Profitable car rental service Turo is still poised for an IPO, but its growth collapsed in 2023

Turo, the venture capitalist-backed peer-to-peer car rental service, reported its fourth quarter and full-year financial results in an updated IPO filing this week. The company initially filed an S-1 to go public in early 2022 and later updated the document quarterly in preparation for an eventual IPO. TechCrunch covers its regular financial disclosures as they shed light on when a well-funded startup with a historic billion-dollar valuation finally decides to pull the trigger and list its shares publicly.

In 2019, Turo raised a $250 million Series E led by IAC, which gave it a post-money valuation of $1.25 billion, according to PitchBook. Crunchbase estimates Turo's total funding to date at just under $500 million.

The company has deployed capital wisely, achieving rapid revenue growth since 2019, positive operating income since 2021 and net profit since 2022.

However, Turo's growth rate has slowed in recent years, making it difficult to estimate the timing of its IPO. The company wouldn't be filing regular S-1/A filings if a public offering wasn't a top priority – in fact, to my knowledge, no other venture capital firm is taking a similar approach, which is a shame – albeit with low technical ratings given their highs in the In 2021, finding the right time 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 startups with more than $1 billion in revenue are crowding the exits of private markets.

How has Turo performed in 2023?

Turo generated $879.8 million in revenue last year, up 18% year-over-year. The company's overall revenue is impressive, but its growth rate has declined dramatically over the past two years. In 2021, Turo's growth rebounded impressively from the pandemic-related issues of 2020, increasing 213% to $469 million this year. However, the triple-digit growth was short-lived for the car rental company, whose revenue growth slowed to 59% in 2022, posting total revenue of $746.6 million.

While Turo's year-over-year growth rate has slumped in recent years, the company has a small amount of good news for investors in its new filing. TechCrunch calculates that the growth rate in the third quarter of 2022 to the third quarter of 2023 was 13.6%, while the fourth quarter to the fourth quarter growth over the same period was slightly stronger at 14.3%. While both numbers are below the full-year growth rate, the fact that revenue growth actually accelerated slightly in the fourth quarter could help make the case to public market investors that the slowdown isn't necessarily irreversible.

Still, the 18% growth isn't so low that Turo can't go public, especially because the company is profitable, although it may raise investor concerns about declines. Gross margins changed slightly last year, declining from 54.3% in 2022 to 51.4% in 2023.

Due in part to this decline in gross margin, Turo's profitability in calendar year 2023 fell short of its 2022 results. The company last year reported its lowest operating profit since 2020 ($13.7 million, down from $46.6 million in 2021) and its lowest net income since 2021 ($15.6 million, down from $154, $7 million in 2022). Unadjusted earnings from tech companies approaching public markets are rare enough to make Turo stand out from the crowd. However, the question remains as to how much value potential public shareholders will add to the company's profitability as growth slows.

Why not go public now?

With net income, growth and revenue approaching $900 million, and a business model that remains in the black, Turo is by far big enough to go public and with a valuation of just over $1 billion dollar should have no difficulty surpassing its final private price.

So why not go public now? Perhaps the company is waiting for its growth to accelerate again, or simply for technology and technology-related revenue multiples to increase again so that it can raise even more cash with less dilution. Or perhaps the company is waiting until investor appetite for tech IPOs returns because it appears to be sustaining itself from the business.

There's reason to be cautious, even as the continually updated S-1 suggests it remains eager. One of its public companies, Getaround, has seen its value decline since it went public as part of a SPAC-led combination. (To be fair, many SPAC-led combinations haven't fared well.)

However, while we wait, there were a few other notable nuggets in Turo's updated S-1 that were worth mentioning:

• Electric vehicles: In its S-1/A filing for the third quarter of 2023, Turo wrote that “electric vehicles represented 8% of Turo vehicle offerings.” That number rose to 9% in the latest report, indicating that the share of electric vehicles on Turo's platform is increasing significantly.
• Slowing supply growth: In its S-1/A filing for the third quarter of 2023, Turo said it has “approximately 350,000 active vehicle listings.” [its] Platform, 16% more than last year.” In the most recent report, these numbers rose to 360,000 and 12%. More cars, slower growth.
• Rising Interest Income Impacts Turo's Adjusted EBITDA: Interest income at Turo has increased as interest rates have risen, 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 (Expenses) net, which also includes interest income. “Cash”, meaning that adjusted profitability was impacted due to the company's increasing interest-based income. To be clear, we have seen this with other companies.

As a reminder, Turo's largest investors 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 if the company decides to start its roadshow and price its shares.