Camplify: Why the AirBnb for Caravans has a long way to run 🚐
We take a closer look at the outlook for Camplify, a P2P marketplace that joined the ASX in June 2021.
Camplify is a business we’ve recently gotten to understand following their IPO on the ASX in June 2021. They are a peer-to-peer (P2P) marketplace for recreational vehicles (RVs) in Australia and a few European markets.
The company’s valuation and guidance upgrades is what got us interested, with the business only valued around $40m and (in the short window since the IPO) has twice upgraded both its transactional volume and revenue figures.
Digging into the fundamentals we found many things we like:
✅ Strong Product Market Fit: Clear customer love with excellent reviews on Trustpilot
✅ Big Market: RVs markets are a big part of tourism, and Camplify’s market share in Australia is 0.2%
✅ Attractive Unit economics: the business captures 15% of total marketplace value in underlying contribution margin
✅ High Growth: marketplace transactions and revenue both growing >100% year on year
✅ Insider ownership: founder Justin Hales owns 14% (with management an additional 6%)
Camplify is one of seven marketplace software companies in the Mopoke Cloud Index, which tracks 87 emerging technology leaders on the ASX. It is the smallest and fastest growing in its peer group.
Our View: Camplify will continue to take share of the RV rentals market from traditional players, create new rental demand from it’s P2P offering, be able to profitably serve that demand with supply of RV rentals, and establish new revenue streams over time.
What the market is missing: Underestimating 1) the size of the Australian RV market and Camplify’s shot at becoming a big global player, 2) their ability to grow underlying markets and product lines, and 3) their strong unit economics.
Key risks: product differentiation, the ability to balance supply and demand of the marketplace and ability to build critical mass in new European markets - either organically or through acquisitions.
Bull case: Camplify builds a global camping ecosystem with pricing power from dominating RV networks, becoming THE global RV brand and offering sticky complimentary products.
Bear case: European markets are not successful, market leadership in Australia is eroded by competition from global players, and an oversupply of RVs drives down pricing and subsequently Camplify’s margins.
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Overview: P2P RV marketplace
Camplify is a peer-to-peer digital marketplace connecting recreational vehicle (RV) Owners to Hirers that operates in Australia, New Zealand, the UK and Spain.
The business was founded in Newcastle in 2014 and has since set up an office in Lisbon, Portugal to service the UK and EU markets.
Camplify raised $10m on their path to IPO from the NRMA (accelerator program), Apollo Tourism (a small competitor) and Acorn Capital, and then raised another $11.5m at a $40m valuation in their IPO in June 2021.
No shareholders sold down in the IPO and they are using the cash to scale up marketing, product development and operations (✅).
Market: $8bn in Australia alone
Camplify operates in the RV market as an online peer-to-peer (P2P) platform that connects hirers and RV owners. RVs include both Caravans (90% of the Australian market) and Campervans (the other 10%).
The key demand driver for RV rental is the number of domestic and international tourists, and the key supplier driver is the number of quality RV owners on the platform.
RVs are a significantly underutilized asset:
RV owners only using their RVs on average 41 days per year so 90% of the time RVs are sitting idle, while they could be earning rental income
51% of RV owners sell their RVs due to low utilization or economic reasons
There is a clear value proposition for both sides of the RV marketplace - owners get extra cash/yield on an underutilized asset, and renters get the flexibility of only having the RV when they need it.
We also see strong growth in market from:
Consumer behavior: Millennials have led a camping boom in recent years favoring experiences over “things,” and the pandemic surge could prove to be a secular shift and accelerate demand
Rental preferences: P2P marketplaces can also expand their underlying markets by bringing greater pools of supply to the market to meet demand, for example in vacation rentals (Airbnb, Vrbo), second hand goods (Ebay) and personal lending (LendingClub, Wisr)
Reopening of Australia: hopefully by 2022/ 2023, international visitor demand will return as international visitors account for ⅓ of the Australian tourism industry
Pre-pandemic, Australia has historically been a big tourism market - punching well above its weight in total spend compared to other countries based on population size, although a lower share of that goes to the RV market than European markets.
What this means is that although Australia is a small market by population, it's actually a sizable RV market of $8bn annually - and slightly bigger than individual European markets.
Below is a table of global RV markets by size and where Camplify is currently active. RV spend is the total expenditure on RV trips (rental and owners).
Why this matters is that often global growth for Australian technology companies means growing to bigger addressable markets, but for Camplify - it already plays in a pretty big one and something we think the market under-appreciates and will support their ability to establish their global presence.
We think investors in the RV rental space need to then answer a few questions:
How big can RV rental demand become in these markets?
Can players capture enough demand from the overall market?
Can players match that demand with enough supply?
In Australia, there were 41 million nights spent at Caravan parks and 75% of these are expected to be owner RVs, meaning an existing rental market size of 10 million nights (or 3.4m RV rental trips)
With only 31k of these trips on Camplify today, they account for 0.9% of the RV rental market, and P2P networks can become a large share and expand underlying rental markets - AirBnb accounts for approximately 20% of the vacation rental industry
Their ability to differentiate will be critical to Camplify’s ability to continue to take rental share from traditional rental players and defend against other P2P competitors - it’s clear that they are thinking about this already with 150k RV members in their community (also hiring people to help build it) and a growing focus on value added services and memberships.
Australia is 90% of the business today and Camplify has grown to become a leading RV rental platform with one of the largest RV fleets in Australia (6.1k RVs), but still with very low share of the overall market of 741k RVs (0.8%)
To put that in perspective to AirBnb again, there are ~10m housing units in Australia and according to research from the State of Australian Cities, 4% of the Australian housing stock has been used as an Airbnb
Given the low utilization of RV assets and enough trust in the platform, we believe that the RVs on P2P marketplaces will grow to be a much bigger market than it is today and be able to match new and existing demand.
If Camplify can get to 2% share of the demand for total Australian RV trips over time (i.e. owner and rental market) - the business would be 10x bigger than it is today and would only need 12% of the Australian RV market supply to fulfill this demand. Gross Transaction Value (GTV) at this level would be $300m.
If they can do this in New Zealand and other markets that they are making headway into (Spain and the UK), this would take the GTV on Camplify to well above $1bn.
Product: transaction revenue and recurring memberships
Camplify’s product is an online platform that connects hirers and RV owners.
Demand side: RV hirers find the platform largely through organic and paid advertising and submit rental requests to RV owners (example listing here)
Supply side: RV owners list their underutilized RVs on the platform and turn them a new source of income (see how it works here)
Importantly, Camplify does not own or hold RV inventory or require physical retail outlets, but acts as an intermediary to connect RV Owners and Hirers.
Camplify generates revenue today from:
Hire revenue (~80% of revenue) – platform fees charged to both Hirers and Owners calculated as a percentage commission on bookings (typically 25%).
Premium memberships (~20% of revenue) – a monthly subscription fee for providing additional marketing services, reduced commissions, insurance and accident excess reduction. This grew to 2k members in FY21 with annual recurring revenue of $1.4m
The average RV rental transaction looks something like this:
Sally lists her RV on Camplify setting a price of $200 a night
Patrick goes to Camplify and books the RV for 5 nights
Camplify collects $1,000 from Patrick, takes a 25% cut ($250) and gives Sally $750
Camplify operates at 70% gross margins, so the gross profit on serving the P2P transaction is $175
People seem to like it.
From Camplify’s 68,470 onsite reviews, both Owners and Hirers have an overall average of 4.9 out of 5.
Similarly on Trustpilot, the business has 2,316 reviews with 79% of them being Great or Excellent.
Business Model: the flywheel of online classifieds
Camplify’s technology platform is a Ruby on Rails application with a React frontend (both modern technologies), hosted on Amazon Web Services and using a variety of embedded tools behind the scenes like Active Campaign, Freshworks and Sendgrid.
The app is available online and provides RV discovery, booking and payments, handover checklists and insurance facilitation, and they have 24/7 support offered by their services team.
The backbone of the business model is the network effects which are common in online classified businesses. These platforms are capital-light as the supply and demand is built by participants in the marketplace.
These business models can be highly scalable and dominant market leaders can end up with super high cash flow margins and significant moats. For example, REA group is mature online classifieds leader in Australian property and has 70% EBITDA margin and 35% free cash flow margins (!).
It’s important to note that not all online marketplaces are the same and some benefit more than others on localized network effects.
In the Mopoke Cloud Index - Carsales, iCar, Frontier Digital Ventures and Airtasker all benefit from their service matching buyers and sellers that are nearby (or in a certain geography) generally in the same product or service category, while others operate in a global market without these barriers to entry.
A remote worker can hop between Freelancer.com, Fiverr and UpWork with little friction and compete with other remote workers in those markets - this is much harder to do with local networks of specific verticals (like a used car network in Melbourne for Carsales, or a caravan to rent in Brisbane on the Camplify network).
For businesses that can build dominant local network effects, the benefits should show up in unit economics over time (on a market-by-market basis), drive higher organic growth, and support retention.
Outside of the core online classifieds rental model in different geographies, Camplify has shown their ability to execute on vertical integration and launch new products. This growth focus was highlighted in their FY21 results covering Product Innovation, Increased penetration and Revenue Expansion.
An example of this is Camplify recently adding RV sales to their business where they connect their audience with manufacturers to purchase RVs directly and delivered straight to them (instead of via a dealer). Similar to a business like SG Fleet - they then take a clip of every vehicle sold.
This has started to influence headline gross margin numbers, but is good for the business and aligns strongly with their broader mission of making van life accessible for all.
Unit Economics: 25% take rate & 15% contribution margins
Camplify’s unit economics are a make-up of booking revenue, the customer acquisition costs (CAC) of RVs and bookings, the ‘take rate’ of the transaction value and its cost to serve the transaction.
Booking revenue: RVs on the platform are required to fulfill demand, with the average booking of around $1,000 per trip.
CAC of RVs: Camplify acquires RVs on the platform at $100 per RV, and the average RV gets booked 6 times a year. This means that the average RV generates $6,000 a year, and the amortized costs of an RV for a single booking is $17 (assuming a one year life, so $100 divided by 6 bookings).
CAC of Bookings: Hirers on the platform drive demand and the business has been able to acquire new RV hirers at $5, who transact on average once every 2 years at the moment - so effectively $10 per booking.
Paid to RV Owner: From the $1,000 booking fee, the RV owners get 75% ($750) and Camplify gets 25% ($250)
Costs to Serve: based on 70% gross margins, the cost to manage the P2P transaction between RV owner and Hirer for Camplify is $75 (being 30% of $250)
Contribution margin: aggregating the above leaves the business with $148 per booking
The numbers are actually better than this as Camplify only needs to acquire the RV on the platform once (RVs can last 20 years) and currently 21% of hirers come back to the service.
Given the platform is relatively new - we'd expect this to trend higher over time because they are onboarding many new RV Hirers, and delivering a great experience as shown in their online reviews.
Go-to-Market: strong organic growth, with paid upside
Camplify has shown low customer acquisition costs for both RV Owners and Hirers, which has predominantly been driven by organic traffic that accounts for 44% of total visitors to their website.
Historically they have had about 300k visitors a month and the business added 24k RV hirers last year. This equates to a 1.5% conversion (this is good) and shows that people convert when they find the website.
Organic traffic can be much slower to scale up than paid advertising, as building an SEO presence takes months (often years), whereas dollars can be thrown into platforms like Adwords and Facebook for immediate return.
With such strong unit economics, the business has lots of room to be more aggressive in CAC and acquire more hirers on paid platforms.
Competition: players racing to build global brand
Camplify competes with two main groups - traditional RV rental and other competing P2P RV marketplaces.
With 6,161 RVs on its platform, Camplify has a larger fleet in Australia than the two largest RV rental companies operating in Australia combined:
Tourism Holdings (1,300 RVs), and
Apollo Tourism (1,400 RVs)
Tourism Holdings (THL.nzx) and Apollo Tourism (ATL.asx) are both publicly listed companies and both do rental and manufacturing of RVs.
A key part of the thesis on Camplify is that they will be able to grow total RV rental nights AND take share of RV rental nights from existing players.
Apollo Tourism reported in their 1H FY21 results that they continue to see subdued rental market demand and are operating at 20% of pre-COVID levels. This is contrary to what Camplify has experienced over the last two years with GTV up 3x whilst improving its take rate and maintaining its gross profit margin.
With poor online reviews for many of these traditional rental brands (Britz, RoadBear Rentals, Apollo Camper) - we think Camplify is rapidly taking share of the Australian RV rental market.
In P2P RV marketplaces - several smaller players are active in Australia (Outdoorsy, Camptoo, ShareACamper), and in Europe and the US there are a few larger players (RVshare, Indiecampers, Yescapa).
Outdoorsy is the main competitor on the global stage and recently raised US$120m to drive growth and the expansion of its insurtech business, Roamly. In the USA, the biggest player is RVshare which is run by the former Chief Revenue Officer of HomeAway.
Many of the smaller players won't be able to attract enough eye-balls for their online classifieds flywheel to compete - MyCaravan.com.au is an example of this in Australia which shut down in 2020.
Lastly, active travelers visit multiple destinations over time - so having a common marketplace available across destinations is going to be key in long term RV hirer retention.
Airbnb built an incredibly successful moat because it has a combination of local inventory with a global brand, and was able to displace localized platforms like Stayz in Australia. An American coming to Australia had no idea what Stayz was.
HomeAway (which bought Stayz in 2013 and has since become Vrbo) realized this and consolidated the Stayz brand in 2018 to more efficiently compete in a short-term holiday rental marketplace that was increasingly dominated by paid search engine marketing (read: platforms with strong unit economics buying more demand).
Building these local inventory networks with a strong global brand presence is going to be key for Camplify’s long term success in retaining active travels globally.
Ownership: 20% insiders ownership
The share registry is fairly tightly held by longer term holders:
Justin Hales (CEO and Founder): 14% of the company
Apollo Tourism: 18%
Acorn Capital: 14%
NRMA: 7% (Camplify went through the NRMA Jumpstart Accelerator in 2015)
Director and Senior Management: 6%
Other Existing Shareholders: 27%
IPO Shareholders: 21%
Apollo Tourism (18% shareholder, ATL.ASX) has been significantly impacted by COVID and is accelerating fleet sales to reduce their net debt of $174m, which is currently supported by only $20m of annualized EBITDA.
While Camplify has a strong strategic fit, it wouldn't surprise us if their stake was eventually sold down to support their underlying business.
Valuation: 5.3x Forward Revenue
If Camplify can continue increasing its share of RV bookings in the Australian market with similar unit economics, the business outlook looks promising and will be worth far more that it is today at $40m (or $1.40 per share).
The business is already cash flow positive, generating $2.4m of operating cash flow in FY21 from its strong working capital profile that collects cash for bookings in advance (25% of the booking value is received on behalf of the RV Owner at the time of booking).
Below are our forecasts on just the Australian business - this excludes the real options value in the camper ecosystem (i.e. insurance products), new product lines like RV sales (which it recently started) and the newer European markets the business is growing in.
Market share percentages are based on expected bookings on the platform divided by total market bookings.
Compared to the other marketplaces in the Mopoke Cloud Index on a value versus growth basis, the business also seems out of alignment with peers.
We think investors are under-appreciating the growth outlook for Camplify’s rental platform, adjacent offerings and their underlying economics.
While the business has no doubt benefited from a temporary COVID uplift as holidayers have been stuck domestically domestically for the last 18 months, at a 0.2% share of the RV market in Australia - Camplify has a long way to run.
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