Thursday, June 3, 2010

Cruising Around Zipcar's S-1

This week, the Zipcar car-sharing service filed an S-1 with the SEC, as it gets ready to sell shares to the public. While the service has pissed me off by taking up valuable parking spaces in the DC area, I appreciate the creativity behind the concept.

In my last post I mentioned how innovation was overrated in terms of economic development.   Well that's not entirely true.  A major innovation from Zipcar is that they have put photos of girls in bikini tops in the documents they filed with the SEC.   This has got to be one of the best things to happen to American business since Steve Jobs invented the Mac. a registration statement to sell financial securities.
Now, it took me quite awhile to recover from that unexpected surprise.  But I was able to actually take a look at the financial statements.   First thing is that their annual revenue is $133 million, more than the entire MARTA system in Atlanta, and a figure that's growing about 25% per year.   Many of their costs are fixed, so the additional revenue growth is improving margins, and their operating loss has dropped to 4% of revenue from 12% of revenue a year ago.    They should break-even within the next 12 months.

Overall membership is at 360,000, about half the daily ridership of the DC Metro, and has doubled over the last two years, though some of that came from the Flexcar acquisition.  Membership's currently growing at a 25% annual rate, a level at which it would take three years to double again.   Usage revenue per car, excuse me vehicle, has held around $50 per day throughout the company's history.   And here's the interesting part, though not as interesting as the bikini tops on page 3 of their filing - 98% of their cars are leased.   They can take advantage not only of the mass production of cars, but can adjust their fleet up and down based on demand.   This is one reason why this company is selling shares to the public, while transit systems are asking the public for more money.

The balance sheet looks fairly clean, with just $26 million of long-term debt.   There is some convertible preferred stock, but much of this is the VCs' investment, which means future shareholders can expect some dilution.   Nonetheless, this company will have a far easier time making interest payments than just about any transit system.    And I also doubt the MTA, WMATA, or MBTA will be putting pictures of bikinis in their financial statements anytime soon.

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