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

<h3>KEY POINTS</h3>
<div></div>
<ul>
<li>Positive EBITDA milestone moves EVmo to the next stage in its evolution and growth ramp.&nbsp;We see 3Q EBITDA as a validation of the operating leverage in the business model and a reflection of the focus on fleet efficiency and cost controls. We expect it should also help expand new vehicle financing options as most lenders focus on EBITDA metrics and recent results should put EVmo in a new category of borrower.</li>
<li>Record revenues and margins on continued execution.&nbsp;Revenues of $3.5 million were up 30% Y/Y, with gross margin, excluding vehicle depreciation, of 50% versus 36% in 3Q21. The results reflect rental fleet growth, its focus on fleet management, and the benefits of owning and controlling its fleet of vehicles.</li>
<li>Corporate partnerships open a new avenue for growth and geographic expansion.&nbsp;In 3Q22, EVmo began a partnership with Trek World USA and is working on additional partnerships with municipalities, universities, and companies. We expect these partnerships will help the company expand into new markets, strengthen the already high utilization metrics, and diversify its customer base.</li>
<li>2022 revenue outlook updated.&nbsp;EVmo now expects 2022 revenues of $13-15 million due to delays in vehicle deliveries related to the global supply chain and higher interest rates. However, management emphasized that the updated guidance reflects timing rather than changes in demand, noting renter activity remains high and its growth outlook is unchanged.</li>
<li>Cash stood at $4.3 million at 3Q22.&nbsp;EVmo added 384 new cars, or $9 million in leased vehicles. We do not expect the company to raise equity to fund future growth given its EBITDA generation, the collateral value of the cars, and its corporate partnerships.</li>
</ul>
<h2>OUR TAKE</h2>
<h2>The Opportunities</h2>
<p>EVmo is at an inflection point in its substantial growth curve as a leading player in the rideshare industry. Recent quarterly results highlight the leverage in the company’s business model and its fleet management operations expertise. With the corporate partnership with Trek World USA and new financing opportunities with positive EBITDA, we believe the company can accelerate its revenue and EBITDA growth into 2023 and beyond.</p>
<h2>The Obstacles</h2>
<p>Slower-than-expected vehicle growth in 2H22 is a function of market dynamics and cost discipline. EVmo needs to show further growth in its fleet, especially reaching ‘scale’ of 2,000 cars, which should deliver 25% EBITDA margins and cash flow generation to help fund more vehicles.</p>
<p>Please read our prior research reports on EVmo here or at&nbsp;www.watertowerresearch.com.</p>
<h3>DISCLOSURES</h3>
<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


Positive EBITDA milestone moves EVmo to the next stage in its evolution and growth ramp.&nbsp;We see 3Q EBITDA as a validation of the operating leverage in the business model and a reflection of the focus on fleet efficiency and cost controls. We expect it should also help expand new vehicle financing options as most lenders focus on EBITDA metrics and recent results should put EVmo in a new category of borrower.
Record revenues and margins on continued execution.&nbsp;Revenues of $3.5 million were up 30% Y/Y, with gross margin, excluding vehicle depreciation, of 50% versus 36% in 3Q21. The results reflect rental fleet growth, its focus on fleet management, and the benefits of owning and controlling its fleet of vehicles.
Corporate partnerships open a new avenue for growth and geographic expansion.&nbsp;In 3Q22, EVmo began a partnership with Trek World USA and is working on additional partnerships with municipalities, universities, and companies. We expect these partnerships will help the company expand into new markets, strengthen the already high utilization metrics, and diversify its customer base.
2022 revenue outlook updated.&nbsp;EVmo now expects 2022 revenues of $13-15 million due to delays in vehicle deliveries related to the global supply chain and higher interest rates. However, management emphasized that the updated guidance reflects timing rather than changes in demand, noting renter activity remains high and its growth outlook is unchanged.
Cash stood at $4.3 million at 3Q22.&nbsp;EVmo added 384 new cars, or $9 million in leased vehicles. We do not expect the company to raise equity to fund future growth given its EBITDA generation, the collateral value of the cars, and its corporate partnerships.

OUR TAKE
The Opportunities
EVmo is at an inflection point in its substantial growth curve as a leading player in the rideshare industry. Recent quarterly results highlight the leverage in the company’s business model and its fleet management operations expertise. With the corporate partnership with Trek World USA and new financing opportunities with positive EBITDA, we believe the company can accelerate its revenue and EBITDA growth into 2023 and beyond.
The Obstacles
Slower-than-expected vehicle growth in 2H22 is a function of market dynamics and cost discipline. EVmo needs to show further growth in its fleet, especially reaching ‘scale’ of 2,000 cars, which should deliver 25% EBITDA margins and cash flow generation to help fund more vehicles.
Please read our prior research reports on EVmo here or at&nbsp;www.watertowerresearch.com.
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.

Record 3Q Results; Positive EBITDA a Major Milestone with More Growth Ahead