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spk04: Thank you for joining us today to discuss PartsID's fourth quarter 2020 financial results. On today's call are Nino Trapina, Chief Executive Officer, and Kailas Agrawal, Chief Financial Officer. I would like to point out that certain statements made during this presentation are forward-looking statements. These forward-looking statements reflect management's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting PartsID's business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this call and webcast, we refer you to the disclaimer regarding forward-looking statements including in our fourth quarter 2020 earnings release, which was furnished to the SEC today on Form 8K, as well as the company's other filings with the SEC. The company does not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, the company plans to refer to certain adjusted non-GAAP metrics on this call. Explanation of those metrics and reconciliations of GAAP metrics to those non-GAAP metrics can be found in the earnings release issued earlier today, which is also posted on the press releases page of our website at www.partsidinc.com. With that, I'll turn the call over to Nino Cipina, Chief Executive Officer of PartsID. Sir, the floor is yours.
spk03: Thank you, and thanks everyone for joining us for our first earnings call as a publicly traded company. After successfully completing our business combination with legacy acquisition corporate November, we are excited to begin this next chapter in the company's history. 2020 was a strong year for our company on many levels, highlighted by record revenue of $400 million, an increase of 39% over 2019, and strong gains in profitability and cash generation. There were also a number of important accomplishments and milestones that strengthened our foundation for the future. Having just come public late last year, I know many are new to the PartsID story. So before I go into a review of our recent performance, I want to spend some time discussing our business, technology platform, and operating model. PartsID is the owner and operator of CarID.com. a leading digital commerce platform for the automotive aftermarket along with other verticals. We believe the company is ideally positioned to capitalize on the surge in e-commerce adoption as well as further disrupt the $400 billion auto market aftermarket industry and $120 billion plus total addressable market for the other seven new verticals we operate. We are a technology-driven company digital commerce company focused on creating custom infrastructure and unique user experiences within niche markets. Our technology solution is a data and information platform that enables and facilitates a differentiated digital commerce experience within complex product markets as opposed to a pure e-commerce retailer. The deep technology platform that we have built integrates software engineering and catalog management data intelligence, mining and analytics, along with user interface development that utilizes distinctive rules-based parse fitment software capabilities. In order to handle the ever-growing need for accurate automotive product and parse data, we utilize cutting-edge computational and software engineering techniques, including Bayesian classification to enhance and improve data records, and product information and also deliver an engaging user experience. The technology platform also offers us fungibility, which was demonstrated by the fact that we were able to launch seven new verticals, such as MotorcycleID.com, BoatID.com, and CamperID.com in August 2018, leveraging the same proprietary technology platform and data architecture with a unified shopping cart enabling customers to shop across verticals and check out seamlessly using one cart. Through the journey of building a comprehensive and complex product portfolio with over 17 million SKUs, as well as building an end-to-end digital commerce platform, we have developed a platform for both digital commerce and fulfillment, relying on insights gleaned from nearly 14 billion data points related to vehicle parts, a virtual shipping network comprising over 2,500 locations, over 5,000 active brands, and machine learning algorithms for complex fitment industries such as vehicle parts and accessories. There are several key points that highlight the attractiveness of our platform and model and underscore how PartsID is distinguished from the competition. First, our distinctive technology provides accurate fitment data. which enables a successful experience for the auto parts consumer and supplier. Unlike any other consumer product category, the success or failure of selling parts comes down to fitment data that sellers like us add to our product offerings. Fitment is the compatibility of each part and accessory to each specific vehicle year, make, model, engine type, trim, and more. Having fitment data that is accurate, complete, and in the right format for each channel is crucial to a superior user experience and a successful customer transaction. Furthermore, our proprietary technology enables us to test and add new product lines and brands rapidly. Second, our product catalog of over 17 million SKUs and 5,000-plus brands is unrivaled. Our comprehensive catalog is enriched with nearly 14 billion data points related to vehicle parts, advanced 3D imagery, in-depth product descriptions, customer reviews, installation and fitment guides, as well as other rich custom content created in our in-house studio, specifically catering to the needs of the automotive aftermarket industry, and is further complemented by specialized customer service. Third, our proprietary and capital-efficient fulfillment model allows us to grow rapidly without the need for additional capital. Our network of over 1,000 product vendors has enabled us to scale our catalog size quickly and add new verticals, unlike traditional players that have more capital-intensive businesses. We can test and add new product lines and brands quickly without tying up capital and worrying about inventory obsolescence. Our geo-optimized fulfillment algorithm determines which product vendor to buy from while the sale is being made and incorporates factors such as real-time inventory from 2,500 fulfillment locations, customer proximity, shipping costs, and profitability. This decentralized, data-driven approach allows the company to increase fill rate and delivery speed. Fourth, our superior customer experience is a result of rich content, wide product range with ease of selection, proprietary fitment data, and highly trained customer service, providing a data-driven engagement platform for discovery and inspiration. This is evident by, one, the growth in repeat customers, which grew 43.8% compared to 2019, B, an overall product return rate of approximately 5%, versus an industry average of more than 20%, and C, an MPS score of 66%. We have spent 10 plus years building our platform and it is not easy to replicate. In fact, our decades plus investment in technology and data is arguably the deepest competitive moat around our business. And it has allowed us to deliver 400 million in revenue in 2020 while offering the consumer extensive selection and experience. With that background, I'll walk through the major highlights from 2020 and then discuss our long-term growth plans before turning it over to Kalash for a review of the financials. As I said earlier, we achieved a record revenue of $400 million, an increase of 39% year-over-year. There were several drivers of our top-line performance in 2020. Product cultivation, fulfillment initiatives, marketing strategies, and pricing optimizations. along with continued refinement of our software and technology, puts us in a great position to profitably grow revenue and enhance our customer experience. We concentrated our efforts on underdeveloped product lines to expand our catalog and experienced tremendous growth therein. This included original equipment and repair parts, which have been a major area of focus and opportunity. Over the last 12 months, we have added original equipment parts and accessories, for several of the major automotive manufacturers to our platform, such as Ford, Toyota, Dodge, Nissan, Ram, and more, which has significantly expanded the breadth and depth of our category offering. The fastest growing part of our business in 2020 were the new verticals we launched over the last two years, including motorcycle, boating, RV slash camper, and power sports. These new verticals represented approximately 10% of total revenue this year, up from low single digits in 2019, and we see a clear pathway to further accelerate penetration in 2021 and beyond by deploying similar tactics that have fueled our growth in auto. From a fulfillment perspective, we added 267 distribution points, which further improves our customer proximity and thus delivery speed. In 2020, we also took steps to diversify our marketing mix and boost brand building. We launched our first TV commercial test in the spring, followed by another campaign in the winter. These campaigns leveraged programmatic, platform, and publisher-direct media buys. In addition, we significantly increased social media advertising efforts to expand our audience base. In our search engine marketing programs, we implemented automated bidding strategies to improve performance. We also continuously test advertising spend, add content, audience targeting, and more to optimize for traffic, conversion rate, and ROI on our advertising investment. In addition, while our efforts to establish more effective pricing policies are ongoing, the initial results from price elasticity experiments are very encouraging. We are pleased with the top line performance that we delivered in 2020, which, combined with our efficient cost structure, fueled 135.2% increase in adjusted EBITDA, and generated $22 million in cash from operations. Looking ahead, we see a long runway for growth thanks to several strategic initiatives. In 2021, we are working on several strategic initiatives such as brand building, marketing diversification, vendor optimization, cost optimization, and automation, starting with marketing. As we stated in the past, we are committed to shedding the distinction of being the best kept secret in the automotive parts business. This year, we plan on increasing our investment in television and social media advertising to build on the work we started in 2020. In addition, there is work underway to grow email subscribers and implement new automated campaigns using product and customer data to personalize email messages. The next strategic initiative is vendor optimization. Within our core automotive product lines, we are working on developing additional vendor relationships in large, relatively underdeveloped categories, such as original equipment and repair parts. We are also pursuing similar strategies in our newer verticals and are making good headway increasing SKU counts for these fast-growing businesses by onboarding a wide selection of products and brands. Next slide. We are committed to providing an enhanced customer experience and becoming a one-stop shop and seamless solution for vehicle enthusiast needs. We can now offer customers seeking do-it-for-me services the ability to shop and choose from a wide variety of tires, seamlessly select a tire installation center near them from over 2,000 active locations on our platform and schedule an appointment. We are in the process of adding many more locations. Finally, We feel that automation is imperative as we scale the business. To that end, we are investing in fitment deployment in new verticals, streamlining vendor management and communication with a self-service vendor portal, leveraging technology to improve customer communication and pricing optimization. We are confident that ParseID is positioned for continued growth given our strategic initiatives, differentiated technology, comprehensive product catalog, and experienced management team. Our focus is long-term profitable growth. We are excited about our growth trajectory and look forward to updating you on our progress as we continue to execute our long-term vision for the company. With that, I'll turn the call over to Kalash to review our financials. Kalash?
spk01: Thanks, Nino. I will start with a review of our full year's results and conclude with a summary of our both quarter performance and the balance sheet highlights. As Nina outlined, 2020 was a very strong year for our company and the net revenue increasing 39.3% to record 400.8 million compared to 287.8 million in 2019. This increase was primarily attributable to 24.3% increase in website traffic and 19% increase in conversion rate compared to the prior year. The increase in website traffic and the conversion rate was primarily attributable to product growth in new verticals, search engine bidding automation and optimization, and increased e-commerce adoption due to COVID-19. For the year, we posted strong customer acquisition and retention trends. Compared to last year, the number of customers who purchased from us in 2020 grew 53% and number of customers who made at least one purchase in earlier years or the repeat customers increased 44%. We believe this growth in number of overall and repeat customers speaks volume about our customer experience. Moving down to the panel, gross profit for 2020 increased 40.2% to 85.8 million compared to 61.2 million in 2019, with gross margin up 10 basis points to 21.4% compared to 21.3%. The 24.6 million increase in gross profit was primarily attributable to the year-over-year increase in the revenue. Operating expenses were 84.5 million compared to 62 million in 2019. The increase in operating expenses was primarily attributable to higher advertising expenses aimed at driving website traffic and increasing brand awareness, combined with $5.5 million in business combination transaction expenses. Operating expenses as a percentage of revenue improved to 21.1% from 21.5%, reflecting greater leverage on higher revenues during 2020. Excluding the transaction expenses, operating expenses as a percentage of revenue were 19.7% and an improvement of 180 basis points. For the year, operating income increased 2.1 million to 1.3 million as compared to an operating loss of 0.8 million in 2019. Excluding aforementioned transaction expenses, operating income was 6.9 million in 2020 an improvement of 7.6 million year over year. Net income for 2020 was 2.1 million compared to a net loss of 0.7 million in 2019. Adjusted EBITDA, which excludes transaction expenses and other items that do not impact the fundamentals of our operations and which are detailed in the consideration table in today's earnings release, increased 135.2%. to 15.4 million compared to 6.6 million in 2019. Turning to the fourth quarter, we delivered a strong finish to the year with net revenue increasing 32.8% to 93.1 million compared to 70.1 million in fourth quarter of 2019, driven by the same trends that fueled our full year top line performance. Gross profits for the fourth quarter of 2020 increased 29.1% to 19 million compared to 14.7 million in the same prior year period. The gross margin of 20.4% compared to 21%. The increase in gross profit was attributable to the year-over-year increase in revenue, partially offset by 60 basis point decrease in the gross margin, primarily due to higher product promotion expenses. Operating expenses were 25.6 million for the fourth quarter of 2020 compared to 16.3 million in fourth quarter of 2019. The increase in operating expenses were primarily attributable to higher advertising expenses aimed at driving website traffic and increasing brand awareness combined with 5.3 million in business combination transaction expenses. Excluding these transaction expenses, Operating expenses as a percentage of revenue were 21.8% and improvement of 150 basis points reflecting greater leverage on higher revenues during the fourth quarter. Operating loss in the quarter was 6.6 million compared to an operating loss of 1.6 million in the fourth quarter of 2019. Excluding transaction expenses, fourth quarter 2020 operating loss was 1.3 million. Net loss in fourth quarter of 2020 was 4.1 million compared to net loss of 1.3 million in the same prior year period. While adjusted EBITDA increased 56.8% to 1.1 million compared to 0.7 million in the prior year period. Turning now to our balance sheet, as of December 31st, 2020, the company had 22.2 million compared to 13.6 million at December 31st, 2019. The increase in cash was primarily driven by net cash provided by operating activities of 22 million, partly offset by cash used in investing activities 7.3 million, primarily relating to website and software development expenditures, and cash used in financing activities of 6.1 million, which includes 5.6 million in cash payments for cancellation of legacy equity warrants. Given our data-driven inventory-like business model, we feel good about our cash position and our ability to continue investing in our long-term growth initiatives and work towards achieving our long-term profitable growth goals. With that, operator, we are now ready to take the questions. Thanks.
spk04: Thank you. We will now be having our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may also press star two if you would like to remove your question from the queue. One moment, please, while we now poll for questions. Our first question is from Maria Rips with Canaccord. Please proceed with your question.
spk02: Great, and thanks for taking my questions. And congrats on a strong year. A couple of questions. So 2020 was an exceptional year for many e-commerce platforms and you delivered very strong growth. How are you thinking about sort of e-commerce adoption in the auto parts space continuing to develop once the economy starts opening up? And can you maybe talk about some of the steps that the company is taking to retain and engage customers you acquired over the past year?
spk03: Hi, Maria. Thank you for the question and thank you for joining us today. So we believe the pandemic has encouraged irreversible changes in shopping behavior that is very likely to continue in the post-COVID world. For example, the pandemic has highlighted the risk of picking up germs while shopping, meaning that fear of another health crisis may well drive behavioral change in the longer term. It also has made it necessary for even those who may have previously preferred to buy in-store to do their shopping online. And many of those people have realized the benefits of e-commerce, such as convenience and wider selection. So to me, it seems likely that e-commerce's increasing popularity will continue long after memories of the pandemic have faded. On the second part of your question, in terms of strategic steps to retain and engage customers, we're actively working on diversifying our marketing mix by developing retargeting programs on social media, growing email subscribers, implementing more automated marketing programs, and developing a loyalty program long-term which would span across all eight of our verticals.
spk02: Thank you, Nino. And just kind of to follow up on your marketing strategy, you mentioned investments in social, in TV this year. What I wanted to ask you is how did your customer acquisition strategy messaging change during COVID and how are you planning to adjust it here coming out of COVID? And related to that, how do you expect the iOS and IDFA changes to impact your customer acquisition strategy, if at all?
spk03: Great question, Maria. Let me take that one piece at a time. So on the overall marketing strategy and brand positioning, We focus all those efforts around our core consumer, which at a very high level is a blue-collar, DIYer car enthusiast who in many cases also happens to own another vehicle such as a motorcycle, an ATV, a jet ski, or even a camper. This person really takes pleasure in accessorizing his vehicles and is drawn to us by our wide catalog selection, custom content, and the overall customer experience fueled by our comprehensive fitment data. From a marketing execution perspective, nearly all of our marketing investment is performance-based, and it's worked well for us. In 2020, as you heard me say, we started making some very intentional changes to our marketing execution and channel. We migrated a large portion of our search engine advertising programs to automated bidding. We ran our first two TV commercials using, as I said in the prepared remarks, programmatic, platform, direct, and publisher direct media buys. And we also accelerated social media advertising significantly across Instagram and Facebook. Regarding Apple's iOS 14 update, it will certainly affect advertisers to some degree, specifically when it comes to ad targeting. Many targeting types will no longer work for users that have opted out of sharing their IDFA. But the bigger advertising platforms, Google and Facebook, They have other deterministic variables that they can use, we can use as advertisers to inform our targeting and support our targeting. Measurement will offer to some degree, but really the key here that we're talking about is capturing first-party data. As long as we continue to focus on growing our email subscribers, establishing an SMS program, and collecting that first-party data, we will always have an edge in terms of being able to circumvent these ad tracking and blockers that Apple and potentially other technology companies implement. So again, as long as we stay focused on capturing first-party data and diversifying our marketing mix, I believe we'll be well-positioned to overcome these kind of hiccups.
spk02: Got it. Understood. And maybe one last question, if I could. You talked about installation partnerships. How important are those sort of for your user retention or user experience or even for brand building? And ideally, how many partnerships would you like to have going forward sort of in the near term?
spk03: Yes, great question. We are very excited about our tire installation program. It is something we started in 2020. Last year we activated roughly 1,100 tire installation locations. So far this year, we've activated over 1,000 more locations, so bringing our total tire installation locations to approximately 2,100 active locations. This initiative is helping us attract and grow the Do It For Me consumer segment. We have aggressive plans for tire installation services this year, and then we are certainly already discussing strategic plans for other installation services we can add in the future beyond tires.
spk02: Got it. I appreciate the call, Adina. Thank you.
spk03: Thank you, Maria.
spk04: Thank you. Our next question comes from Michael Baker with DA Davidson. Please proceed with your question.
spk05: Hey, guys. First, I want to start with a financial question on a past presentation from the fall. You laid out some plans for 2021 and 2022 in terms of revenue and EBITDA. I just wanted to Ask about those. Are those still targets that can be relied upon? $465 million in sales in 2021, $535 million in 2022, and then EBITDA going to $20 million and then $28 million.
spk03: Hey, Mike, great question. So, look, our continued focus is on long-term and responsible, profitable growth. We believe we can keep our head down, continue to deliver on the key projects we're working on, and be cost-effective. We should be able to deliver growth responsibly in the coming years. Let me take that question to Kailash for additional context.
spk01: Kailash Patel Yeah, Mike, while we won't like to comment on the numbers that we presented previously, But as Nino set out, our long-term profitable revenue growth remains as our key strategy and we'll continue to work on that. To that end, we are actually looking to invest in building our products and data catalog further, enhance our proprietary technology stack, diversify advertising and the brand building, which Nino explained, and driving the operational improvements in fulfillment, shipping, and pricing. So we do believe all these measures, what we are taking us, we should be looking to a good long-term profitable growth.
spk05: Okay, well, maybe as a follow-up, so those investments you just described, were those contemplated in those, that outlook that you gave in these presentations? In other words, I thought maybe something you were getting at is you're going to be investing more, so maybe you wouldn't have the same level of profitability in 2021 as you had previously thought, or is that not the message? And then, you know, sort of another part of the same question, I guess, is the gross margin decline of 60 base points in the fourth quarter, was that planned or was that promotional activity, you know, something that was a bit of a surprise or needed to get to the 400 million in sales?
spk01: No. No, I won't say it is a surprise. It was a planned activity for the post-quarter, and we do change the strategies from time to time. So in post-quarter, we did thought fit that we should be promoting the products, and we launched some product promotions and where that margins went down. So it was certainly a planned activity. And whatever investments we are talking about, the normal tests are certainly included in our plans, what we presented previously. But who knows, we may come out with a special test and a may want to prepare for some market events, et cetera, and we may invest more, but our overall focus will still remain not to lose the profits and remain profitable in all the circumstances. And that's the, I would say, on a best effort basis, we should remain profitable all throughout.
spk05: Okay. Okay, one other question, if I could. different, more of a strategy or bigger picture question, and we've talked about this in other forums, but I thought I'd ask for the group perhaps. Some of us who have come at this from an auto parts aftermarket retail perspective and have covered that space for a long time, rather than the technology perspective. One of the hallmarks of the auto parts aftermarket space was the need for immediacy, and because of that, the fact that it It's not that it doesn't work online, but online was never really a big part of it. If you look at AutoZone and O'Reilly and those guys, online sales are a very small part of their business. And in fact, when they offer people a discount to have a product shipped to their house rather than coming into the store and pick it up, more often than not, about 70% of the time, people come into the store to pick it up. In other words, you're paying more to pick the product up in store rather than having it shipped to your house. Your business comes out from a different way on both those perspectives in terms of online and the immediacy. So how do you square that? Why does your business work when other guys have said that those aren't features of the auto parts space?
spk03: Hey, Mike. You cut out for a second, but I think I captured the question. Let me answer it. Sorry, it was a long one. No, it's okay. I think what I'm hearing is the other retailers, Omni retailers, are experiencing smaller online growth or it's a smaller part of the business. I think there's a few key things about that. So our industry, unlike many other retail industries, I think has some unique components to it. First, Fitment. So Fitment is... you know, the compatibility, right? So purchasing products online is not the easiest thing to do in a complex category like auto parts and accessories. We've been solving that, right? Our rich, comprehensive data, our purpose-built technology platform, this is at our core what we as an organization have set out to solve. And I think we've made a lot of progress. And I believe many people who shop carid.com tend to agree that the experience is superior to many other competitors. So fitment is one thing that has prohibited online adoption in our industry. The second piece is the do-it-for-me consumer segment. Many consumers don't have the tools, the know-how, or the willingness to install parts or repair parts themselves. So this clearly pulls a consumer offline to get something done. But as you heard in our prepared remarks, many of the initiatives we have around DIFM, starting with tire installation, the objective around it really is to kind of solve this DIFM problem that has been kind of prohibiting some of the online adoption of auto parts and accessories. So you take solving Fitment, you take working at solving the DIFM component, and then the third part, you work at really finding the right way to empower and encourage consumers to do it themselves, right? I think if you stay focused on achieving that from a customer perspective... along with the overall online adoption in the industry and across the board happening in retail, I think you have a really, really encouraging bright future, especially given the proprietary technology and data set that we have.
spk05: Okay. Yeah, great. Thanks for the complete answers. I'll turn it over to somebody else.
spk03: You got it.
spk04: Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for any closing remarks.
spk03: Thank you, everyone, for dialing in. That's it.
spk04: Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.
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