Jayride is an Australian company which links airline travellers with airport transfers. They have a direct-to-consumer app, but the really interesting part is growing partnerships with large travel brands / OTCs who can embed the Jayride tech into their own offering.
The company claims that the TAM is 6.5 billion airport transfers each year, but that is the total number of airport passenger trips annually which seems like a gross overestimate of the likely market. The principal market is probably corporate travel, and perhaps package holiday deals.
The current market cap is about $44 million. The business is still substantially loss-making (approx. $2.6 million cash burn in FY21), but likes to focus on a ‘standstill EBITDA’ which is (Passenger Trips x Trip Revenue x Contribution Margin) – fixed costs. That is currently (73k x $7.5 x 42.6%) - $1.1m, or roughly $865k in the red.
The company also likes to promote “Contribution Profit” which is trip revenue minus all variable costs, including customer acquisition costs and variable operating costs like customer support. This is probably not a bad way to think about the benefits of (allegedly) static fixed costs and improving unit economics, but the emphasis is a bit promotional for my liking.
The pitch is really that there is a massive market, Jayride is well positioned with growing partner integrations and the numbers begin to look much better with scale as fixed costs won’t rise substantially. The business aims to achieve $10/trip net revenue and a 50% contribution margin (ie. $5 per trip) in the near term. Clearly, if they can get even 0.10% of the claimed TAM then this would be a far more valuable business (eg. $32.5m revenue vs. $760k commission currently). But there's a bit between here and there!
If we assume that the fixed costs don’t change at all (a generous assumption!) and the company gets a 20x EBITDA multiple in five years’ time, it would need to grow trips at >70% CAGR to double the market cap by then (that is, provide a 15% CAGR on an investment today). That seems like a very high bar, particularly granted the significant risk associated with ongoing Covid-19 restrictions on travel, the risk of competition for OTCs (eg. Booking.com and friends taking this in house) or from existing industry behemoths like Uber.
The company has just completed a $11m capital raising which gives it a bit more runway, but further dilution seems likely. There is always the risk that a substantially cash-burning business like this will find it difficult to fund continued growth if there is a general downturn. I don’t think this business has a place as a minnow – it’s either get big or die trying.
I don’t know what value I would put on the business, but current levels require assumptions that are a little too heroic to justify much more work for mine.
