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A quick overview of RVeloCITY
RVeloCITY, Inc. (RGBO) has applied to raise an undisclosed amount in connection with an IPO of its Class A common stock, according to an S-1 registration statement.
The company operates a RV rental marketplace to connect RV owners with renters.
RVGO’s direct-to-consumer approach is also difficult to do well, and the company isn’t even used to making a gross profit.
When we know more about the IPO, I will give a final opinion.
Introducing RVeloCITY
RVeloCITY, Inc., based in Phoenix, Arizona, was founded to develop a peer-to-peer platform connecting RV hosts to guests, similar to what Airbnb does for stationary lodging.
Management is led by Chairman and CEO Paul Kacir, who has been with the company since its inception in 2015 and was previously Vice President and General Counsel of First Solar and held a similar position at Creo, Inc.
The company’s main offerings include:
-
Quotation platform
-
Fleet Calendar
-
Customer and fleet management tools
-
Value-added services
As of August 31, 2022, RVeloCITY has recorded an investment at fair market value of $15.1 million from investors including Philomena Investments, SAKPE Holdings and various individuals.
RVeloCITY – Customer Acquisition
The company drives traffic to its website and mobile app through organic marketing efforts online and major mobile app platforms.
The company makes money by selling protection plan services in the event of cancellation by the guest or host or non-delivery of the RV by the host.
Sales and marketing expenses as a percentage of total revenue have remained very high while revenue has increased, as shown in the numbers below:
|
Sales and Marketing |
Expenses vs income |
|
Period |
Percentage |
|
Nine Mos. Completed August 31, 2022 |
554.6% |
|
AF November 30, 2021 |
386.0% |
|
AF November 30, 2020 |
590.8% |
(Source – SEC)
The sales and marketing effectiveness multiple, defined as the number of incremental new revenue dollars generated by each dollar spent on sales and marketing, fell to 0.0x during the most recent reporting period, as shown in the table below:
|
Sales and Marketing |
Efficiency rate |
|
Period |
Many |
|
Nine Mos. Completed August 31, 2022 |
0.0 |
|
AF November 30, 2021 |
0.2 |
(Source – SEC)
RVeloCITY market and competition
According to a 2022 market research report by Global Market Insights, the US recreational vehicle market (as an indicator of the company’s potential market) was estimated at $70 billion in 2021 and is expected to reach $136 billion by 2028.
This represents a projected CAGR of over 10% from 2022 to 2028.
The main drivers of this projected growth are the growing demand for outdoor recreation, including camping, tourism and sports activities.
Additionally, the table below shows the projected distribution of major RV categories through 2028:
Recreational vehicle market (Global Market Snapshots)
Major competitors or other industry participants include:
Financial Performance of RVeloCITY, Inc.
The company’s recent financial results can be summarized as follows:
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A sharp decline in revenue growth
-
Increase in gross loss and negative gross margin
-
Growing operating losses
-
Increase in cash used in operations
Below are the relevant financial results from the company’s registration statement:
|
Total income |
||
|
Period |
Total income |
% deviation from before |
|
Nine Mos. Completed August 31, 2022 |
$313,690 |
7.6% |
|
AF November 30, 2021 |
$338,967 |
153.0% |
|
AF November 30, 2020 |
$133,983 |
|
|
Gross profit (loss) |
||
|
Period |
Gross profit (loss) |
% deviation from before |
|
Nine Mos. Completed August 31, 2022 |
($220,889) |
4226.9% |
|
AF November 30, 2021 |
($76,138) |
672.3% |
|
AF November 30, 2020 |
($9,858) |
|
|
Gross margin |
||
|
Period |
Gross margin |
|
|
Nine Mos. Completed August 31, 2022 |
-70.42% |
|
|
AF November 30, 2021 |
-22.46% |
|
|
AF November 30, 2020 |
-7.36% |
|
|
Operating profit (loss) |
||
|
Period |
Operating profit (loss) |
Operating margin |
|
Nine Mos. Completed August 31, 2022 |
$(6,356,896) |
-2026.5% |
|
AF November 30, 2021 |
($3,541,997) |
-1044.9% |
|
AF November 30, 2020 |
$(2,678,099) |
-1998.8% |
|
Net profit (net loss) |
||
|
Period |
Net profit (net loss) |
The net margin |
|
Nine Mos. Completed August 31, 2022 |
$(6,377,124) |
-2032.9% |
|
AF November 30, 2021 |
($3,429,834) |
-1093.4% |
|
AF November 30, 2020 |
($2,705,811) |
-862.6% |
|
Operating cash flow |
||
|
Period |
Operating cash flow |
|
|
Nine Mos. Completed August 31, 2022 |
($3,279,143) |
|
|
AF November 30, 2021 |
$(2,152,165) |
|
|
AF November 30, 2020 |
$(1,553,116) |
|
(Source – SEC)
As of August 31, 2022, RVeloCITY had $339,707 in cash and $4.6 million in total liabilities.
Free cash flow for the twelve months ended August 31, 2022 was negative ($4.1 million).
RVeloCITY, Inc. IPO Details
RVeloCITY intends to raise an undisclosed amount in gross proceeds from an IPO of its Class A common stock.
Class A common shareholders will be entitled to one vote per share, and Class B shareholders will receive ten votes per share.
The S&P 500 index no longer admits companies with multiple classes of shares in its index.
The company is also seeking to register shares held by selling shareholders for possible resale after the IPO.
No existing shareholders have expressed interest in purchasing shares at the IPO price.
Management says it will use the net proceeds from the IPO as follows:
We intend to use the net proceeds of this offering for reimbursement of all relay tickets and for working capital and general corporate purposes, which may include, but is not limited to, expenses research and development, sales and marketing activities, employee recruitment and retention, funding of future strategic transactions and other business opportunities, and other corporate expenses.
(Source – SEC)
The presentation by management of the company’s roadshow is not available.
Regarding ongoing legal proceedings, management said the company is involved in various routine legal proceedings, but the outcome is “not reasonably likely to have a material adverse effect” on its operations or financial condition.
The sole listed bookrunner of the IPO is Boustead Securities.
RVeloCITY IPO Commentary
RVGO seeks investment in the US public capital market to service debt and for general corporate working capital needs.
The company’s financials generated significantly lower revenue growth, increasing gross loss and negative gross margin, increased operating losses, and increased cash used in operations.
Free cash flow for the twelve months ended August 31, 2022 was negative ($4.1 million).
Sales and marketing expenses as a percentage of total revenue remained very high as revenue fluctuated; its sales and marketing effectiveness multiple fell to 0.0x in the last reporting period.
The company currently plans to pay no dividends and retain all future earnings to reinvest in the company’s growth initiatives or working capital needs.
The market opportunity for the provision of RV-related services in the United States is significant and the market for RV sales is expected to continue to grow at a substantial rate in the coming years as many baby boomers retire and the industry offers innovative solutions for consumers of all. demography.
Boustead Securities is the largest underwriter and IPOs conducted by the company over the past 12 months have generated a negative average return (70.8%) since their IPO. This is an underperformance for all major underwriters over the period.
Risks to the company’s prospects as a public company include its small size, small capitalization and sharp decline in revenue growth.
Its direct-to-consumer approach is also difficult to do well, and the company isn’t even used to making a gross profit.
When we know more about the IPO, I will give a final opinion.
Expected IPO pricing date: to be announced.
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