In the current subscription economy (where everything from movie and music streaming to accommodation are available in the subscription model), even transportation services are joining the bandwagon. Car subscription services are becoming widely embraced especially among the younger demographic (aged 18-24), in which 69% of them would rather enjoy the benefit of having a car that includes insurance, maintenance and roadside assistance for one flat weekly fee without having to deal with maintenance, repairs, or the notoriously expensive rego renewal!
Carly (ASX: CL8), sees endless possibilities in this growing sector. With changing living conditions and a greater desire for flexibility, people are shifting their preference from traditional long-term car financing to more adaptable subscription options, which translated into a boost in the Company’s subscription revenue in the June quarter by 83% to $212k in the previous corresponding period (pcp). This was a 12% rise compared to $189k subscription revenue obtained in the March quarter.
Carly has implemented several cost saving measures which have resulted in a 14% reduction in cash consumption compared to pcp. The Company possessed 212 vehicles at the end of the June 2023 Quarter, which was an increase of 285% within a year.
The strategy to increase the number of owned and financed vehicles is hoped to deliver higher contributions than asset-light vehicles (vehicles not owned by the Company) as Carly is able to hold bigger control and allocation of the asset along with the capital invested in it, ultimately delivering a proportionally higher share of revenue. Owned and financed vehicles comprised 66% of the fleet at June 2023, compared to 56% at the end of March 2023.
However, Carly is still actively collaborating with asset-light vehicle providers to balance out the heavy assets associated with ongoing expansion of their fleet during different market supply situations. Recent additions to the asset-light fleet include the Ioniq 5 and Ioniq 6 electric vehicles provided by Hyundai Australia.
In March 2023, Carly successfully closed its largest ever asset finance facility, with iPartners providing up to $10 million of vehicle financing, which if fully drawn down, would enable the purchase of up to 450 vehicles and would generate approximately $4.7m in annual revenue at 87% utilisation. Carly has made several drawdowns amounting to a total of $2.2m as of the end of June quarter to add further 66 vehicles, with the majority of these vehicles being delivered towards the end the quarter.
Despite these new vehicles needing some time to be subscribed out and contribute towards revenues, Carly successfully decreased its Subscription Vehicle Utilisation rate from 88% in the March 2023 quarter to 84%, just below its target rate of 85%.
Carly recently completed a $1.6m capital raise at an issue price of $0.025 per share.
Subsequently, the iPartners facility loan-to-value ratio (LVR) improved from 80% to 90%, further supporting the vehicle growth strategy in FY 2024 with reduced equity capital requirements.
At the end of the June 2023 Quarter, the Company maintained a cash balance of $1.66m, an increase of $701k from the March 2023 Quarter.
Launched around four years ago, Carly is currently the only ASX-listed company operating a car subscription business. The Company caters to the needs of 38% of Australians who would consider car subscription rather than traditional car ownership models.
Clara is a Business Reporter for The Sentiment.
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