PARTS iD, Inc. Class A

you for joining us today to discuss parts id's fourth quarter and 2021 full year financial results on today's call are nino chapina chief executive officer and kalosh agarwal chief financial officer i'd like to point out that certain statements made during the presentation are forward-looking statements these forward-looking statements reflect management's judgment Analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting Parts ID'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 the conference call and webcast, we refer you to the disclaimer regarding forward-looking statements, including in our fourth 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, Form 10-K, and 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, further events, or otherwise. In addition, the company plans to refer to certain adjusted non-GAAP metrics on this call. Exploration of these 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 release page of our website at www.partsidinc.com. Finally, as a reminder, a slide presentation is accompanying today's prepared remarks. This presentation is viewable through the webcast link located at www.partsidinc.com. With that, I'll turn the call over to Nino Cipina, Chief Executive Officer of PartsID. Nino?

Good afternoon and thank you for joining us. It's great to reconnect with you today to share the details of PartsID's fourth quarter and full year 2021 results. Before we begin, I want to spend a moment to acknowledge our colleagues in Ukraine. As many of you know, PartsID has strong ties to Ukraine. It is home to many of our independent contractors. On behalf of the entire PartsID organization, I want to express our concern for the safety and well-being of our teammates in Ukraine and our sympathy for everyone who has been personally impacted. Our colleagues have demonstrated perseverance, courage, and devotion to our company despite these difficult circumstances. They continue to inspire us. Our thoughts are with them during this challenging time. Moving on to a business overview. Since PartsID has only been a public company for a little over one year, many investors are still new to the story. Therefore, I'd like to take a few minutes to provide an overview of our business, the technology platform, our operating model, and of course, our vision and mission. PartsID is a technology-driven digital commerce company on a mission to transform the $400 billion plus U.S. auto aftermarket and the $100 billion plus adjacent complex parts markets by focusing on the customer's needs and using purpose-built technology and data to create custom infrastructure and unique user experiences where customers can quickly and easily find all the parts and accessories they need, get customer support by highly trained agents, and be so satisfied with their experience shopping this category that not only will they come back in the future, but they will tell their friends and families too. We work to achieve this through our platform business model, which brings together over 1,000 industry suppliers, more than 5,000 brands, approximately 18 million product SKUs, and over 14 billion product and fitment data points. The technology platform integrates software engineering with catalog management, data intelligence, mining and analytics, along with user interface development, which utilizes distinctive rules-based parts fitment software capabilities. To handle the ever-growing need for accurate product and parts data, we utilize cutting-edge computational and software engineering techniques, including Bayesian classification, to enhance and improve data records and product information and ultimately to contribute to the overall development of an engaging user experience. Furthermore, The technology is architected to support much more than just car parts and accessories. We demonstrated the flexibility and scalability of the technology by launching seven adjacent verticals, including BoatID.com, MotorcycleID.com, CamperID.com, and others in August 2018, all of which leverage the same proprietary technology platform and data architecture and with a unified shopping cart enabling customers to shop across all eight verticals and check out seamlessly using one cart. There are several key points that highlight the attractiveness of our platform business 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 auto parts and aftermarket accessories 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 approximately 18 million product SKUs and over 5,000 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 highly trained and specialized customer service. Third, our proprietary and capital-efficient fulfillment model allows us to grow organically 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 adjacent 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 without worrying about inventory obsolescence. Furthermore, 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 our fulfillment network, customer proximity, shipping cost, and profitability. This algorithmic approach allows us to increase fill rate and delivery speed. Fourth, our enhanced customer experience is a result of rich content, wide product range with ease of selection, proprietary fitment data, and highly trained customer service representatives. providing a data-driven engagement platform for discovery and inspiration. This is demonstrated by, one, our catalog size, which contains approximately 18 million product SKUs. Two, despite the supply chain disruptions in 2021, our net promoter score reached a high of 70 in November and has continued to stay in that range. Three, our overall product return rate across all eight verticals continues to be approximately just 5%, versus industry averages of more than 20%. In a category as complex as parts and accessories, this is truly incredible and underscores just how effective our technology and data are. Fourth, but certainly not least, repeat customer revenue, which is defined on this slide, represented 38.4% of total revenue in 2021. This is a record for the company and is up 420 basis points over 2020. We have invested over 10 years building our platform, 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 adjacent verticals leveraging a capital-efficient, just-in-time inventory model to offer the consumer an extensive selection and experience. With that background, I'll walk through the key highlights from the fourth quarter and full year of 2021 and then I will turn it over to Kailash for a review of the financials. After Kailash finishes, I will cover the opportunities we're laser focused on to drive growth and the strategic initiatives we're executing against to capture that growth. After that, we'll open the line to questions. Slide five, please. Slide five, please. As you can see here, despite all the supply chain turbulence in 2021, we thrived. Year over year, we delivered double-digit growth on a quarterly and full-year basis. In addition, our full-year 2021 revenue was nearly 56% greater than in 2019. This is a tremendous achievement that speaks to the resiliency and talent of our organization, not to mention the scalability of the investments we have made over many years in technology, infrastructure, and process. Furthermore, it's clear our strategic initiatives are working for us, as you can see in the improvement of KPIs like conversion rate, which increased 11.3%, average order value, which increased 12.9%, and repeat customers, which increased 440 basis points. Repair parts, including original equipment, is playing an important part in our growth, as are the adjacent verticals, including boating and marine, motorcycle and power sports, and RV and camper. What's most humbling is that we recognize we have only just scratched the surface in these categories and verticals. Turning now to slide six. Slide six, please. Starting with the onset of the COVID-19 pandemic, the last two years presented uncommon challenges for us and the entire industry. The rollout of vaccinations in 2021 helped kickstart the normalization process, though the global economy is still working through the aftershocks of the pandemic. Supply chain disruptions impacted economies everywhere, due in part to repeated factory closures and port backlogs around the world. These cascaded into global inventory shortages and widespread inflation. However, our team met these challenges head on by leading into the advantages and flexibility of our platform business model. For example, to mitigate the impact from product availability shortages, we adjust our sourcing logic to alternative vendors with better inventory positions. Simultaneously, we are partnering with select vendors to reserve inventory based on our projected demand. In times like these, when inflation is pervasive in the economy, we work with suppliers to hold down the cost increases to the extent possible, and where necessary, we pass some of these increases on to retail prices. One notable and clear advantage of our platform business model is the breadth of similar products available to a consumer to trade down the product value spectrum as prices increase. By offering customers options down the value spectrum during times like this, we can capture sales which competitors with a stock and ship model may lose due to their limited product assortment and options. We are leaning into this on the platform and with our call center sales representatives. Next, as I mentioned earlier, PartsID has strong ties to Ukraine. It is home to many of our independent contractors. Fortunately, many of them have been able to migrate to safer regions in Ukraine or to other countries and are continuing to work remotely. PartsID has no physical assets in the country, and fortunately, we haven't experienced any material disruption to regular business activities to date. We are closely monitoring the situation, both the safety of our team members and the need to maintain operations. As the situation continues to evolve, will adapt with any needed temporary or longer-term adjustments as appropriate. With that, I'll turn it over to Kailash for a review of the financials. Kailash?

Thanks, Nino. Good afternoon to everyone. Cross-margin slide eight. COVID-19 supply chain disruptions caused about 1% fall in cross-margin. We were averaging 21.4% pre-COVID era. By the end of the next 12 months, we expect our gross margins to be exceeding 21.4% in line with pre-COVID era. We would like to remind that we have a capital efficient, just-in-time inventory model. As we don't carry the inventory, we don't have a fulfillment cost in our operating expenses. Apple to Apple comparison of our gross margin with the competition calls for adjusting the gross margin for their fulfillment costs. With the initiatives listed on this slide, we expect to progressively move the gross margin needle to 23 to 23.5% in the next 12 to 36 months. Operating expenses, slide nine. While digital advertising markets are also seeing some price inflation, we are staying disciplined to our ROI framework across our various marketing channels. We also continue to innovate with new channels and are being very deliberate around where we invest across the marketing funnel to unlock the best efficiencies. Currently, our advertisement costs are variable as we heavily use performance-based marketing. The other element of variable expenses in SG&A is merchant processor fees for processing of credit card collections and fees for buy now, pay later service providers. Legacy business combination expenses was one-time cost. The public company costs are $4 million, which is being partially driven by DNO insurance costs. Balance sheet and cash flow. All right, slide 10. Our capital efficient and inventory-light model provides higher returns on capital employed by the company. This model enables us to expand in new lines of business and new markets without material investment in inventory and its production. We had $448.7 million revenue with just averaging $1.2 million of physical inventory on hand. Over to Lina.