PARTS iD, Inc. Class A

Thank you for joining us today to discuss PartsID's third quarter 2021 financial results. On today's call are Nino Cipena, Chief Executive Officer, and Kailash Agarwal, 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 more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements included in our third quarter 2021 earnings release, which was furnished to the SEC today on Form 8-K. as well as the company's most recent annual report on Form 10-K and its other filings for 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 to Nino Cipena, Chief Executive Officer of PartsID. Nino?

Thank you, Operator, and good afternoon, everyone. Following a strong first half of 2021, year-over-year sales trends moderated as we progressed through the third quarter. Despite the challenges in Q3, which is traditionally one of our weaker quarters, revenue grew in excess of 11% year-over-year for the nine-month period, in line with our strategic plans, and we remain focused on driving long-term profitable growth. Like many digital businesses, we have seen a pullback in site traffic from the record levels achieved during the third quarter last year. On top of this difficult year-over-year comparison, our sales and margins are also being impacted by the global supply chain disruption, which has led to inventory shortages, increased order cancellations, higher product and shipping costs, and longer delivery times. While our third quarter performance fell short of expectations, we believe the current economic environment is temporary, and we remain optimistic in our long-term vision and strategic plan. As the environment normalizes, we believe PartsID will be well positioned to grow revenue for several reasons. First, our distinctive technology provides accurate fitment data, which enables a successful experience for the auto parts consumer. This has been demonstrated in our continued high average order value levels that have been maintained over the last several quarters. Second, Our product catalog of more than 17.5 million SKUs and over 5,000 active brands is unrivaled. Third, our proprietary and capital-efficient fulfillment model allows us to expand without the need for additional capital. This has enabled us to expand and deepen our supply chain network on certain product departments like repair, original equipment, motorcycle and power sports, boating and marine, and RV camper. 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 has resulted in us increasing our net promoter score to 70, even amidst various headwinds. And fifth, we are making progress to advance the motorcycle and power sports Boating and Marine, and the RV and camper verticals by improving fitment data, onboarding new vendors, and expanding the product portfolio to create a superior digital customer experience. I'm happy to say that we now have leaders in place for these specific verticals too. We have invested heavily over 10 years building our platform, and as you already know, we believe our data platform is the best in the business and it's not easy to replicate. In fact, our investment in technology and data is arguably the deepest competitive moat around our business, and it has allowed us to expand into new verticals, leveraging a capital efficient and strong ROI inventory model to offer the consumer an extensive selection and experience. Unlike conventional stock and ship businesses, our capital efficient, just-in-time inventory model substantially shields us from costs associated with mass inventory transportation and better positions us to deliver long-term profitable growth. This model also allows us to continue to generate cash flow with a high ROI and enables us to grow without any additional capital infusion. We have several initiatives underway to drive growth and margin expansion, which I'll detail shortly. But now I'll turn the call over to Kailash to review our third quarter results.

Thanks, Nino. For the third quarter, revenue decreased by 16.7% year-over-year due to 28.9% lower traffic and 10% increase in order cancellations. We took steps such as applying price changes and making site experience improvements, which led to increases in the conversion rate by 9% and average order value by 11%. The operating adjustments resulted in material lift in the business when compared to third quarter of 2019, revenue was up 45.4%. Another positive from the quarter was 31% increase in repeat customers over the third quarter of 2020. The number of repeat customers defined as customers who made a prior purchase between 2011 to 2020 represented 24% of total customers in the third quarter of 2021. As the third quarter progressed, the global supply chain disruptions worsened, resulting in product shortages, increased cancellations, and higher shipping costs. Our real-time multi-source inventory model helped us source select products from secondary and tertiary sources. This allowed us substantially meet customer demand, though it also typically carried less favorable product pricing. In this difficult supply chain environment, our proprietary fulfillment algorithm has been able to identify the closest source to the customer and help mitigate a portion of the higher shipping costs. Gross margins were 19.8% in third quarter compared to 22.3% in third quarter of last year and 20% in second quarter of 2021. The decrease from Q3 2020 reflects the higher shipping surcharges we have discussed throughout this year, combined with the same pressure from the lack of inventory at some of our large vendor partners. We currently have several margin-focused initiatives underway, including evaluating sales prices, vendor negotiations, and in some cases, exploring new product sources. Total operating expenses increased approximately 3 million or 14% from third quarter of 2020 with the increase primarily attributable to costs associated with being a public company and share-based compensation expenses. Despite the third quarter operating environment more challenging than expected, we managed the business to almost break even on an adjusted EBITDA basis. Turning to our balance sheet, as of September 30, 2021, we grew our cash positions to 23.5 million compared to 22.2 million at December 31, 2020. With our capital efficient business model, our cash balance puts us in a strong position to continue investing in our growth initiatives designed to achieve our long-term profit objectives. I will now turn the call back over to Nino for review of strategic initiatives and closing remarks. Nino.