I recently wrote about three equity crowdfunding investments raising funds on StartEngine, which the 2020 Inc. 5000 calls the 10th fastest-growing private company in the state of California. The star of the article was BrewDog USA, the American subsidiary of the U.K. craft brewer, that’s used its Equity for Punks platform since 2010 to raise millions of dollars of capital to fund its growth. In both crowdfunding and craft beer circles, BrewDog’s reputation is legendary. In addition to Brew Dog, I recommended investors check out two other StartEngine equity crowdfunding investments worthy of consideration. One of them was ModVans, a California-based manufacturer of CV1 modular van conversions.
“Why do I like it?” I stated April 19. “Millennials will love the company’s CV1 campervan. Plus, it already has $3.7 million in sales.” How popular are campervans with millennials? Thor Industries (NYSE:THO), the largest manufacturer of motorhomes and trailers in the U.S., has big plans for this segment of the RV market.
“We see growing potential for [the camper van] product category in North America,” Thor Industries CEO Bob Martin said in April. “Last year, the camper community there grew by 1.4 million households — 56 percent of which are millennials. These new participants are often returning to the roots of campervanning and prefer a lifestyle that involves less effort while offering more adventure and experiential quality.”
Once the novel coronavirus is a thing of the past, you can be sure that people of all ages will be checking out campervans.
ModVans’ CEO, P.J. Tezza, recently suggested three reasons to invest in his company. By the end of this article, I’m confident you’ll want to spend $500, perhaps more.
But just remember, like all investments, do your research and only step up to the plate if you can afford to lose 100% of your funds.
A Proven Track Record
There are plenty of equity crowdfunding investments, on the one hand, that are genuine startups with no revenues and lots of operating losses to show for their troubles. Whether we’re talking about the next best craft distillery or health & wellness initiative, a business with limited or no sales is a venture capital investment with a much higher level of risk.
ModVans, on the other hand, has lots of happy customers. Since 2017, it has sold more than $4 million of the CV1. At an average price of $88,000, we’re talking about 45 modular RVs leaving the company’s assembly facility for customers across the U.S. and Canada.
A Nice Bottom Line
It’s one thing to have top-line sales, but ultimately, equity investors have less chance of generating a return on their shares if the business isn’t profitable.
In fiscal 2019, ModVans had total sales of $1.47 million, a gross profit of $523,362 (35.5% gross margin), and an operating loss of $125,398. In 2018, it had total sales of $357,013, a gross loss of $202,777 (gross margin of -56.8%), and an operating loss of $496,777.
So, the numbers are headed in the right direction.
ModVans’ new facility in Oxnard, California, can produce 10 CV1s per month. Were it to hit that number in 2020 or 2021, based on $88,000 per vehicle; it would generate $10.56 million in annual revenue.
Can it get there within the next two years? If the economy cooperates, it can. In the meantime, it continues to focus on its goal of $10 million in annual sales. If it does hit that number by the end of 2021, you can be sure the shares and company will be worth more than $5.95 and a pre-money valuation of $12.5 million.
The Addressable Market
As I stated previously, if Thor Industries thinks the campervan market is a big deal, you can be sure it is. The Recreational Vehicle Industry Association’s (RVIA) 2019 annual report said this past year was the fourth-best year ever, with yearly sales exceeding both the 30-year and 10-year averages for shipments. In 2019, a total of 410,283 units were shipped to dealers across the U.S.
Based on 2018 RV shipments of 483,700 and a total retail value of $20.1 billion (average of $41,579 per RV), 2019’s total RV retail value would have been approximately $17.1 billion. Sure, that would be a $3 decline in sales, but it would still be better than every year except for 2018, 2017, and 2016.
Further, according to ModVan’s StartEngine presentation, a total of 5,249 Class B RVs (van campers such as CV1) units were shipped in 2017. Adding in the RVIA’s data for 2018 and 2019, an average of 5,126 Class B units were shipped on an annual basis over the past three years.
Should ModVans hit 120 CV1’s in a year (10 per month), the company would have approximately 2% market share for van campers in the U.S.
Can it do better than that? I think it can.
The Verdict on This Equity Crowdfunding Investment
Like many industries, the RV market has taken a bit of a hit as stay-at-home orders have brought the entire country to a standstill. There’s no way around this fact. However, if you think this is a reason not to consider investing in ModVans, you would be misguided.
According to the RVIA’s monthly shipment report for March, there were 377 Class B van campers shipped in March, up 122% over the same period a year earlier. Year to date through March, a total of 1,232 units have been shipped, 46% higher than last year.
Van campers are hot.
TruckCamper magazine recently discussed how the RV industry can beat Covid-19:
“Once Covid-19 is defeated, millions of people will want to get outside and travel after weeks or even months of being cooped up indoors. People who might not have previously considered the RVing lifestyle will look to RVs as they seek to avoid crowded airports, airplanes, cruise terminals, cruise ships, restaurants and hotels,” TruckCamper’s Gordon White stated April 10.
“Whether concerns surrounding coronavirus persist and/or people just want to avoid the predictable crowds, RVing offers an attractive option. In this new normal, RVs represent a safer and more self-contained way to travel.”
And ModVans knows this. Should you invest $500 in the company? I can think of a lot of worse investments to make at this time.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
