Turo, the venture-backed, peer-to-peer car rental service, reported its fourth-quarter and full-year financial performance this week in an updated IPO filing. The company first filed an S-1 to go public in early 2022, later updating the document quarterly in preparation for an eventual offering. TechCrunch covers its regular financial disclosures as they provide insight into when a deeply funded startup with a historical billion-dollar valuation will decide to finally pull the trigger and list its shares publicly.
In 2019 Turo raised a $250 million Series E led by IAC that gave it a $1.25 billion post-money valuation according to PitchBook. Crunchbase counts Turo’s total funding to date at just around the $500 million mark.
The company has put the capital to good use, posting quick revenue growth since 2019, positive operating income since 2021 and net profit since 2022.
However, Turo’s growth rate has decelerated in recent years, making its IPO timing tricky to estimate; the company would not file regular S-1/A filings if a public offering was not a key priority — indeed, no other venture-backed company is executing a similar playbook to my knowledge, which is a shame — but with tech valuations depressed from their 2021-era highs, picking the right moment to go public is not an easy task.
Just ask Reddit, which has been trying to go public for years before filing this year, and the army of billion-dollar-plus startups jammed up at the exits of the private markets.
How did Turo do in 2023?
Turo posted revenues of $879.8 million last year, up 18% compared to the year before. The company’s total revenue scale is impressive, but its growth rate has dramatically declined in the last two years. In 2021 Turo’s growth rebounded from 2020’s pandemic-driven woes impressively, rising 213% that year to $469 million. However, triple-digit growth was short-lived at the car rental company, which saw its revenue growth slow to 59% in 2022 when it recorded $746.6 million worth of total revenue.
While Turo’s year-over-year growth rate cratered in recent years, it did have a small mote of good news for investors in its new filing. TechCrunch calculates that its Q3 2022 to Q3 2023 growth rate was 13.6%, while its Q4 to Q4 growth over the same time frame was a slightly sharper at 14.3%. While both figures are under its full-year growth rate, seeing its revenue growth perk up even slightly in the fourth quarter could help it argue to public-market investors that its deceleration is not necessarily irreversible.
Still, 18% growth is not so low that Turo cannot go public, especially as it is profitable, although it may run into investor concern about declines there, too. Its gross margins devolved slightly last year, falling from 54.3% in 2022 to 51.4% in 2023.
Partially as a result of that gross margin dip, Turo’s profitability in calendar 2023 lagged its 2022 results. It posted its smallest operating profit since 2020 last year ($13.7 million, down from $46.6 million in 2021), and its lowest net profit since 2021 ($15.6 million, down from $154.7 million in 2022). Non-adjusted profits at tech companies approaching the public markets are rare enough to make Turo stand out from the pack, though how much value potential public shareholders will afford its profitability in light of its slowing growth is an open question.
Why not go public now?
With net income and growth and revenue approaching $900 million, and a business model that is staying in the black, Turo is far and away big enough to go public, and with a valuation of just over $1 billion, it should not have a hard time besting its final private price tag.
So, why not go public now? Perhaps the company is waiting for its growth to reaccelerate, or simply for tech and tech-ish revenue multiples to reinflate so that it can raise even more cash with less dilution. Or perhaps, because it appears to be sustaining itself from its operations, it is waiting until investors’ appetites return for tech IPOs.
There’s reason for it to be cautious, even if the continually updated S-1 indicates that it remains eager. One of its public comps, Getaround, has seen its value crater since it went public in a SPAC-led combination. (To be fair, though, many SPAC-led combinations have not fared well.)
While we wait, however, there were several other notable nuggets in Turo’s updated S-1 worth calling out:
- EVs: In its Q3 2023 S-1/A filing, Turo wrote that “electric vehicles represented 8% of Turo vehicle listings.” That figure expanded to 9% in its most recent filing, implying that the share of EVs on Turo’s platform is expanding at a notable clip.
- Slowing supply growth: In its Q3 2023 S-1/A filing, Turo said that there were “approximately 350,000 active vehicle listings on [its] platform, up 16% year over year.” In its most recent filing, those figures rose to 360,000 and 12%. More cars, slower growth.
- Rising interest incomes are dinging Turo’s adjusted EBITDA: Interest incomes at Turo have sharpened with rising interest rates, rising from $5.3 million in 2022 to $18.3 million in 2023. However, as the company notes, adjusted EBITDA “does not reflect other income and (expense), net, which includes interest income on cash,” which means that its adjusted profitability took a hit due to the company’s rising interest-based incomes. We’ve seen this at other companies, to be clear.
As a reminder, the biggest investors in Turo include IAC, with 39.2 million shares; G Squared, a venture capital fund with 16.2 million shares; August Capital with 10.3 million shares; and Canaan Partners, with 9.3 million.
More when it decides to get its roadshow underway and price its shares.
Comment