RVeloCITY Starts U.S. IPO Effort (RVGO)

A Quick Take On RVeloCITY

RVeloCITY, Inc. (RVGO) has filed to raise an undisclosed amount in an IPO of its Class A common stock, according to an S-1 registration statement.

The firm is operating an RV rental marketplace for connecting RV owners with renters.

RVGO’s direct-to-consumer approach is also difficult to do well and the company doesn’t have a history of even making a gross profit.

When we learn more about the IPO, I’ll provide a final opinion.

RVeloCITY Overview

Phoenix, Arizona-based RVeloCITY, Inc. was founded to develop a peer-to-peer platform connecting RV hosts with guests, similar to what Airbnb does for stationary lodging.

Management is headed by Chairman and CEO Paul Kacir, who has been with the firm 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 primary offerings include:

• Listing platform

• Fleet calendar

• Customer and fleet management tools

• Added value services

As of August 31, 2022, RVeloCITY has booked fair market value investment 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 via online organic marketing efforts and major mobile app platforms.

The firm makes money from selling protection plan services for 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 as revenues have increased, as the figures below indicate:

Sales and Marketing	Expenses vs. Revenue
Period	Percentage
Nine Mos. Ended August 31, 2022	554.6%
FYE November 30, 2021	386.0%
FYE November 30, 2020	590.8%

Click to enlarge

(Source – SEC)

The Sales and Marketing efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, fell to 0.0x in the most recent reporting period, as shown in the table below:

Sales and Marketing	Efficiency Rate
Period	Multiple
Nine Mos. Ended August 31, 2022	0.0
FYE November 30, 2021	0.2

Click to enlarge

(Source – SEC)

RVeloCITY’s Market & Competition

According to a 2022 market research report by Global Market Insights, the U.S. market for recreational vehicles (as a proxy for the company’s potential market) was an estimated $70 billion in 2021 and is forecast to reach $136 billion by 2028.

This represents a forecast CAGR of more than 10% from 2022 to 2028.

The main drivers for this expected growth are growing demand for outdoor recreation, including camping, tourism and sporting activities.

Also, the chart below shows the forecast breakdown of major RV categories through 2028:

Major competitive or other industry participants include:

RVeloCITY, Inc. Financial Performance

The company’s recent financial results can be summarized as follows:

• A sharp drop in top-line revenue growth

• Increasing gross loss and negative gross margin

• Growing operating losses

• Increasing cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Nine Mos. Ended August 31, 2022	$ 313,690	7.6%
FYE November 30, 2021	$ 338,967	153.0%
FYE November 30, 2020	$ 133,983
Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Nine Mos. Ended August 31, 2022	$ (220,889)	4226.9%
FYE November 30, 2021	$ (76,138)	672.3%
FYE November 30, 2020	$ (9,858)
Gross Margin
Period	Gross Margin
Nine Mos. Ended August 31, 2022	-70.42%
FYE November 30, 2021	-22.46%
FYE November 30, 2020	-7.36%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Nine Mos. Ended August 31, 2022	$ (6,356,896)	-2026.5%
FYE November 30, 2021	$ (3,541,997)	-1044.9%
FYE November 30, 2020	$ (2,678,099)	-1998.8%
Net Income (Loss)
Period	Net Income (Loss)	Net Margin
Nine Mos. Ended August 31, 2022	$ (6,377,124)	-2032.9%
FYE November 30, 2021	$ (3,429,834)	-1093.4%
FYE November 30, 2020	$ (2,705,811)	-862.6%
Cash Flow From Operations
Period	Cash Flow From Operations
Nine Mos. Ended August 31, 2022	$ (3,279,143)
FYE November 30, 2021	$ (2,152,165)
FYE November 30, 2020	$ (1,553,116)
(Glossary Of Terms)

Click to enlarge

(Source – SEC)

As of August 31, 2022, RVeloCITY had $339,707 in cash and $4.6 million in total liabilities.

Free cash flow during 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 stockholders 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 firms with multiple classes of stock into its index.

The company is also seeking to register shares held by selling shareholders for potential resale after the IPO.

No existing shareholders have indicated an 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 from this offering for repayment of all of the Bridge Notes and for working capital and general corporate purposes, which could include, without limitation, expenditures for research and development, sales and marketing activities, recruiting and retaining employees, funding future strategic transactions and other business opportunities, and other corporate expenditures.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management said the firm is involved in various routine legal proceedings but that 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.

Commentary About RVeloCITY’s IPO

RVGO is seeking U.S. public capital market investment to pay down debt and for its general corporate working capital needs.

The company’s financials have generated sharply lower top-line revenue growth, growing gross loss and negative gross margin, increasing operating losses and higher 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 have remained very high as revenue has fluctuated; its Sales and Marketing efficiency multiple fell to 0.0x in the most recent reporting period.

The firm currently plans to pay no dividends and to retain any future earnings for reinvestment back into the firm’s growth initiatives or working capital needs.

The market opportunity for providing RV-related services in the United States is large and the RV sale market is expected to continue to grow at a substantial rate in the coming years as many Baby Boomers enter retirement and the industry provides innovative solutions for consumers of all demographics.

Boustead Securities is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (70.8%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

Risks to the company’s outlook as a public company include its small size, thin capitalization, and sharply dropping revenue growth.

Its direct-to-consumer approach is also difficult to do well and the company doesn’t have a history of even making a gross profit.

When we learn more about the IPO, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.