtained in exchange for lease liabilities 16 
Conversion of promissory notes to equity security investment in related parties
2,345  
Reclassification of certain derivative warrant liabilities to equity upon exercise
 15,356 
Recognition of indemnity holdback liabilities upon acquisition of businesses 1,563 
Stock-based compensation capitalized to internal-use software1,459 773 
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents$129,142 $65,518 
Restricted cash3,675  
Total cash, cash equivalents, and restricted cash$132,817 $65,518 
The accompanying notes are an integral part of these condensed consolidated financial statements.
13

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. Organization and Description of Business
Rover Group, Inc. and its wholly owned subsidiaries (collectively “Rover” or the “Company”) is headquartered in Seattle, Washington with U.S. offices in Spokane, Washington and San Antonio, Texas, and internationally in Barcelona, Spain. The Company provides an online marketplace and other related tools, support and services that pet parents and pet care providers can use to find, communicate with, and interact with each other.
On July 30, 2021 (the “Closing Date” or “Closing”), Nebula Caravel Acquisition Corp. (“Caravel”) consummated the previously announced merger pursuant to a Business Combination Agreement and Plan of Merger, dated February 10, 2021 (the “Business Combination Agreement”), by and between Caravel, Fetch Merger Sub, Inc., a wholly owned subsidiary of Caravel (“Merger Sub”), and A Place for Rover, Inc. (hereinafter referred to as “Legacy Rover”). Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with and into Legacy Rover, with Legacy Rover continuing as the surviving entity and as a wholly owned subsidiary of Caravel (together with the other transactions described in the Business Combination Agreement, the “Merger”). On the Closing Date, Caravel changed its name from Nebula Caravel Acquisition Corp. to “Rover Group, Inc.”
Liquidity
As of September 30, 2023, the balance of cash and cash equivalents, short term investments, and long term investments was $129.1 million, $74.8 million, and $26.9 million, respectively. The Company has historically incurred losses from operations and had an accumulated deficit of $377.0 million as of September 30, 2023. The Company has primarily funded its operations with proceeds from the issuance of redeemable convertible preferred stock, common stock and other equity transactions, proceeds from the Merger, and debt borrowings. As the Company invests in expansion activities, we may continue to experience operating losses. Management believes that the Company’s current cash and cash equivalents and investments will be sufficient to fund its operations for at least the next 12 months from the issuance of these condensed consolidated financial statements.
The Company’s assessment of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties. The Company’s actual results could vary as a result of its near and long-term future capital requirements that will depend on many factors. The Company has based its estimates on assumptions that may prove to be wrong, and it could use its available capital resources sooner than it currently expects. The Company may be required to seek additional equity or debt financing. If additional financing is required from outside sources, the Company may not be able to raise it on acceptable terms or at all. If the Company is unable to raise additional capital when desired, or if it cannot expand its operations or otherwise capitalize on its business opportunities because it lacks sufficient capital, its business, operating results, and financial condition would be adversely affected.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The unaudited condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries, after elimination of all intercompany balances and transactions. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2022. The information as of December 31, 2022 included in the condensed consolidated balance sheets was derived from those audited financial statements.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial information for the interim periods presented. The unaudited condensed consolidated results of operations for the interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period.
14

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Reclassifications
Certain amounts previously presented for prior periods have been reclassified to conform to current presentation. These reclassifications did not affect assets, liabilities, net loss, cash flows or equity for the periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated balance sheets and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions, include, but are not limited to, the capitalization and estimated useful life of the Company’s internal-use software development costs, estimates used in impairment tests, the assumptions used in the valuation of leases, legal contingencies, stock-based compensation expense, income taxes and non-income tax reserves, and certain deferred tax assets and tax liabilities. These estimates and assumptions are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

Segment Information
The Company has one operating segment and one reportable segment. As the Company’s chief operating decision maker, the chief executive officer reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Substantially all long-lived assets are located in the United States. Substantially all revenue is based in the United States, and no individual foreign country represents 10% or more of the Company’s revenue.
Foreign Currencies
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Gains and losses on those foreign currency transactions are included in determining net loss for the period of exchange and are recorded in other income (expense), net in the condensed consolidated statements of operations. The net effect of foreign currency was a $0.6 million and $0.2 million loss during the three and nine months ended September 30, 2023, respectively, and a $0.2 million and $1.0 million loss during the three and nine months ended September 30, 2022, respectively.
Certain Significant Risks and Uncertainties
The Company is subject to certain risks and challenges associated with other companies at a similar stage of development, including risks associated with: dependence on key personnel; marketing; adaptation to changing market dynamics and customer preferences; and potential competition including from larger companies that may have greater name recognition, longer operating histories, more and better established customer relationships and greater resources than the Company.
The Company’s ability to provide a reliable platform largely depends on the efficient and consistent operation of its technology information systems and those of its third-party service providers. Any significant interruptions could harm the Company’s business and reputation and result in a loss of business. To management’s knowledge, no interruptions, attacks or breaches have, individually, or in the aggregate, resulted in any material liability to the Company, any material damage to the Company’s reputation, or any material disruption to the Company’s business.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash, investments and accounts receivable. The Company maintains cash balances that exceed, and may in the future exceed, the insured limits set by the Federal Deposit Insurance Corporation. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company reduces credit risk by placing cash and investment balances with major financial institutions that
15

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
management assesses to be of high-credit quality and also limits purchases of debt securities to investment-grade securities. The Company regularly evaluates the credit rating for issuers of government and corporate debt securities that it holds and other non-financial third party institutions.
For the three and nine months ended September 30, 2023 and 2022, no individual pet care provider, pet parent, or affiliate represented 10% or more of the Company’s revenue. As of September 30, 2023 and December 31, 2022, accounts receivable was $76.5 million and $53.2 million, respectively, and was inclusive of $73.9 million and $51.1 million, respectively, which was due from payment processors who collected payment from pet parents on behalf of the Company. As of September 30, 2023 and December 31, 2022, the accounts receivable balance was also inclusive of $2.0 million and $1.4 million, respectively, which was due from arrangements with third parties, in which these third parties reimburse the Company for credits issued to pet parents. The Company’s receivables are short-term in nature and the Company’s historical experience of losses has not been material.
Revenue Recognition
Marketplace Platform Revenue
The Company operates an online marketplace that provides a platform for pet parents and pet care providers to communicate and arrange for pet care services. The Company derives substantially all, or approximately 90% or more, of its revenue from pet parents’ and pet care providers’ use of the Company’s platform and related services that enable pet care providers to offer, book, and fulfill pet care services.
The Company enters into its standard terms of service with pet care providers and pet parents who wish to use the Company’s platform. The terms of service define the rights and responsibilities of pet care providers and pet parents when using the Company’s platform as well as general payment terms. The Company charges a fixed percentage service fee for each arrangement of pet care services between the pet parent and the pet care provider on the Company’s platform (a booking) and do not vary based on the volume of transactions. A booking defines the explicit fee from which the Company earns its fixed percentage service fee. The creation of a booking combined with the terms of service establish enforceable rights and obligations for the transaction. A contract exists between the pet care provider and the Company upon the creation of a booking and after the pet care providers’ cancellation period has lapsed. Pet care providers are considered the Company’s customers to the extent that they pay a fixed percentage fee, generally up to a fixed dollar amount, to the Company for the booking. Similarly, pet parents are considered the Company’s customers and a contract exists between the pet parent and the Company upon the creation of a booking and after the pet care providers’ stated cancellation period has lapsed. Pet parents pay for services at the time of booking.
The Company considers the facilitation of the connection between pet care provider and pet parent to be the promise in the contracts. This is consistent with the terms of service, as well as the substance of what a pet care provider or pet parent is expecting from the use of the Company’s platform. While customers have access to the use of the platform, customer support, and other activities, these activities are not considered distinct from each other in the context of the overall arrangement, which is the facilitation of a connection between a pet care provider and a pet parent. As such, the Company has determined that its sole performance obligation is to facilitate a connection between pet care providers and pet parents through its platform. The Company’s performance obligation is satisfied at a point-in-time when the connection has been completed, which is when the pet care provider and pet parent have completed a booking, any related cancellation period has lapsed, and the related underlying pet care services have begun. The Company derives revenue from pet care providers and pet parents primarily in the United States, as well as Canada, the United Kingdom and Western Europe.
Judgment is required in determining whether the Company is the principal or agent in transactions with pet care providers and pet parents. The Company evaluates the presentation of revenue on a gross or net basis based on whether it controls the service provided to the pet parent and is therefore the principal, or the Company arranges for other parties to provide the service to the pet parent and is therefore the agent. The Company has concluded it is the agent in transactions with pet care providers and pet parents because, among other factors, it is not responsible for the delivery of pet care services provided by the pet care provider to the pet parent. Accordingly, the Company recognizes revenue on a net basis, representing the fee the Company expects to receive in exchange for providing access to the Company’s platform to pet care providers and pet parents.
The Company has no significant financing components in its contracts with customers. The Company recognizes revenue net of any sales tax paid related to its revenue transactions.
16

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Provider Onboarding Revenue
The Company earns revenue from non-refundable provider onboarding fees by completing quality assurance reviews of new pet care provider profiles including obtaining background checks, which are performed by a third party. Pet care providers pay the onboarding fee at the time of sign up. The Company recognizes revenue related to provider onboarding services at a point-in-time upon satisfaction of the related performance obligation, determined to be the completion of the quality assurance review of the pet care provider’s profile including a background check. The Company is considered to be a principal in these transactions and recognizes revenue on a gross basis. Costs associated with performing the pet care provider onboarding review are recognized in cost of revenue (exclusive of depreciation and amortization shown separately).
Payments to Customers
From time to time, the Company makes payments to pet parents and pet care providers as part of its marketing promotions, incentive programs and refund activities.
Marketing Promotions and Incentive Programs
The Company encourages the use of its platform and attracts new customers through its marketing promotions and incentive programs. The Company uses marketing promotions in tandem with sales and marketing spend to attract new pet parents to its platform. Promotions offered to pet parents in the form of credits, coupons or discounts are recorded as a reduction of revenue or included in marketing expense.
The Company offers referral credits to its existing pet parents or pet care providers for referrals of new pet parents or pet care providers. These referral credits are paid in exchange for a distinct marketing service and therefore the portion of these credits that is equal to or less than the cost of acquiring a new pet parent or pet care provider are accounted for as a customer acquisition cost. These new customer acquisition costs are expensed as incurred and reflected as marketing expenses in the Company’s condensed consolidated statements of operations. The portion of these credits in excess of the fair value of acquiring a new pet parent or pet care provider is accounted for as a reduction of revenue.
On occasion, the Company offers promotional discounts to existing pet parents. The Company records incentives provided to existing pet parents as a promotion and reduces revenue on the date that the corresponding revenue transaction is recorded.
Refunds
In certain instances, the Company issues refunds to pet parents as part of its customer support activities for customer satisfaction matters in the form of credits to be applied toward a future booking. The Company accounts for such refunds as variable consideration and therefore records the amount of each refund or credit issued as a reduction of revenue.
Pet Parent Deposits and Pet Care Provider Liabilities
The Company records payments received from pet parents, excluding the revenue portion due to the Company, in advance of the related services being provided as pet parent deposits. As the related performance obligations are satisfied, these amounts are settled through our payment processor and derecognized. In addition, we hold pet care provider liabilities relating to bookings completed prior to the implementation of our current payment processor and related systems where payment has not yet been requested by the pet care provider. The Company is subject to compliance with escheat laws applicable by jurisdiction where pet care providers do not claim the amounts owed to them for services rendered.
Rover Guarantee
In connection with services provided to facilitate the connections between pet care provider and pet parent, the Company provides a contractual guarantee to reimburse pet parents or pet care providers for certain expenses arising from injuries or other damages incurred during a service booked through the Company’s platform, subject to specified conditions (the “Rover Guarantee”). The Company’s obligation under the Rover Guarantee is accounted for in accordance with Accounting Standards Codification (“ASC”) 460, Guarantees. As a result, the Company estimates the fair value of the liability incurred in connection with providing the Rover Guarantee and records such amounts in accrued expenses and other current liabilities within the Company’s condensed consolidated balance sheets.
17

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Marketing

Advertising expenses were $9.7 million and $27.4 million during the three and nine months ended September 30, 2023, respectively, and $6.3 million and $20.4 million during the three and nine months ended September 30, 2022, respectively.
Goodwill
Goodwill represents the excess of the aggregate fair value of the consideration transferred in a business combination over the fair value of the assets acquired, net of liabilities assumed. Goodwill is not amortized, but is subject to an annual impairment test. The Company performs its annual goodwill impairment test as of October 31, or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Management determined that the Company has two reporting units for which goodwill has been assigned for the evaluation of goodwill impairment, the Rover and GoodPup component business units.
Events or changes in circumstances which could trigger an impairment review include significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends, significant underperformance relative to historical or projected future results of operations, a significant adverse change in the business climate, cost factors that have a negative effect on earnings and cash flows, an adverse action or assessment by a regulator, estimated per share fair value of common stock, unanticipated competition or a loss of key personnel.
The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if the Company concludes otherwise, then it is required to perform a quantitative assessment for impairment.
The quantitative assessment involves comparing the estimated fair value of each reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the book value exceeds the fair value, an impairment loss is recognized in an amount equal to the excess, not to exceed the total amount of goodwill allocated to that reporting unit. See Note 2—Summary of Significant Accounting PoliciesInterim Impairment Assessment for additional information regarding the interim impairment assessment.
Intangible Assets
Intangible assets are amortized over the estimated useful life of the assets. Amortization of intangible assets associated with or used in the services provided by the Company from which it generates revenue are classified within cost of revenue (exclusive of depreciation and amortization shown separately) in the Company’s statements of operations. Amortization of intangible assets not associated with or used in the services provided by the Company from which it generates revenue are classified within depreciation and amortization expense within the Company’s statements of operations. For the periods presented, amortization of the Company’s capitalized internal-use software costs related to its online platform has been included within cost of revenues. For the periods presented, amortization expense related to other intangible assets have been classified within depreciation and amortization within the Company’s statement of operations. See Note 2—Summary of Significant Accounting Policies—Interim Impairment Assessment for additional information regarding the interim impairment assessment.
The Company identified certain intangible assets, consisting of technology and tradenames, as defensive assets. These are assets that the Company acquired but does not intend to actively use. Rather, the Company intends to hold the assets to prevent others from obtaining access to the assets.

Interim Impairment Assessment
During the quarter ended June 30, 2023, management identified various qualitative factors such as downward revisions to business forecasts and trends of adverse macroeconomic conditions on the GoodPup business performance that collectively indicated it is more-likely-than-not that the goodwill and intangible assets of the GoodPup reporting unit and asset group fair values were less than their carrying amounts as of June 30, 2023. It had previously been determined by the Company that GoodPup’s reporting unit and the asset group for assessing impairment of long-lived assets are the same. As a result, the Company performed an interim quantitative impairment assessment for goodwill in accordance with ASC 350, Intangibles—
18

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Goodwill and Other, and intangible assets in accordance with ASC 360, Property, Plant, and Equipment. The June 30, 2023 quantitative impairment tests indicated a decline in the fair value of the GoodPup reporting unit and asset group, resulting in a non-cash impairment charge of $6.9 million to write off goodwill and intangible assets in full. Impairment charges are included in impairment loss on intangible assets and goodwill in the condensed consolidated statements of operations.
The Company’s remaining goodwill and intangible asset balance as of September 30, 2023 relates to the Company’s prior acquisitions within the Rover reporting unit, for which the Company concluded it was not more-likely-than-not that fair values were less than carrying amounts at September 30, 2023.
The Company estimated the fair value of the GoodPup asset group and reporting unit using the income approach. Such fair value measurements are based predominately on Level 3 inputs. Inherent in the Company’s development of cash flow projections are assumptions and estimates derived from a review of our operating results, business plan forecasts, expected growth rates, and cost of capital, similar to those a market participant would use to assess fair value. Management also makes certain assumptions about future economic conditions and other data. Many of these factors used in assessing fair value are outside the control of management.
Restricted Cash
The Company classifies any cash balances that are restricted as to withdrawal or usage as restricted cash on the condensed consolidated balance sheets. In connection with the Company’s noncancellable Seattle headquarters lease agreement, which expires in 2030, the Company is required to hold a $3.7 million collateral account to secure the associated $3.5 million letter of credit, which is reflected in the restricted cash balance as of September 30, 2023, and for the duration of the lease. Upon the expiration of the lease agreement, the restriction will be lifted and the amounts will return for the general usage of the Company. See Note 9—Commitments and Contingencies for more information regarding the Company’s letters of credit.
Net Income (Loss) Per Share Attributable to Common Stockholders
The Company calculates basic and diluted net income (loss) per share attributable to common stockholders in conformity with the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common stock outstanding for the periods presented, without consideration for potentially dilutive securities. Diluted net income (loss) per share is calculated by giving effect to all potential weighted average dilutive common stock. The dilutive effect of outstanding awards and convertible securities is reflected in diluted net income (loss) per share by application of the treasury stock method or if-converted method, as applicable.
Recently Adopted Accounting Pronouncements
The Company is provided the option to adopt new or revised accounting guidance as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as private companies, including early adoption when permissible. The Company has elected to adopt new or revised accounting guidance within the same time period as public business entities, as indicated below.
In March 2022, the FASB issued ASU No. 2022-02 Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendment in this ASU provides an update to: (1) troubled debt restructurings guidance in Subtopic 310-40 and enhances disclosure requirements for certain loan refinancings and restructurings; and (2) requires public entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases. The guidance is effective for the Company for the year beginning after December 15, 2022. The Company adopted this standard on January 1, 2023 using the prospective transition method. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements.
19

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Recently Issued Accounting Pronouncements
In June 2022, the FASB issued ASU No. 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restriction. The amendment in this ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This amendment also requires public entities to add certain disclosures for equity securities subject to contractual sale restrictions. The guidance is effective for the Company for the year beginning after December 15, 2023. The Company will adopt this standard on January 1, 2024 using the prospective transition method. The Company does not expect the adoption of the new standard to have a material impact on the Company’s condensed consolidated financial statements but will continue to evaluate the new standard in future accounting periods.
3. Business Combinations
On June 15, 2022, the Company acquired all issued and outstanding stock of GoodPup, an early-stage company that operates a virtual dog training platform. The transaction was accounted for as a business combination. The total purchase price for this acquisition of $7.4 million included a $1.6 million holdback for indemnity and subsequent adjustments that is expected to be paid within the 18-month holdback period. The purchase price was provisionally allocated as follows: $4.4 million to intangible assets (see Note 8—Goodwill and Intangible Assets for more information), ($1.0) million to net assets and liabilities assumed based on their estimated fair value on the acquisition date, and the remaining $4.0 million to goodwill. The goodwill from the acquisition was mainly attributable to expected synergies and other benefits. The goodwill was not tax deductible. The intangible assets were amortized on a straight-line basis over their estimated useful lives of three to five years.

During the fourth quarter of 2022, the Company obtained additional information during the measurement period that existed as of the acquisition date and recorded adjustments to the preliminary purchase price allocation that resulted in a decrease of $0.2 million to goodwill, $0.1 million to net liabilities assumed, and $0.1 million to the holdback liability. The adjustment did not have a material impact on the Company’s consolidated statements of operations.

Certain employees hired in conjunction with the acquisition received restricted stock unit awards and retention bonuses that are subject to service conditions. The Company accounted for these awards and bonuses as a post-business combination expense.

The Company incurred no acquisition-related costs during the three and nine months ended September 30, 2023. The Company incurred no acquisition-related costs during the three months ended September 30, 2022 and $0.4 million in acquisition-related costs during the nine months ended September 30, 2022, which were included in general and administrative expenses in the consolidated statement of operations.

The results of operations for this acquisition have been included in the Company’s consolidated statements of operations since the date of acquisition. Actual and pro forma revenue and results of operations for the acquisition have not been presented because they did not have a material impact on the consolidated results of operations.
During the second quarter of 2023, the Company recorded a non-cash impairment charge related to GoodPup of $6.9 million to write off goodwill and intangible assets in full. There were no other non-cash impairment charges for the three and nine months ended September 30, 2023 and 2022. See Note 2—Summary of Significant Accounting PoliciesInterim Impairment Assessment and Note 8—Goodwill and Intangible Assets for more information.
4. Revenue Recognition
Contract Balances
Contract liability balances on the Company’s condensed consolidated balance sheets consist of deferred revenue for amounts collected upon the completion of a booking. Deferred revenue is limited to the amount which the Company expects to recognize as revenue and the amounts expected to be paid out to pet care providers are separately presented as pet parent deposits on the Company’s condensed consolidated balance sheets, as those amounts will not result in revenue recognized. The deferred revenue balance is reduced by the amount of credits, coupons, or discounts to the extent that they are expected to reduce the revenue recognized upon satisfaction of the performance obligation. Substantially all of the deferred revenue as of
20

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
September 30, 2023 relates to bookings that begin within the next twelve months, at which time revenue will be recognized, unless the booking is canceled during the pet care provider’s cancellation period.

The changes in the Company’s deferred revenue balances were as follows (in thousands):

Balance at June 30, 2023$16,390 
Bookings and other62,858 
Revenue recognized(66,136)
Balance at September 30, 2023
$13,112 
Balance at December 31, 2022
$5,544 
Bookings and other174,150 
Revenue recognized(166,582)
Balance at September 30, 2023
$13,112 
Substantially all deferred revenue as of June 30, 2023 and December 31, 2022 was recognized as revenue during the three and nine months ended September 30, 2023, respectively.
5. Investments
The Company’s investments include available-for-sale investments, convertible notes, and equity investments without a readily determinable fair value. Available-for-sale investments consist of marketable securities that are accounted for at fair value. Premiums and discounts paid on securities at the time of purchase are amortized over the period of maturity. The amortized cost and fair value of the investments and unrealized gains and losses were as follows (in thousands):
September 30, 2023
Amortized CostsGross Unrealized GainsGross Unrealized LossesFair Value
Marketable securities:
Commercial paper$8,020 $ $(5)$8,015 
Corporate securities36,207  (37)36,170 
US Government securities42,427  (121)42,306 
Asset-backed securities4,746  (7)4,739 
Agency bonds9,205  (16)9,189 
Certificate of deposit1,321   1,321 
Total marketable securities101,926  (186)101,740 
Total investments$101,926 $ $(186)$101,740 
21

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
December 31, 2022
Amortized CostsGross Unrealized GainsGross Unrealized LossesFair Value
Marketable securities:
Commercial paper$54,851 $ $(51)$54,800 
Corporate securities38,260  (220)38,040 
US Government securities108,551  (792)107,759 
Asset-backed securities8,269  (35)8,234 
Agency bonds4,989  (12)4,977 
Total marketable securities214,920  (1,110)213,810 
Other investments:
Convertible notes1,810   1,810 
Total other investments1,810   1,810 
Total investments$216,730 $ $(1,110)$215,620 
Unrealized losses of the Company’s available-for-sale securities that have been in a continuous unrealized loss position for twelve months or longer were immaterial as of September 30, 2023 and December 31, 2022.

The contractual maturity of the available-for-sale investments were as follows (in thousands):

September 30, 2023
Within 1 year1 to 5 yearsMore than 5 yearsTotal
Marketable securities:
Commercial paper$8,015 $ $ $8,015 
Corporate securities13,419 22,751  36,170 
US Government securities42,306   42,306 
Asset-backed securities572 4,167  4,739 
Agency bonds9,189   9,189 
Certificate of deposit1,321   1,321 
Total marketable securities74,822 26,918  101,740 
Total investments$74,822 $26,918 $ $101,740 

December 31, 2022
Within 1 year1 to 5 yearsMore than 5 yearsTotal
Marketable securities:
Commercial paper$54,800 $ $ $54,800 
Corporate securities32,767 5,273  38,040 
US Government securities101,289 6,470  107,759 
Asset-backed securities 8,234  8,234 
Agency bonds2,491 2,486  4,977 
Total marketable securities191,347 22,463  213,810 
Other investments:
Convertible notes1,810   1,810 
Total other investments1,810   1,810 
Total investments$193,157 $22,463 $ $215,620 
22

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company believes there were no fundamental issues such as credit losses or other factors with respect to any of its available-for-sale securities for both the three and nine months ended September 30, 2023 and 2022. The unrealized losses on investments in fixed-maturity securities were caused primarily by interest rate changes. It is expected that the securities would not be settled at a price less than par value of the investments. Because the declines in fair value are attributable to changes in interest rates or market conditions and not credit quality, and because the Company has the ability to hold its available-for-sale investments until a market price recovery or maturity, the Company has not recognized any credit loss reserves as of September 30, 2023 and December 31, 2022.
Equity investments without a readily determinable fair value consist of equity securities that are accounted for at cost, with adjustments for observable changes in prices or impairments, and are classified within the caption investment in equity securities in related parties in the condensed consolidated balance sheet with any adjustments recognized as a component of change in fair value of other investments in the condensed consolidated statements of operations. As of September 30, 2023, these investments had a carrying value of $3.8 million. The Company did not hold any equity investments without a readily determinable fair value as of December 31, 2022. Each reporting period, the Company performs a qualitative assessment to evaluate whether the investment is impaired. This assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data. If the investment is impaired, the Company would write it down to its estimated fair value. The Company did not recognize any impairments to equity investments during the three and nine months ended September 30, 2023.
Other Investments
Convertible Notes and Equity Investments (Related Party Transaction)
In July 2022, the Company entered into transaction agreements with Pioneer Square Labs (“PSL”) and entities affiliated with PSL, a start-up studio and venture capital fund of which one of the Company’s directors, Greg Gottesman, is a managing director and co-founder. The Company with PSL co-invested in an early-stage company that provides a service for pet parents that is complementary to the Company’s current offerings (the “Investee”). The Company contributed intellectual property in the form of a nonexclusive license agreement in exchange for 5,000,000 shares of common stock, which represents 15% of the Investee’s diluted outstanding equity as of September 30, 2023. The Company accounts for this investment under the equity method as it has significant influence over the Investee but does not hold a controlling financial interest.
In July 2022, in conjunction with the agreements, the Company made an initial investment of $1.0 million in the Investee in the form of a convertible note, which had a maturity date of July 2023. Subsequently, the Company invested an additional $0.3 million and $0.5 million in the form of convertible notes during September 2022 and November 2022, respectively. As of November 2022, all investments in the form of convertible notes were amended to mature in November 2023. The convertible notes accrued interest at a rate of 5% per year and were payable upon the maturity dates. The Company elected to measure these convertible notes at fair value with changes in fair value reported in earnings.
In June 2023, the Company converted the entire balance of its convertible note investments into 4,162,357 shares of Series Seed Preferred Stock of the Investee according to the terms of the notes’ conversion feature at a discounted conversion price of $0.4507 per share. The fair value of the convertible notes at the conversion date was determined to be equal to fair value of the shares of Series Seed Preferred Stock received upon conversion, which was $2.3 million. The adjusted carrying value of the investment was reclassified from notes receivable from related parties to investment in equity securities in related parties in the condensed consolidated balance sheets as a result of the conversion. The Company recognized total fair value adjustments of $0.0 million and $1.1 million within change in fair value of other investments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2023, respectively. No incremental fair value adjustment was recorded for the three and nine months ended September 30, 2022. There were no impairment charges for the three and nine months ended September 30, 2023 and 2022. See Note 6—Fair Value for more information on the fair value of the convertible notes.
In June 2023, simultaneous to the note conversion the Company also invested an additional $1.5 million in the Investee in exchange for 2,662,406 shares of Series Seed Preferred Stock at a price of $0.5634 per share. As of September 30, 2023 the carrying value of the Company’s aggregate Series Seed Preferred Stock investment was $3.8 million, as recorded in investment in equity securities in related parties within the condensed consolidated balance sheets. As the Company’s basis in the Investee’s common stock as accounted for under the equity method was valued at zero, the Company’s proportionate share of losses resulted in a reduction to the carrying value of the convertible note investments prior to the conversion event as well as a reduction to the carrying value of the Series Seed Preferred Stock investment subsequent to the conversion event. For the three
23

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
and nine months ended September 30, 2023, the Company recorded losses of $0.3 million and $1.0 million, respectively, within loss from equity method investments in the condensed consolidated statements of operations, representing its proportionate share of net income or loss based on the Investee’s financial results. For both the three and nine months ended September 30, 2022, the Company recorded losses of $0.3 million within loss from equity method investments in the condensed consolidated statements of operations, representing its proportionate share of net income or loss based on the Investee’s financial results.
PSL and the Company have equivalent minority ownership positions in the Investee, and have customary rights afforded to investors in venture-backed companies. PSL has been, and will continue to be, reimbursed for certain corporate costs by the entity and will provide, and be compensated for, certain services to the entity. For the three and nine months ended September 30, 2023, the amount reimbursed to PSL by the Investee for in-house services provided and other expenses was immaterial. Mr. Gottesman is not on the board of the Investee and will not serve on its board unless approved by the Company’s board of directors. Mr. Gottesman holds a minority position in PSL.
6. Fair Value
The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis (in thousands):
September 30, 2023
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$17,800 $ $ $17,800 
US Government securities 6,969  6,969 
Investments:
Commercial paper 8,015  8,015 
Corporate securities 36,170  36,170 
US Government securities 42,306  42,306 
Asset-backed securities 4,739  4,739 
Agency bonds 9,189  9,189 
Certificate of deposit 1,321  1,321 
Total assets measured at fair value$17,800 $108,709 $ $126,509 
December 31, 2022
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$23,006 $ $ $23,006 
Commercial paper 7,954  7,954 
Investments:
Commercial paper 54,800  54,800 
Corporate securities 38,040  38,040 
US Government securities 107,759  107,759 
Asset-backed securities 8,234  8,234 
Agency bonds 4,977  4,977 
Other investments:
Convertible notes  1,810 1,810 
Total assets measured at fair value$23,006 $221,764 $1,810 $246,580 
24

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table provides a reconciliation of the beginning and ending balances for the Level 3 financial assets measured at fair value using significant unobservable inputs (in thousands):
Convertible Notes
Balance at December 31, 2022$1,810 
Additions during the period 
Proportionate share of equity method losses(266)
Incremental change in fair value801 
Conversion into investment in equity securities in related party(2,345)
Balance at September 30, 2023$ 
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each period. There were no transfers of financial instruments between valuation levels during the periods presented.
The Company classifies financial instruments as Level 2 within the fair value hierarchy which are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. Prices of these securities are obtained through independent, third-party pricing services and include market quotations that may include both observable and unobservable inputs. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments.
The Company classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable, either directly or indirectly. The Company’s assessment of a particular input to the fair value measurement requires management to make judgments and consider factors specific to the liability. The fair value hierarchy requires the use of observable market data when available in determining fair value. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each period.
Valuation of Convertible Note Investments
As described in Note 5—Investments—Other Investments—Convertible Notes and Equity Investments (Related Party Transaction), the Company previously held convertible note investments in the Investee that were measured at fair value. As of December 31, 2022, these convertible notes were held at a fair value of $1.8 million. In June 2023, the convertible note investments converted into shares of Series Seed Preferred Stock and the Company no longer held a convertible note investment as of September 30, 2023. The fair value of the notes was based predominantly on the credit quality of the underlying business and its ability to repay principal and interest, as well as the potential outcome of future equity financing transactions that may trigger the conversion feature provided by the notes. The fair value of the convertible notes at the conversion date was determined to be equal to fair value of the shares of Series Seed Preferred Stock received upon conversion, which was $2.3 million.
Valuation of Private Placement Warrant Derivative Liability
In December 2021, the Company announced that, pursuant to the terms of the Warrant Agreement, it would redeem all of the outstanding private placement warrants (“Private Warrants”) held by Nebula Caravel Holdings, LLC, the sponsor of Caravel and a greater than five percent stockholder of the Company (the “Sponsor”), and public warrants (“Public Warrants” and, collectively with the Private Warrants, “Warrants”) that remained outstanding at 5:00 p.m. New York City time on January 12, 2022 (the “Redemption Date”).
In January 2022, the Company issued 2,046,220 shares of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), related to the December 2021 and January 2022 cashless exercise of 5,425,349 Public Warrants and 2,574,164 Private Warrants, representing approximately 98.6% of the Public Warrants and 100% of the Private Warrants, respectively. Holders of Warrants received 0.2558 shares of Class A Common Stock per Warrant in lieu of receiving a redemption price of $0.10 per Warrant (the “Redemption Price”). A total of 74,631 Public Warrants remained unexercised after the Redemption Date and broker protect period and the Company redeemed those unexercised Public Warrants. Pursuant to the
25

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
redemption, the Public Warrants ceased trading on The Nasdaq Global Market effective as of the close of trading on the Redemption Date, and were delisted after market close on the Redemption Date. As of September 30, 2023, no warrant liabilities were outstanding as the related carrying amount of the warrant liability was reclassified to stockholders’ equity during the first quarter 2022.
7. Balance Sheet Components
Property and Equipment, net
The following table presents the detail of property and equipment, net as follows (in thousands):
September 30,
2023
December 31,
2022
Computers$1,547 $1,452 
Furniture and fixtures3,799 3,777 
Leasehold improvements13,479 13,808 
Internal-use software24,485 21,652 
Asset retirement obligation225 225 
Total property and equipment43,535 40,914 
Less:  Accumulated depreciation and amortization(24,274)(21,396)
Total property and equipment, net$19,261 $19,518 

Depreciation and amortization of property and equipment was $1.0 million and $3.0 million during the three and nine months ended September 30, 2023, respectively, and $1.0 million and $2.9 million during the three and nine months ended September 30, 2022, respectively. Depreciation and amortization of property and equipment was recorded to depreciation and amortization in the condensed consolidated statements of operations. The Company capitalized $2.6 million and $7.7 million of software development costs for the three and nine months ended September 30, 2023, respectively, and $2.4 million and $6.5 million for the three and nine months ended September 30, 2022. Internal-use software amortization was $1.9 million and $5.4 million during the three and nine months ended September 30, 2023, respectively, and $1.7 million and $5.2 million during the three and nine months ended September 30, 2022, respectively. Internal-use software amortization was recorded to cost of revenue (exclusive of depreciation and amortization shown separately) in the condensed consolidated statements of operations.
Accrued Expenses and Other Current Liabilities
The following table presents the detail of accrued expenses and other current liabilities as follows (in thousands):
September 30,
2023
December 31,
2022
Income and other tax liabilities$2,101 $1,670 
Accrued legal expenses and open claims917 686 
Accrued legal settlements (1)
 18,000 
Accrued professional services696 435 
Holdback related to business combination1,343 1,343 
Accrued share repurchase553  
Coupon liabilities317 205 
Other current liabilities564 355 
Total accrued expenses and other current liabilities$6,491 $22,694 
__________________
(1)See Note 9—Commitments and Contingencies for more information.

26

ROVER GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Employee Retention Credit
The employee retention credit (“ERC”), as originally enacted through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) on March 27, 2020, is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees from March 17, 2020 to December 31, 2020. The Disaster Tax Relief Act, enacted on December 27, 2020, extended the ERC for qualified wages paid from January 1, 2021 to June 30, 2021, and the credit was increased to 70% of qualified wages an eligible employer paid to employees during the extended period. The American Rescue Plan Act of 2021, enacted on March 11, 2021, further extended the ERC through December 31, 2021.
In the second quarter 2022, the Company filed an application with the U.S. Internal Revenue Service (“IRS”) for the ERC. Employers are eligible for the credit if they experienced full or partial suspension or modification of operations during any calendar quarter because of governmental orders due to the COVID-19 pandemic or a significant decline in gross receipts based on a comparison of quarterly revenue results for 2020 and/or 2021 with the comparable quarter in 2019. The Company’s ERC application was equal to 70% of qualified wages paid to employees during the period from January 1, 2021 to June 30, 2021 for a maximum quarterly credit of $7,000 per employee. On July 3, 2023, the Company recorded other income of $1.9 million related to the realization of the credit in the second quarter 2023. Consulting fees associated with the ERC application were immaterial. The Company’s eligibility remains subject to audit by the IRS for a period of five years.
The Company accounted for the ERC by analogy to ASC 450-30, Gain Contingencies and ASC 855, Subsequent Events. As the notice of refund and receipt of cash from the IRS was received on July 3, 2023, the Company determined the notice of refund affected the realization of the anticipated ERC and therefore, the ERC was recognized as a receivable as of the balance sheet date.
The Company recorded the $1.9 million ERC in the second quarter of 2023 within prepaid expenses and other current assets in the condensed consolidated balance sheets and within other income (expense), net on the condensed consolidated statements of operations. The Company has not recorded additional calculated quarterly credits as income as of September 30, 2023 because it is not reasonably certain further amounts will be collected due to the delayed processing and enhanced scrutiny of applications submitted before September 14, 2023 as announced by the IRS in September 2023.
8. Goodwill and Intangible Assets
Goodwill
The following table summarizes the changes in the carrying amount of goodwill (in thousands):
Balance at December 31, 2022$36,915 
GoodPup Impairment(3,756)
Balance at September 30, 2023$33,159 
During the second quarter of 2023, the Company recorded a non-cash impairment charges of $3.8 million to write off goodwill in full for the GoodPup reporting unit. Impairment charges were included in impairment loss on intangible assets and goodwill in the condensed consolidated statements of operations. See