Turo Files IPO: Car-Sharing Company to Go Public

Turo Files for Public Offering

Turo, the peer-to-peer car-sharing platform, has submitted its S-1 filing with the U.S. Securities and Exchange Commission, initiating the process to become a publicly traded company.

The company initially began this process confidentially back in August.

Details of the Filing

The S-1 document, made public on Monday, currently lacks specific details regarding the terms of the proposed offering.

Founded in 2010, Turo operates a marketplace that connects car owners with renters, often drawing comparisons to Airbnb but for automobiles.

Turo’s Growth and Market Position

Through its website and mobile application, Turo enables individuals to rent out their personal vehicles.

As of September 30, 2021, the platform featured approximately 85,000 active hosts and a selection of 160,000 vehicles available for rent across more than 7,500 cities.

Car owners are presented with an opportunity to recoup vehicle ownership expenses, while renters benefit from access to cost-effective, short-term rental options.

This value proposition is particularly appealing given the recent surge in rental car prices, largely attributed to supply chain disruptions stemming from the COVID-19 pandemic.

Industry Dynamics and Potential Risks

Difficulties within the conventional car rental sector have undoubtedly contributed to Turo’s increasing market share.

However, the S-1 filing’s risk factors section indicates that this growth hasn’t been without its challenges, despite the competitive landscape.

The company faces ongoing competition within the car-sharing and rental markets.

Here's a summary of key statistics:

• Active Hosts: 85,000
• Active Vehicle Listings: 160,000
• Cities Served: Over 7,500

Financial Performance Overview

Let's begin with an analysis of Turo’s financial standing.

According to its S-1 filing, Turo recorded net revenue of $149.9 million during 2020, representing a 6% increase over the prior year. However, the company experienced net losses of $97.1 million in 2020, which was a modest improvement compared to the $98.6 million net loss reported in 2019.

Several factors contributed to the revenue growth observed by Turo. Notably, the implementation of a digital tool known as the Turo Risk Score played a significant role. This feature, introduced in April 2020, dynamically adjusts the fees charged to guests when completing a booking.

Turo attributes its increased net revenue to this tool, alongside hosts raising the prices for vehicle rentals. These adjustments collectively impacted the company’s financial performance.

Significant Growth in 2021

The year 2021 witnessed a substantial surge in both sales and losses for Turo.

During the first nine months of 2021, Turo generated $330.5 million in net revenue, a remarkable 207% increase from the $107.8 million recorded during the same period in 2020. Concurrently, net losses also expanded considerably.

Turo reported a net loss of $129.3 million for the nine months ending September 30, 2021, in contrast to the $51.7 million net loss reported for the equivalent period in 2020.

This increase in revenue can be attributed to a rise in both the number of days vehicles were booked and the gross booking value per day, as detailed in the S-1 filing.

Expense Management and Adjusted EBITDA

An examination of the S-1 reveals a strategic shift in Turo’s expense management. The company demonstrated fiscal restraint in 2020, reducing operating expenses from $133.9 million in 2019 to $95.8 million.

However, the first nine months of 2021 saw a reversal of this trend. Operating expenses for this period reached $124.01 million, compared to $71.6 million during the same timeframe in the previous year.

Despite the $129 million net loss, Turo achieved an adjusted EBITDA of $69.8 million during the first nine months of 2021. This was largely due to a $174.7 million positive change in the fair value of redeemable convertible preferred stock warrant liability.

Potential Risks for the Company

Several risk factors could impact the company’s performance, extending beyond concerns about user adoption of the Turo platform and the presence of competitive offerings from both established car rental businesses and similar applications.

The COVID-19 pandemic introduced a degree of instability to Turo’s operations, as highlighted in company reports. This resulted in workforce reductions and a temporary suspension of services in Germany during 2020, followed by a substantial recovery exceeding pre-pandemic activity levels.

A potential area of liability for Turo stems from the actions of its hosts, specifically the possibility of criminal activity. While no legal actions or penalties have been incurred to date, reports surfaced in August of the previous year indicating the use of Turo and comparable peer-to-peer rental platforms in instances of human trafficking and other illicit activities.

U.S. Customs and Border Protection has acknowledged an increasing trend of such misuse, particularly in border regions.

Furthermore, Turo could be subject to legal challenges from municipalities, particularly airport authorities, demanding the acquisition of traditional rental car permits. This is an area where legal disputes have already arisen.

Currently, four lawsuits concerning airport usage are ongoing, with three remaining unresolved, including a case initiated by Turo against the City of Los Angeles.

Potential for Expansion and Development

Even with inherent challenges, Turo projects its presently reachable market to be $146 billion, with a comprehensive total addressable market reaching $230 billion.

The company’s filings indicate that this $230 billion total addressable market is comprised of $134 billion within North America, $65 billion in Europe, and $31 billion across the remainder of the globe.

This global figure encompasses countries where Turo believes there is a viable medium- to long-term prospect for host recruitment.

The company demonstrates a clear intention to broaden its reach both domestically, within the United States, and across international territories.

Furthermore, Turo is prepared to pursue strategic acquisitions and forge new partnerships.

These efforts are designed to provide both hosts and guests with services and functionalities currently unavailable through internal development.

Key Market Breakdown

• North America: $134 billion
• Europe: $65 billion
• Rest of World: $31 billion

This breakdown highlights the significant opportunities Turo identifies in diverse geographical regions.

The company’s strategy focuses on capitalizing on these opportunities through organic growth and external collaborations.