Turo, the venture-backed, peer-to-peer car rental service, disclosed its financial performance for the fourth quarter and full year in an updated IPO filing. The company initially submitted an S-1 to go public in early 2022, later updating the document quarterly in preparation for an eventual offering. HindiStatus.in 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 list its shares publicly.
In 2019, Turo secured a $250 million Series E led by IAC, resulting in a $1.25 billion post-money valuation according to PitchBook. Crunchbase reports Turo’s total funding to date at around the $500 million mark.
The company has utilized the capital effectively, achieving rapid revenue growth since 2019, positive operating income since 2021, and net profit since 2022.
However, Turo’s growth rate has slowed down in recent years, making the timing of its IPO difficult to predict. The company would not consistently file S-1/A filings if a public offering was not a top priority. Nonetheless, with tech valuations lower from their 2021 highs, choosing the right moment to go public remains challenging.
Reddit serves as an example, as it has been attempting to go public for years before filing this year, joining other billion-dollar startups waiting to enter the public markets.
How did Turo perform in 2023?
In 2023, Turo reported revenues of $879.8 million, an 18% increase compared to the previous year. While the total revenue scale of the company is impressive, its growth rate has significantly decreased over the last two years. In 2021, Turo rebounded from the pandemic-driven challenges of 2020, achieving a remarkable 213% growth to reach $469 million. However, this triple-digit growth was short-lived as the company’s revenue growth slowed to 59% in 2022, reaching $746.6 million in total revenue.
Although Turo’s year-over-year growth rate has declined in recent years, there was a slight positive in its new filing. HindiStatus.in calculates a 13.6% growth rate from Q3 2022 to Q3 2023, and a slightly sharper 14.3% growth from Q4 to Q4 during the same period. Despite both figures being under its full-year growth rate, a slight improvement in revenue growth in the fourth quarter could help in demonstrating to public-market investors that its deceleration is not necessarily irreversible.
Nevertheless, an 18% growth rate is not so low that Turo cannot go public, especially given its profitability. However, concerns may arise regarding declines in profitability as well. The company’s gross margins decreased slightly last year, falling from 54.3% in 2022 to 51.4% in 2023.
Partly due to this gross margin dip, Turo’s profitability in calendar 2023 lagged behind its 2022 results. It recorded 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). Turo’s non-adjusted profits in the tech industry approaching the public markets are rare, making it stand out, though the value potential public shareholders may assign to its profitability amidst slowing growth remains uncertain.
Why not go public now?
With net income and revenue growth nearing $900 million, and a business model sustaining profitability, Turo is sufficiently large to go public. With a valuation just over $1 billion, it should easily exceed its final private valuation.
So, why delay the public offering? Perhaps the company is waiting for its growth to accelerate again, or for tech revenue multiples to rise, enabling it to raise more capital with less dilution. It could also be waiting for investor appetite to return for tech IPOs since it seems to be operating successfully from its operations.
There are reasons for caution, even as the continually updated S-1 indicates eagerness. One of Turo’s public comparables, Getaround, has seen its value decline since going public through a SPAC-led combination. (To be fair, many SPAC-led combinations have not performed well.)
While awaiting further developments, there were several other notable details in Turo’s updated S-1 worth highlighting:
- EVs: In its Q3 2023 S-1/A filing, Turo mentioned that “electric vehicles represented 8% of Turo vehicle listings.” This figure increased to 9% in the most recent filing, indicating a notable expansion in EV presence on Turo’s platform.
- Slowing supply growth: In its Q3 2023 S-1/A filing, Turo reported “approximately 350,000 active vehicle listings on [its] platform, up 16% year over year.” In the latest filing, these figures rose to 360,000, a 12% growth rate. More cars, slower growth.
- Rising interest incomes impact Turo’s adjusted EBITDA: Interest incomes at Turo have risen with increasing interest rates, from $5.3 million in 2022 to $18.3 million in 2023. However, adjusted EBITDA “does not reflect other income and (expense), net, which includes interest income on cash,” resulting in a hit to adjusted profitability due to rising interest-based incomes. This trend has been seen at other companies as well.
As a reminder, Turo’s major investors include IAC with 39.2 million shares, G Squared with 16.2 million shares, August Capital with 10.3 million shares, and Canaan Partners with 9.3 million shares.
We’ll have more details when Turo commences its roadshow and prices its shares.
