Q3 2023 Investor Update
Boxcar’s growth is accelerating. Q3 revenue is +75% vs Q3 2022 while operating expenses are down YoY. Q4 2023 will probably be another 25% higher than last quarter, meaning that growth will be +100% YoY by the end of 2023.
Looking forward, the introduction of congestion pricing in New York City stands as a monumental opportunity for Boxcar. We're strategically positioned to leverage this change, poised to boost our ridership, improve our service speed, and expand our reach across the city's geography.
Best,
Joe
In-App Revenue, Excluding Membership Dues:
Technology Highlights:
Boxcar has been sending notifications via email, SMS, and in-app banners since 2017, but in the last few years we have seen consumer behavior change in such a way that now many of our customers reply to our text-message notifications. But we didn’t have a great way to handle these.
We decided in Q3 to spend some significant effort upgrading our two-way SMS-capabilities and now we are able to have seamless conversations with our customers and see a great deal of customer detail the moment they text.
The customers love this. We also automatically text new signups an automated message introducing ourselves and saying that they can text any questions they have. We’ve always done this via email but the response rate wasn’t great and the response rate here is over 75% - people just love texting their questions and we’re delighted to answer them.
We are on the verge of releasing our largest technology upgrade in years which is automated bus tracking. This build integrates multiple APIs and will allow us to see exactly where our buses are relative to where they are supposed to be and provide a much higher level of customer service with far fewer human resources required. I’ll provide a much more in-depth overview of this build when it’s don in the next few weeks.
Q3: The Ugly
I want to kick off this update with my biggest failure of Q3. I could have done a better job load balancing in August and we lost $50k more than we should have.
Load balancing is how we refer internally to the practice of reducing bus runs on slow days or slow times of the year.
I am an eternal optimist, and I also hate to degrade our product by running fewer buses and providing reduced options to our members. We make this hard decision all the time and I need to direct it more aggressively for the month of August in the future. And I will.
But to be honest this is what you sign up for with me - I’d rather err in this direction by placing asymmetric bets on growth than slow down when we could grow.
Financials
Our core business is moving in the right direction. Our total parking and bus reservations increased 10% QoQ, even though it’s our seasonally slowest quarter (and in past years Q3 has often been lower than Q2). Combined bookings are up 75% annually vs Q3 last year.
I expect these numbers will double again by Q3 2024 given our growth and tailwinds.
The costs associated with expansion as well as seasonal slowness dragged down our margin and bottom line significantly in the past 4 months.
I don’t expect we’re going to be profitable in Q4 2023 like we were in Q4 2022, but I expect that revenue will grow another 25% QoQ, gross profit will remain positive, and net operating income will improve to roughly -$150k.
We have barely increased our quarterly operating expenses despite 10x-ing our top line revenue since Q2 2021. You can see our quarterly operating expenses below, with our Q3 opex labeled.
We certainly remain “flush enough” with cash that we don’t have to worry about running out of money in the next year.
[redacted balance sheet]
Membership Revenue
Membership revenue continues to dominate, generating 500k+ annually in net revenue and climbing without any end in sight.
Parking Update
We finally hit a new all-time high for parking.
We’ve now built a $1M ARR parking business twice, and the second time took 300 days longer than the first.
If you remember what I wrote in April 2022:
Parking growth is still in Magrathea mode, meaning that we are holding off on business development until there’s sufficient demand to merit the resources that are required to onboard parking lots. I expect a year from now we’ll be where we need to be and will be turning the parking acquisition machine back on.
It took 6 months longer than I expected 18 months ago, but we have officially triggered what we needed in order to take our parking acquisition out of the mothballs. We are once again actively acquiring parking for the first time since March 2020.
We have added 13 spots in Chatham, 3 in Westfield, 25 in Montclair, and 45 in Matawan in the past month since we started reaching back out to property owners. It feels good to turn this machine back on.
Like our bus service, our commuter parking will likely benefit significantly from NYC’s congestion pricing, scheduled to start in May 2024, as people pivot to riding all forms of mass-transportation where there is insufficient parking.
I will be actively hiring a parking acquisition associate with a Q1 2024 start date in the event you know anyone who you would be able to recommend.
The Plan(s)
In my last update I laid out two potential ways to tackle congestion pricing: raise a proper Series A in the $7M+ range or stay the course and continue to grow off our reserves.
I’m still not ready to make a decision but am meeting with some investors at the moment. Not Series A leads but rather family offices, larger Angel investors, and some investment networks.
The argument for fundraising is that we have a great moment of growth on our hands and it would be a shame to not make the most of it when we have this seismic stuff that will be happening in the mass transit space in the next 5 years.
The argument against any fundraising is also clear: Boxcar is well-capitalized, revenue is $2M per employee, we have an impressive growth rate, and we can pivot to profitability at any time.
I am seldom so conflicted but would rather avoid taking any dilutive action until we can more confidently see what exactly the return on the new capital would be.
Thanks for your support, as always please send any questions my way and I’ll try to answer them in the next update.
Best,
Joe