Research from Water Tower Research, Water Tower Research

Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Equity Bottom-Up

<h2>KEY POINTS</h2>
<div></div>
<ul>
<li>EVmo reported 1Q22 revenue of $2.5 million, up 7% from 2021.&nbsp;Revenue was flat from 4Q21 as delivery of new cars did not begin until early 2Q22. Net loss of $1.5 million improved from a loss of $4.4 million in 1Q21 due to a significant reduction of interest and financing costs as well as lower operating expenses. Complete results can be accessed&nbsp;<a href="https://finance.yahoo.com/news/evmo-reports-first-quarter-2022-144400934.html?.tsrc=rss" target="_blank" rel="noopener">here</a>.</li>
<li>New cars being deployed; company on track for a 2,000-car fleet by YE22.&nbsp;EVmo began receiving new cars from manufacturers in early 2Q as the pace accelerated. Management expects to receive 400+ cars per quarter for the remainder of 2022 and then see 25% growth in quarterly deliveries in 2023.</li>
<li>Balance sheet strengthened by January 2022 capital raise.&nbsp;Cash stood at $11 million as of March 31 and management reiterated that it could grow to its 2,000-car target through existing and in-place non-dilutive debt. Further, the company expects to be operationally break-even at 900 cars and be able to&nbsp;self-fund future growth at a 2,000-car fleet.</li>
<li>2022 guidance reaffirmed with 100%+ revenue growth expected in 2023.&nbsp;Management continues to forecast 2022 sales of $18.2-19.4 million, with gross margins of 36-40% before vehicle depreciation. In 2023, the company plans to target the addition 500 cars per quarter, which would generate more than $50 million in revenue, with $12.5 million in EBITDA.</li>
<li>EVs and hybrids are now 34% of the existing fleet.&nbsp;The evolution to an all EV/hybrid fleet of cars continues. In addition to the competitive and branding benefits, EVs can also be rented for higher rates and should have lower operating and maintenance expenses.</li>
<li>Demand for new cars remains strong.&nbsp;Utilization rates remain high, with average rental days up 8% from 1Q and more than 60% of drivers renting for 80 consecutive days. Moreover, EVmo has driver waiting lists for new cars as they arrive.</li>
</ul>
<h2>COMPANY OVERVIEW</h2>
<h2>The Opportunities</h2>
<p>EVmo is at an inflection point in its explosive growth curve as a leading player in the rideshare industry. 2021 and early 2022 have seen the pieces put in place to enable and support this ramp going forward: a new management team with extensive experience in the transportation sector, a strengthened balance sheet, improved vehicle financing partnerships, and OEM supply agreements that will enable the company to reach 2,000 vehicles in its fleet by YE22, up from ~650 at 1Q22.</p>
<h2>The Obstacles</h2>
<p>The company’s growth was limited in 2H21 and 1Q22 due to tightness in the US light-duty vehicle market as well as the need for management to put in place financial and operational improvements. EVmo needs to show continued fleet growth throughout 2022 as well as improving gross margins as it expands in both existing and new markets.</p>
<p>Please see our prior research on EVmo&nbsp;here.</p>
<h2>COMPANY OVERVIEW</h2>
<p>EVmo, Inc., is a leading provider of rental vehicles for use in the rideshare, delivery and logistics industries. The company empowers drivers to run their own businesses by bridging the gap between rideshare and "last mile" delivery drivers in need of suitable vehicles that meet the requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash, and Grubhub, also known as transportation network companies (TNC).</p>
<p>A new management team took the helm in mid-2021, led by fleet logistics veteran CEO Stephen Sanchez and Executive Chairman Terren Peizer, a successful and well-known investor and entrepreneur. 2021 and early 2022 saw the team take several actions to stabilize the company and position it for the future. These include securing new debt facilities to acquire vehicles, a $13.7 million equity raise in January 2022, and numerous hires and new processes implemented to improve vehicle utilization and maintenance efficiencies, as well as the overall user experience.</p>
<p>On March 31, 2022, EVmo announced plans to grow its fleet of cars to 2,000 vehicles by the end of 2022, up from ~600 vehicles at YE2021. It set 2022 revenue guidance of $18.2-19.4 million, an 80% increase from $10.2 million of revenue in 2021. Each additional vehicle should generate more than $21,000 in annual revenues, based on historical performance, which suggests that a 2,000-vehicle fleet would generate more than $40 million in annual revenues in 2023. Should inflation push rental rates higher, there is potential upside to that number.</p>
<h2>How It Works</h2>
<p>Drivers can rent vehicles from the company using its proprietary Rideshare Rental platform (via app or web) which allows drivers to check the available inventory of EVs, hybrids, or delivery vans, and then book and manage their rental. EVmo’s cars can be rented daily, weekly, or monthly, and drivers can tailor their rentals through the Rideshare Rental platform. Depending on the make and model, rental prices begin at $39 per day or $795 per month.</p>
<p>EVmo provides a solution for people who want to drive for one of the TNCs but either do not own a vehicle (or at least one that meets the TNC standards) or need a specific type of vehicle for the driving task (passenger pick-up vs food delivery vs package delivery). Unlike other rental options, EVmo drivers are not tied to one TNC, giving drivers the flexibility to work for Uber/Lyft, or Grubhub/DoorDash/InstaCart. The Rideshare Rental App also provides renters exclusive access to e-commerce delivery gigs.</p>
<p>EVmo fully controls and maintains the vehicles, including providing preventive and regular maintenance, advanced telematics diagnostics, and emergency road service. The company also offers drivers the necessary commercial insurance and, more importantly ensures that the vehicles are configured and guaranteed to be compliant with the standards set by the TNCs. All vehicles in the fleet are equipped with telematics and kill switches to monitor activity and minimize risk.</p>
<h2>The Market</h2>
<p>The ridesharing and delivery gig industries have seen explosive growth over the past years. Many of the leading investment banks and research firms are calling for rideshare growth to average more 10% a year between now and 2030, and for the industry to exceed $200 billion in revenues by 2030.</p>
<p>One of the challenges the ridesharing and delivery gig industries face is ensuring that driver growth keeps pace with the massive demand. The major TNCs have all talked about the challenges they are facing finding drivers to meet demand, and many have been instituting programs to entice new and former drivers to work on their platforms, such as cash bonuses and even covering the cost of renting cars.</p>
<h2>DISCLOSURES</h2>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Graham Mattison, who is the writer of this report, covers the Industrial Technology and ClimateTech &amp; Sustainable Investing sectors for WTR. Mr. Mattison and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY POINTS


EVmo reported 1Q22 revenue of $2.5 million, up 7% from 2021.&nbsp;Revenue was flat from 4Q21 as delivery of new cars did not begin until early 2Q22. Net loss of $1.5 million improved from a loss of $4.4 million in 1Q21 due to a significant reduction of interest and financing costs as well as lower operating expenses. Complete results can be accessed&nbsp;here.
New cars being deployed; company on track for a 2,000-car fleet by YE22.&nbsp;EVmo began receiving new cars from manufacturers in early 2Q as the pace accelerated. Management expects to receive 400+ cars per quarter for the remainder of 2022 and then see 25% growth in quarterly deliveries in 2023.
Balance sheet strengthened by January 2022 capital raise.&nbsp;Cash stood at $11 million as of March 31 and management reiterated that it could grow to its 2,000-car target through existing and in-place non-dilutive debt. Further, the company expects to be operationally break-even at 900 cars and be able to&nbsp;self-fund future growth at a 2,000-car fleet.
2022 guidance reaffirmed with 100%+ revenue growth expected in 2023.&nbsp;Management continues to forecast 2022 sales of $18.2-19.4 million, with gross margins of 36-40% before vehicle depreciation. In 2023, the company plans to target the addition 500 cars per quarter, which would generate more than $50 million in revenue, with $12.5 million in EBITDA.
EVs and hybrids are now 34% of the existing fleet.&nbsp;The evolution to an all EV/hybrid fleet of cars continues. In addition to the competitive and branding benefits, EVs can also be rented for higher rates and should have lower operating and maintenance expenses.
Demand for new cars remains strong.&nbsp;Utilization rates remain high, with average rental days up 8% from 1Q and more than 60% of drivers renting for 80 consecutive days. Moreover, EVmo has driver waiting lists for new cars as they arrive.

COMPANY OVERVIEW
The Opportunities
EVmo is at an inflection point in its explosive growth curve as a leading player in the rideshare industry. 2021 and early 2022 have seen the pieces put in place to enable and support this ramp going forward: a new management team with extensive experience in the transportation sector, a strengthened balance sheet, improved vehicle financing partnerships, and OEM supply agreements that will enable the company to reach 2,000 vehicles in its fleet by YE22, up from ~650 at 1Q22.
The Obstacles
The company’s growth was limited in 2H21 and 1Q22 due to tightness in the US light-duty vehicle market as well as the need for management to put in place financial and operational improvements. EVmo needs to show continued fleet growth throughout 2022 as well as improving gross margins as it expands in both existing and new markets.
Please see our prior research on EVmo&nbsp;here.
COMPANY OVERVIEW
EVmo, Inc., is a leading provider of rental vehicles for use in the rideshare, delivery and logistics industries. The company empowers drivers to run their own businesses by bridging the gap between rideshare and "last mile" delivery drivers in need of suitable vehicles that meet the requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash, and Grubhub, also known as transportation network companies (TNC).
A new management team took the helm in mid-2021, led by fleet logistics veteran CEO Stephen Sanchez and Executive Chairman Terren Peizer, a successful and well-known investor and entrepreneur. 2021 and early 2022 saw the team take several actions to stabilize the company and position it for the future. These include securing new debt facilities to acquire vehicles, a $13.7 million equity raise in January 2022, and numerous hires and new processes implemented to improve vehicle utilization and maintenance efficiencies, as well as the overall user experience.
On March 31, 2022, EVmo announced plans to grow its fleet of cars to 2,000 vehicles by the end of 2022, up from ~600 vehicles at YE2021. It set 2022 revenue guidance of $18.2-19.4 million, an 80% increase from $10.2 million of revenue in 2021. Each additional vehicle should generate more than $21,000 in annual revenues, based on historical performance, which suggests that a 2,000-vehicle fleet would generate more than $40 million in annual revenues in 2023. Should inflation push rental rates higher, there is potential upside to that number.
How It Works
Drivers can rent vehicles from the company using its proprietary Rideshare Rental platform (via app or web) which allows drivers to check the available inventory of EVs, hybrids, or delivery vans, and then book and manage their rental. EVmo’s cars can be rented daily, weekly, or monthly, and drivers can tailor their rentals through the Rideshare Rental platform. Depending on the make and model, rental prices begin at $39 per day or $795 per month.
EVmo provides a solution for people who want to drive for one of the TNCs but either do not own a vehicle (or at least one that meets the TNC standards) or need a specific type of vehicle for the driving task (passenger pick-up vs food delivery vs package delivery). Unlike other rental options, EVmo drivers are not tied to one TNC, giving drivers the flexibility to work for Uber/Lyft, or Grubhub/DoorDash/InstaCart. The Rideshare Rental App also provides renters exclusive access to e-commerce delivery gigs.
EVmo fully controls and maintains the vehicles, including providing preventive and regular maintenance, advanced telematics diagnostics, and emergency road service. The company also offers drivers the necessary commercial insurance and, more importantly ensures that the vehicles are configured and guaranteed to be compliant with the standards set by the TNCs. All vehicles in the fleet are equipped with telematics and kill switches to monitor activity and minimize risk.
The Market
The ridesharing and delivery gig industries have seen explosive growth over the past years. Many of the leading investment banks and research firms are calling for rideshare growth to average more 10% a year between now and 2030, and for the industry to exceed $200 billion in revenues by 2030.
One of the challenges the ridesharing and delivery gig industries face is ensuring that driver growth keeps pace with the massive demand. The major TNCs have all talked about the challenges they are facing finding drivers to meet demand, and many have been instituting programs to entice new and former drivers to work on their platforms, such as cash bonuses and even covering the cost of renting cars.
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Graham Mattison, who is the writer of this report, covers the Industrial Technology and ClimateTech &amp; Sustainable Investing sectors for WTR. Mr. Mattison and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.  WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.  The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Company at an Inflection Point as the Pace of New Cars Accelerates; 2022 Guidance Reaffirmed