1. Zipcar, Inc.
Executive Brief and Research Report
Green Wheels Mobility Solutions
http://www.GreenWheels.US
New York, NY and San Francisco, CA
Copyright December 2012 (1st
Edition: March 2011)
Our Research Report and Executive Brief is for investors in Zipcar and firms that require insight on self-service,
on-demand, hourly car rentals, and car sharing. Green Wheels Mobility Solutions is an independent consultant
that covers the alternative transportation industry. The Report contains a small sample of our research and data.
We’ve never been employed by Zipcar or its competitors and have no affiliation with a broker/dealer, media firm,
or investment advisor. This publication should not in any way be construed as an offer to buy or sell securities.
Zipcar (“ZIP”) is traded on Nasdaq; its IPO was underwritten by brokers that are listed at the bottom of this page.
The prospectus for Zipcar’s IPO of common shares, dated April 14, 2011, is available at the web link:
http://www.SEC.gov/Archives/edgar/data/1131457/000119312511091283/ds1a.htm
Table of Contents Page
Executive Summary: “The Top 10” Questions that Investors and Firms should have about Zipcar 2
About the Author; Investment Thesis for Zipcar; other Self-Service Car, aka Car Sharing Operators 3
Quarterly Analysis of P&L and “Adjusted EBITDA” for Fiscal Year 2012, 2011, and 2010 4
Business Models for Self-Service Cars: “Car Sharing 1.0” versus “Car Sharing 2.0” (and version “3.0”) 5
Zipcar’s Fifteen (15) Metro/City Markets in the US, CAN, and UK: Capsule Summaries, by City 6
Boston Metro’s Demos, Population, Density & Fleets: 16 Neighborhoods of BOS, and 10 Adjacent Towns 7
Actual and Pro Forma Results, and “Adjusted EBITDA”, for FYE 2007 through FYE 2011 (and 2012) 8
Zip’s Revenue and Profits in the Four (4) “Established Markets” (the NYC, BOS, DC, and SF Metro areas) 9
Zipcar Vehicle Financing (“ZVF”); Fleet Composition; and Revenue per Vehicle, per Day (Usage) 10
Zip’s “30 Makes and Models”: An Analysis of Car Preferences in 3 Zipcar-cities (POR, BOS, and NYC) 11
Manhattan Island, New York: Analysis of Locations, Fleets, and Car Models: Zip’s “Distribution” 12
Revenue Analysis; Competitive Threats from “The Big 4” RaCs; Car Makers; Non-profits; Cooperatives 13
Zipcar at “Big 10” and “Pac 10” Schools & Other Colleges; Social Networks; Car vs. Ride Sharing 14
Peer-to-Peer Car Sharing; “Wheelz”; “Fast Fleet”; Marketing; Zip’s Management Team and Firm Culture 15
M&A: “Streetcar” (LON); “Flexcar” (SEA); “Avancar” (Barcelona); “DenzelDrive” (Vienna); Targets 16
Zip’s Valuation: a Rental Car (like “DTG” ) - or eCommerce (like “OPEN”)?; Zip’s Franchise Opportunities 17
2009 P&L for 3 Nonprofits in SF, CHI & PHI. ZIP was valued by some @ 5X. What are they worth? 18
Zipcar’s Balance Sheets at September 30, 2012; December 31, 2011; and December 31, 2008 thru 2010 19
“A Modest Proposal”. Zip (USA) vs. “Mobility” (SWI): a “Corporate” car club vs. a “Cooperative” 20
Goldman, Sachs & Co. J.P. Morgan & Co.
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2. Cowen & Company Needham & Company Oppenheimer & Co.
Zipcar, Inc.
Green Wheels Mobility Solutions
Executive Summary: “The Top 10” Questions for Investors in Zipcar
David Letterman’s # 1 of The Top 10 Reasons you own a car in New York: “You can, from blocks away, hear
the sound of a car door slamming and tell whether it’s empty, or people are in it.” Residents will get the joke.
Car owners use free “alternate side of the street parking” or pay $500 a month, or $15 an hour, for a
garage.
Zipcar has 778,000 members (~ 150,000 are active “users”) and 10,000 vehicles in the US, CAN, UK, and EU.
Total revenue per member of $375 a year implies an average vehicle usage of 2 hours a month, or 4 days a year.
Fees for membership, $0 deductible insurance, and penalties were 16% of revenue in FY 2012 (7% in FY 2007).
Zipcar is approaching saturation in areas of its 5 established cities where “Hipsters” (possible “Zipsters”) reside.
Our Modest Proposal is for Zipcar to a convert to a CoOp: we see Car Sharing 1.0 as a “not-for-profit business”.
“Mobility” (of Switzerland) has 100,000 members and “owners”; and 2,600 cars in 500 towns. It makes money.
Zip (post-buyout) of “Streetcar” has 1,500 cars in densely-populated boros of London. In the UK it loses money.
(1) Save its rate hikes and new fees, can Zip grow profits; get scale in new cities; and expand its demographic reach?
“NO for 3”. 2011 FYE: Revenue; Adj. EBITDA; GAAP Profit (Loss): $242MM; $11MM; ($7MM). Q3 2012: $78MM; $7MM; $4MM.
(2) What do the big US Rent-a-Cars (RaCs) offer in self-service, on-demand, hourly car rentals, aka “car sharing”?
“HertzOnDemand” (NYC; BOS; DC; 4 cities in EU; colleges); Enterprise’s “WeCar” (NYC; PHI; colleges); “AvisOnDemand” (Paris).
(3) Zip’s IPO (4/14/11) priced at $18 (market cap of $800MM, or 3X revenue); opened at $30; and hit $6 on 11/7/12.
Zip used a peer group of eCommerce stocks for valuations; the IPO was hyped; flipping and shorting was heavy; and “reality” settled-in.
(4) Can Zipcar generate hyper-growth from “Streetcar” (of London) and use it as a base for a European expansion?
NO. Population-density of Inner LON (3.1MM residents) is 1/3rd of Manhattan, NYC (1.6MM residents). “CoOps” dominate in the EU.
(5) 75% of US revenue is NYC, BOS, DC & SF: 50 US cities have a “major” sports team. Just 10 have 100+ Zipcars.
Zip exited LA in 2007, due to low population-density: the catalyst to a reentry in 2010 (20 cars in Hollywood) was free on-street parking.
(6) Will US cities, like their counterparts in Europe, develop “EV” car sharing programs, as a tie-in to mass transit?
“Car2Go” uses EVs in San Diego. “AutoLib” in Paris was copied by Amsterdam and more cities in the EU, e.g. London will follow suit.
(7) European car makers launched car sharing programs in the US and Europe. What are the US car makers doing?
GM invested in and partnered with “RelayRides”; Ford is Zip’s partner for colleges; Daimler offers “Car2Go”; and BMW “Drive-Now”.
(8) Can Zip put the 50 Nonprofits/CoOps that operate car sharing in North America “OB”, aka, “Out of Business”?
NO. Zip copied the business model of EU-based CoOps. Three (3) NGOs in SF, CHI, and PHI had combined 2009 Revenue of $20MM.
(9) What is Zipcar’s C-level team’s approach to Management (and Leadership); and what is the company’s culture?
Zip’s CEO and COO are “process-oriented Managers”. During their ten (10) year tenure Zip has had 4 CMOs, plus 2 VPs of Marketing.
(10) What is Zipcar doing in the “on-college-campus” markets - and with social networking and media platforms?
Outside its cities Zip has 700 cars at 175 schools (200 are at 10 schools). Hertz, Enterprise, Uhaul and NGOs have a total of 125 schools.
(11) Should institutional (and individual) investors value ZIP as a rental car stock? Or as eCommerce, like OPEN?
ZIPcar is a tiny, regional, hourly “RaC” with in-car technology, web-based reservations, and some “apps”. Some say that is eCommerce.
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3. Green Wheels Mobility Solutions (http://www.GreenWheels.US) conducts independent research on car clubs.
We’ve not been employed by Zipcar or its competitors; and aren’t affiliated with a broker/dealer; media outlet;
or investment advisor. Our research is supported by the analysis of financial, statistical, and anecdotal evidence.
Zipcar, Inc.
Executive Brief & Research Report
Green Wheels Mobility Solutions
http://www.GreenWheels.US
About the Author
Mark Shurtleff is an independent Consultant and acknowledged Expert on the self-service car industry.
His insight stems from his research and development of a platform that aimed to compete with Zipcar.
Mark now offers the research to institutional investors and other firms. Previously, he advised financial
and strategic buyers about a buyout of Zip. Mark gathers and analyzes data for car clubs’ operations on
a global basis; fleets; demographics; technology; and marketing. This approach enables Mark to act as
Zipcar’s shadow CEO. Prior to the IPO he valued ZIP at $5 a share; his 12 month price target was $10.
Our Report contains statistics, anecdotes, and opinions on a global industry’s past, present, and future.
Previously, for 15 years Mark worked in equity research sales for Standard & Poor’s and Value Line;
and finance for Salomon Brothers in New York. He earned a BA in Economics from Rutgers College.
Investment Thesis
Zip’s pre-tax profit in 2012 was $3MM (net loss in 2011 was $7MM) - 12 years after its founding; and
its buyout of 2 competitors. Management asserts that with time and money it will reach scale; it quotes
a consulting firm’s estimates for the market: “In 2009, car sharing was $253MM in North America and
$297MM in Europe; for 2016 we project $3.3B and $3.5B; and $4B in Asia.” My estimate for 2020 is
$3B (not $11B). Zip claims that $11B is attainable by 2020 and it has 100 metros as targets: the reality
is that local clubs now serve residents of the cities’ neighborhoods that have the key drivers to success:
high population-density, education, and income; mass transit; and use by small businesses. New clubs
are government-sponsored EV-systems and auto-OEMs’ programs, which by nature are not-for-profit.
As are RaCs’ clubs. Just five (5) EU-cities have populations of 2MM+ (London, Paris, Berlin, Rome,
Madrid). 5 of 15 cities with 1 to 2MM are in East Europe: Zip bought Vienna’s 100-car club in 2012.
Zip has 8,000 cars in the US: 75% are in 4 metros. It has cars in 12 other US cities, plus 500 cars are in
Toronto and 1,500 in London. The fleet for car sharing operators, globally, is 50,000: Dollar/Thrifty,
the smallest US RaC, has 100,000 cars in the US. Zip, “Flexcar”, and “Streetcar” (combined) raised
$170MM from VCs and Angels; Zip’s IPO raised $112MM. Zip’s Deficit is $58MM (net of a $10MM
benefit in 2012): including the tax benie, and Street’s and Flex’s losses, the cumulative loss is $130MM.
Our valuation of Zipcar at the IPO was $6 (Fair Value = Book Value), or 1X projected 2012 Revenue:
ZIP priced at $18; opened at $30; and hit $6 in late-2012. I was right. Sell-side Analysts were wrong.
Avis bid $1.5B (1X revenue) for a profitable DTG while most Analysts valued ZIP (a tiny RaC) at 5X.
Vis a’ vis comparisons between ZIPcar and “OPENtable”, OPEN owns NO restaurants (or cars); rents
NO tables (or garages); NOR does it insure diners (or drivers). Zip’s niche is well-educated consumers
located in high-population-density areas of some US/Global cities: ZIPcar is a tiny hourly Rent-a-Car.
Self-Service Car Operators: Cars, Parking, Insurance, Gas, Maintenance, and Technology
Hertz, Enterprise, Avis, Sixt, and EuropCar have invested in, or partnered with, car clubs for 15 years.
Car Makers; Dealers; Garage Owners; Governments; Nonprofits; and Coops have, as well. Zip did not
invent the business model. “Zipsters” get 180 miles of Gas with a booking and handle refueling; street
crews clean the cars; penalties/fees exist for smoking, pets, and late-returns. Maintenance was covered
by GE’s leases, but Zip now uses an ABS facility. Members book cars on-line or via phone. Pick-up is
at a Garage or on-street space with RFID card or Smart Phone; Drop-off is at the same location: 1-way,
due to logistics, isn’t feasible. Pricing for each hour (or day) varies by city; day of the week; and car
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4. model. Cars are added with membership-growth and usage, but obtaining a car on many Weekends is
a challenge. Acquisition of Parking by Zip in the right Place at the right Price is an issue. To secure a
rental, members use multiple “pods” (aka points of departure), e.g., Portland has 230 cars in 170 pods.
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