Peer-to-peer car-sharing company Turo files IPO to go public

Peer-to-peer car-sharing startup Turo has released its filing to become a publicly traded company in the United States, a process the company began confidentially in August.

The S-1 document filed Monday with the U.S. Securities and Exchange Commission does not include terms for its offering.

Turo, which was founded in 2010 and has been compared to Airbnb for cars, allows private car owners to rent out their vehicles through the startup’s website or app. The company boasts 85,000 active hosts and 160,000 active vehicle listings in over 7,500 cities as of September 30, 2021. Car owners get the chance to offset ownership costs, and users get the benefit of affordable short-term rentals at a time when rental car prices are increasing due to pandemic-induced supply chain issues. Challenges in the traditional car rental industry have certainly allowed Turo to gain some market share, despite steep competition, but that popularity has come with a cost at times, a reading of the risk factors portion of the S-1 shows.

Quick financial breakdown

First let’s take a look at the financials.

In 2020, Turo generated net revenue of $149.9 million in 2020, a 6% growth from the previous year, according to the S-1. Net losses were $97.1 million in 2020, a slight improvement from the $98.6 million in net losses it had in 2019.

Turo points to a couple of drivers of its revenue growth, notably a digital tool called the Turo Risk Score. This feature, which launched in April 2020, dynamically adjusts the fees that Turo charges guests to complete a booking. Turo said this tool, along with hosts increasing the prices for vehicles that they charge to guests, contributed to its increased net revenue.

In 2021, sales and losses skyrocketed.

Turo says it generated $330.5 million in net revenue in the first nine months of 2021, a whopping 207% increase from $107.8 million for the same period in 2020. Its net losses also expanded as well. Turo reported a net loss of $129.3 million for the nine months ended September 30, 2021, compared to $51.7 million for the same period in 2020.

The reason? Turo notes in its S-1 that revenue increased as the number of days booked rose along with gross booking value per day.

Scanning the S-1, it also appears that Turo tried to do more with less in 2020 and has since turned the financial faucet back on this year. The company tightened its spending in 2020 with operating expenses dropping from $133.9 million in 2019 to $95.8 million in 2020.

The first nine months of 2021 tell a different story. The company’s operating expenses in the first nine months of the year were $124.01 million compared to $71.6 million during the same period last year. Turo also says it hit adjusted EBITDA — a modified profitability metric  — of $69.8 million in the first nine months of 2021. It achieved that in spite of that $129 million net loss because of a $174.7 million change in the fair value of redeemable convertible preferred stock warrant liability.

Risk factors

Risk factors facing the company include the obvious “what if people don’t use Turo” and “we face competition” from similar apps and traditional car rental companies. But a few others stick out.

For one, Turo notes that the COVID-19 pandemic added volatility to its business. The company was forced to layoff staff and even closed its operations in Germany in 2020, only to have the business come roaring back to “above pre-Covid levels.”

The car rental app notes it may face liability for criminal activities of its hosts. There doesn’t appear to be any lawsuits or fines, yet but in August last year, Turo and other peer-to-peer rental apps were found to have been used by criminals for human trafficking and other crimes, a trend that the U.S. Customs and Border Protection admits is a growing trend near the border.

Turo is also liable for lawsuits from cities — or more specifically airport authorities — that would require the long-time startup to obtain rental car permits. And in this area, Turo has in fact been sued and countersued. There have been four lawsuits regarding airport use and three of them, including one initiated by Turo versus the City of Los Angeles, have yet to be settled.

Opportunities and growth

Despite potential risks, Turo estimates its current serviceable addressable market to be $146 billion and its total addressable market to be $230 billion.

“We estimate that our $230 billion TAM includes $134 billion in North America, $65 billion in Europe, and $31 billion in the rest of the world (which consists of selected countries in which we believe we have a medium- to long-term opportunity to onboard hosts),” according to the filing.

Notably, the company appears to be ready to expand its operations within its home U.S. market as well as internationally. It also is ready to make some strategic acquisitions and partnerships “to offer our hosts and guests services and features that we do not currently offer in-house.”