Late last week, car rental marketplace Turo dropped an updated S-1 filing featuring its first-quarter results. TechCrunch+ previously covered the company’s full-year 2022 results, noting at the time that Turo was growing quickly while staying profitable and was posting revenue totals that, when compared with its last known private valuation, were attractive indeed.
“What’s not to like?” we asked back in March.
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But this new slew of data complicates that previously rosy picture a little.
Today, instead of comparing Turo’s pace of revenue growth in Q1 2023 to the same period a year earlier, we’re going to compare that with Turo’s revenue growth rate throughout 2022. We’re doing this primarily because the company was enduring COVID-related headwinds in early 2021, which means it would be a bit unfair to compare Q1 2023 growth rates to those set in Q1 2022. The post-COVID tailwinds it enjoyed last year have somewhat tapered off now, so the growth that the company is seeing today could be argued to be more “organic” than what it saw a year ago.
In the first quarter, Turo’s revenue rose at a slower rate than it had in full-year 2022, and the company was unprofitable to boot. Seasonality is a factor in this business, so we’ll need to figure out just how much these new results matter, and if they should change our opinion that the company should go public post-haste.
The backdrop has changed since we last talked about this company: Cava’s IPO is rapidly approaching, and the venture-backed company seems to be enjoying strong interest for its shares despite not strictly being a tech company, indicating that there could be more appetite than expected for IPOs. Turo would prove a better test for tech companies wondering if the time is right to go public.
It’d be lovely if Turo’s Q1 2023 results give us reason to hope that it would go public this year. Fresh and pertinent data on the demand for tech shares in the public market would be incredibly useful to our reporting on the late-stage startup market. After all, what is Turo if not a late-stage unicorn full of private capital?
Turo’s first quarter
In 2022, Turo’s revenue rose 59% to $746.6 million compared to $469 million in 2021. But that increase in revenue also came with higher spending, with operations and support expenses rising 92%, product development costs climbing by 66%, and sales and marketing costs increasing by 111% to $111.3 million in the year.
Still, the company enjoyed a 5% operating margin and an even better bottom line. It was a good year for Turo, which saw revenues stuck between $140 million and $150 million in 2019 and 2020. But there was an explosion in consumer demand for mobility options after COVID waned, and Turo’s revenues soared as a result.
With all that in hand, how did the company perform in Q1 2023? All the data below is compared to year-ago comparable results (Q1 2022):
- Revenue rose 30% to $186.2 million.
- Operating costs (costs of revenue inclusive) grew 42% to $197.6 million.
- Turo swung to an operating loss of $11.4 million from an operating profit of $3.9 million last year.
- Net loss widened to $23.9 million from a loss of $7 million a year earlier.
If Turo was profitable in 2022, why did it post a net loss in the first quarter of that year? Simple: Its full-year results were better than the path its first-quarter numbers indicated the company was on. For enterprise software businesses, nearly every quarter will see revenue rising compared to the previous quarter, and for a consumer-facing platform where Turo plays the middle person, the results are going to be more varied.
For example, the company’s revenues rose to $190.2 million in Q2 2022 from $142.9 million in Q1 2022. Then they shot higher in Q3 2022 to $226.3 million, before falling to $187.3 million in the final quarter of the year. The first quarter is sometimes Turo’s slowest of its year.
That fact alone makes the company’s recent results a bit harder to digest. We are not looking at Turo at its most winsome; instead, we’re observing a company coming off a hot year and dealing with its annual doldrums. This makes it a bit harder to answer our question here: “Is this company ready to kick open the IPO window?”
On one hand:
- Turo is large and has a history of profitability.
- The public is not going back to a return to isolation, implying stable future demand for Turo’s service at the least.
- Some car prices are finally falling, which could be helping the company cultivate a greater supply base for customer rentals.
And, on the other:
- Turo’s unprofitability in Q1 2023 is not simply a case of seasonality affecting the business. The company’s gross margins improved from early 2019 through Q2 2022, but they have worsened since then. Investors could be concerned about the pricing power of Turo’s marketplace.
- That lower gross margin figure could make it much harder to float Turo at a valuation that its backers would be happy to support.
What’s nice is that Turo has lots of cash and an untapped (and expandable!) credit line. It is not in any danger of running low on operating resources, which means it can go public when it wants to.
Sadly, I doubt that Turo will want to do an IPO on the back of its less-profitable Q1 numbers. The company will likely want to wait until it can show something more impressive like its Q2 or Q3 data, which, if history holds up, will detail far better revenue and profitability.
So, no, I doubt that Turo will be racing out the door, ready to change the tenor of the IPO conversation. Perhaps in a quarter or two? Maybe. The better its Q2 results, the greater the chances that Turo heads into the melee.
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