Collaborate Corporation Limited (ASX:CL8) is pleased to present its consolidated cash flow report and business update for the quarter ended 31 March 2020.

Collaborate achieved excellent results in the March 2020 Quarter, despite the impact of COVID-19, recording a 15% increase in Receipts from Customers compared to the December 2019 Quarter. This is Collaborate’s best ever quarter in terms of Receipts from Customers, and the fourth consecutive quarter of growth. The March 2020 result represents an increase of 78% compared to the March 2019 Quarter, with strong performance in underlying transactions, supported by development fees related to Carly NZ.

The recent strong results are attributable to the diversification strategy deployed by Collaborate to reduce reliance on the highly competitive and seasonal car rental market and focus on the growth opportunities afforded by Carly vehicle subscriptions and rideshare rentals. The development of Carly New Zealand for its launch partner, Turners Automotive, during the quarter also supported revenue diversification efforts and contributed to the increase in cash receipts.

As the COVID-19 situation evolved in March 2020 and traditional car rental companies saw large declines in revenue due to the curtailment of business and consumer travel, DriveMyCar only saw a moderate increase in cancellations and reduction in forward bookings late in the month. Rideshare rentals were also moderately impacted as fewer rideshare trips were completed. Revenue from Carly car subscription remained strong and continued to grow throughout March 2020. In contrast, retail sales of new passenger vehicles declined by 25% in March 2020 (VFACTS March 2020). Carly is an alternative to car purchase and provides a lower risk option for consumers and businesses that require cars but do not want to take on long-term financial obligations. Given this recent economic turmoil, Carly provides a highly attractive option for consumers and businesses, and Collaborate expects this to increase.

The ongoing challenges of COVID-19 are acknowledged, and substantial cost saving measures have been adopted in April 2020 to ensure that Collaborate has sufficient resources to cope with a reduction in economic activity. Despite these challenges, Collaborate believes it is well positioned to take advantage of new opportunities that are arising as people and businesses reassess the merits of taking on long-term finance for vehicles in a period of economic uncertainty.

Key highlights include:

• 15% increase in Receipts from Customers vs. the December 2019 Quarter and  78% increase vs. March 2019 Quarter
• 4% increase in Rental Transaction Value vs. December 2019 Quarter and 49% increase vs. March 2019 Quarter 
• 32% increase in Gross Revenue vs. December 2019 Quarter and 91% increase vs. March 2019 Quarter 
• 6% increase in Net Rental Days Realised vs. December 2019 Quarter and 61% increase vs. March 2019 Quarter
• 26% increase in Carly Rental Transaction Value vs. December 2019 Quarter
• 38% increase in Carly number of Subscriptions Booked vs. December 2019 Quarter
• 31% increase in Carly number of Live Subscriptions vs. December 2019 Quarter
• Launch of Carly in Brisbane and Gold Coast on 12 February 2020
• Completion of development work for Carly New Zealand
• 15% increase in Rideshare Rental Transaction Value vs. December 2019 Quarter and 61% increase vs. March 2019 Quarter  
• 16% increase in Rideshare Gross Revenue vs. December 2019 Quarter and 53% increase vs. March 2019 Quarter
• 16% increase in Rideshare Net Rental Days Realised vs. December 2019 Quarter and 58% increase vs. March 2019 Quarter  
• 24% decrease in Staff costs vs. the December 2019 Quarter.

The Directors closely monitor cash flows and funding requirements and are assessing all funding alternatives, which may include a placement to strategic and/or high-net-worth investors to ensure that the Company can continue to pursue the growth opportunities of the businesses. In response to the potential impact of COVID-19, Collaborate has taken a prudent approach to cash management and proactively implemented a range of cost saving measures. All staff have taken a 20% temporary salary reduction, non-executive directors have reduced their fees by 40%, service providers and agencies have agreed to fee reductions in the range of 20% to 30% and the Company has applied for all support that the Group may be eligible to receive as part of the State and Federal Government COVID19 stimulus packages. All staff moved seamlessly to remote working mode on 20 March to abide by the recommendations of health authorities. No downtime was experienced and normal operations can continue until restrictions are lifted.

Vehicle Revenue Streams

Rental Transaction Value (RTV) increased 4% vs. the December 2019 Quarter, largely as a result of growth in Carly subscription revenue and rideshare rental revenue. The December Quarter typically produces strong results due to holiday period demand, and historically the March quarter has seen a decline in RTV as part of the seasonal cycle. As planned, with the strategic focus shifting to Carly subscriptions, DriveMyCar rental revenue declined during the March 2020 Quarter, while Carly RTV increased 26% and rideshare rental RTV increased 15%. The subscription and rideshare rental revenue streams are more predictable and have a stronger recurring nature, and demand can be more effectively influenced by marketing activities, thus giving Collaborate more influence over revenue growth in the future. 

Gross Revenue increased 32% vs. the December 2019 Quarter, supported by growth in RTV and fees earned from the delivery of Carly New Zealand for Turners Automotive Group. As announced on 19 March 2020, in response to New Zealand Government mandated COVID-19 Level 4 lockdown restrictions, Turners Automotive Group advised that it had delayed the launch of Carly NZ beyond the previously scheduled date of 31 March 2020. Collaborate is fully supportive of this decision as a delay will ensure maximum attention and uptake following launch in the region. Technical and operational development was completed on schedule by 31 March 2020. With the recently announced easing of New Zealand lockdown restrictions, Carly NZ is expected to be launched in the September 2020 Quarter. 

Given the scale of the car subscription opportunity and the significant ongoing negotiations with manufacturers, dealers and other parties seeking to partner with Carly, limited metrics will be reported so that the existing competitive advantage in the subscription market is preserved. This is in line with the limited, if any, metrics reported by other providers in the car subscription market. 

Strategic Direction

Collaborate remains committed to its strategy of providing flexible access to vehicles and its focus on Carly car subscription and rideshare rentals. While many businesses will be severely impacted by COVID-19, Collaborate’s efforts to reposition itself over the past 12 months has prepared it well to deal with the current challenges, benefit from economic uncertainty and leverage opportunities brought about by longer term structural change in the automotive market. 

In recent weeks, traditional car rental companies have experienced severe declines in demand as consumer and business travel largely ceased. Collaborate reduced its focus on the car rental market, through its DriveMyCar brand, over 12 months ago, owing to the highly competitive market and seasonal demand and price fluctuations. DriveMyCar has also seen reductions in forward demand, but as focus had already been reduced, the overall impact on Collaborate is less than that experienced by other companies with a strong focus on the car rental market. 

Monthly Rental Transaction Value from Rideshare rentals has increased by 110% from July 2019 to March 2020, supported by DriveMyCar’s strong offering in this market. Short-term declines in rideshare rental revenue are expected during COVID-19 movement restrictions, however the flexible access to rideshare vehicles provided by DriveMyCar is anticipated to appeal to an expected influx of new rideshare drivers who will be seeking employment as the COVID-19 restrictions ease and demand for transport increases. The closure of Holden’s Maven positions DriveMyCar well for this future rebound in demand for rideshare rentals. 

While some volatility is currently being experienced in the demand for Carly car subscription, there has been far less impact from COVID-19 compared to car rental and rideshare rental revenue streams. The COVID-19 situation is predicted by the Reserve Bank of Australia to cause a contraction of the Australian economy and this may cause businesses and consumers to seek to de-risk their financial situation by limiting the number of long-term financial commitments. Carly car subscription is an alternative to a lease, loan or outright purchase of a vehicle and provides consumers and businesses with the ability to access vehicles they require without long-term financial risk. It is likely that the COVID-19- related concern about strength of the economy will accelerate the shift to more flexible vehicle access options. Carly is likely to benefit from this shift, even in an environment of slow economic growth. 

Chris Noone, Collaborate CEO, commented: “We are very pleased to see that the strategic actions taken by Collaborate over 12 months ago have resulted in the best ever quarterly performance and have provided resilience in the face of the COVID-19 pandemic. 

I would like to acknowledge the commitment of the Collaborate staff, who have acted swiftly and professionally to deal with a myriad of new challenges and the support they have shown by accepting a temporary pay reduction while we deal with the current situation. Our partners, agencies and suppliers also deserve recognition for accommodating our needs at this time. Despite the current challenges, we are energised by the new opportunities that lie ahead for Carly.”

This announcement was authorised to be given to ASX by the Board of Directors of Collaborate Corporation Limited.