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spk01: Good morning, ladies and gentlemen, and welcome to the EasyFill Holdings third quarter 2022 earnings call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, John McNamara. Sir, the floor is yours.
spk00: Thank you. Good morning, everyone, and welcome to today's conference call to discuss EZFIL's 2022 third quarter financial results. With us today for management are Mike McConnell, Chief Executive Officer and Arthur Levine, Chief Financial Officer. Before we begin, as usual, we would remind everyone that certain matters discussed during today's call or answers that may be provided to questions may constitute forward-looking statements as defined under federal securities laws. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the risk factors section of the company's annual report on Form 10-K filed with the SEC. Copies of these documents are available on the SEC's website as well as on the company's website. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these after the date of this call, except as required by law. With that, I'd like to turn the call over to Mike McConnell. Go ahead, Mike.
spk04: Thanks, John. Good morning, everyone. Thank you for joining us today to review our third quarter 2022 results. A little more than one year ago, we became a public company. When we reported our third quarter results for the 2021 fiscal year, we reported revenue of $1.9 million and $5.2 5.2 million for the first nine months of the year. 60% of that revenue came from a single customer. We had 13 trucks, and all of our customers were in the South Florida region. Today, we're essentially the same company, but we have significantly grown to meet the demand of what we see as enormous market potential. Our results for the third quarter of 2022 bear that out. We reported revenues of 4.1 million, a 120% increase from the 1.9 million, we reported a year ago for our first quarter reporting as a public company. On a nine month basis, revenues grew to 10.2 million from 5.2 million and 95% increase. While we don't control the price of fuel, and as you all know, the price has been very volatile this year, we've improved our margin per gallon by six cents or 16% since we became public. No one customer accounts for more than 30% of Q3 revenue, a significant improvement from where we were when we first became a public company. In fact, we've added more than 75 new fleet customers in 2022, with over 25 new fleet customers in the third quarter alone. We've also expanded to new locations with some of our existing customers. We've grown our fleet of trucks from the 13 we began with when we completed our IPO to 38 today. We've expanded our operations from a small footprint in South Florida to today, in West Palm Beach, Tampa, Orlando, and most recently Jacksonville. As we said in our September announcement, Jacksonville is one of the largest cities by area in the U.S. You see tremendous opportunities for further expansion throughout Florida while at the same time we'll be looking to grow to other states. We continue to focus primarily on growing our commercial business which currently makes up over 80% of our revenue. The opportunity to expand our on-demand consumer and specialty markets including marine, It's still part of our strategy and we'll be opportunistic about these as they present themselves. We're also planning to partner with other companies to introduce other products and services in the coming quarters to leverage our technology and improve our overall margin. As everyone knows, Hurricane Ian barreled into Florida into October and Florida residents are still assessing the damage. Easy Field was there at the forefront of our efforts to provide assistance where needed. We had our trucks on site delivering fuel to firefighters and first responder vehicles, as well as delivering fuel to residents in affected areas. We're very proud to have been recognized by the governor's office as one of the private sector companies providing needed emergency efforts. We've come a long way since our IPO in September of last year. We're proud of what we've accomplished in terms of growing the business in a challenging market. We're looking forward to continue to exit our business plan and expand the company's footprint and breadth of products and services. in a manner that is consistent with the ultimate goal of consistently generating shareholder value. With that, I'll turn the call over to Arthur, who will walk you through the financial results. Go ahead, Arthur.
spk05: Thank you, Mike. As Mike noted earlier, revenue for the third quarter of 2022 increased 120% to $4.1 million from $1.9 million in the prior year period. The increase was driven primarily by a 71% increase in total gallons delivered, 180,000 to 994,000 gallons in the third quarter of 2022. Our margin per gallon in the period increased by 16 cents to 43 cents per gallon in this year's third quarter. We've been successful at increasing our overall margin per gallon as we add new fleet customers at higher margins. We expect that we will maintain a healthy margin as we continue to add commercial fleet accounts and more consumers, including marine. Cost of sales was 4.2 million compared to 1.8 million in the prior year period. The increase from the prior year reflects the increase in sales as well as the hiring of additional drivers to support the growing business, primarily in new markets. Depreciation and amortization increased to $0.48 million in the third quarter of 2022 from $0.24 million in the prior year period, primarily the result of the increase in the fleet of delivery vehicles. Operating expenses excluding depreciation and amortization were $3.5 million in the second quarter of 2022 compared to $1.8 million a net increase of $1.7 million. The major increases were in payroll, sales and marketing, insurance, and public company expenses. The Q3 marketing expenses also included an advertising campaign directed to residential and marine customers. Interest expense was lower in 2022 than the prior year period due to the early repayment in September 2021 of pre-IPO debt as well as lower-cost financing post-IPO. On a GAAP basis, we reported a net loss in the third quarter of $4 million compared to $2.4 million in the prior year period. Adjusted EBITDA loss in the third quarter of 2022 was $3.3 million as compared to a loss of $1.2 million in the third quarter of 2021. The increased loss in the third quarter of 2022 reflects increased spending on infrastructure to grow and expand the business in the operating expense areas previously noted. We used approximately $3 million in cash in operations during the third quarter. Like many fast-growing companies, we are working diligently to get to the point where we reach break-even cash flow. The key to significantly reducing our cash burn lies in continuing to increase our sales volume and improve customer margins while also improving the efficiency of the drivers that have been hired as we ramp up sales in the new markets that we opened in 2022. We also plan to exercise very strict control over our operating expenses as we continue to scale, now that we have completed building out our core infrastructure. We expect our delivery truck fleet will be 42 at year end. We have more than enough truck capacity for now but we will evaluate before the end of the year our need for additional orders for delivery during 2023. Finally, our cash position at quarter end was six million, excluding investments, compared with 16.9 million at year end 2021. We have no long-term debt, and outstanding borrowings under our line of credit were one million at the end of the quarter. With that, we'd be happy to take questions.
spk01: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Tate Sullivan with Maxim Group. Please go ahead.
spk03: Thank you. A couple for me. Arthur, starting with your last comment on the truck target for the end of the year, do you still have scheduled to take delivery of five trucks by the end of the current quarter, or are you staying at 40, or do you have any capital commitments to take any additional trucks, please?
spk05: Well, we're currently at 38, and we plan to take delivery of four, which will bring our account to 42 at the end of the year.
spk03: Okay, thank you. And then as you take delivery of the trucks with, I mean, with the lower, I mean, and the additional cost of drivers, I mean, how quickly to set expectations, how quickly for those trucks to start to generate profits? And, I mean, let's say in a new city that you enter in Florida, I mean, can it be six months? Can it be shorter? And what are the variables for when a truck, a new, a freshly delivered truck can start?
spk05: delivering profits for you please yeah well we with what we call an anchor tenant so that we're not starting with zero business uh but um you know our model is that we need we need a truck to be approximately 60 to 70 percent utilized uh in order for it to start generating a positive cash flow and that's that uh and that assumes that the truck is uh doing two eight or two eight hour shifts per day
spk03: And to get to that level, I mean, have you seen trucks? Do you already have trucks in your fleet at that level of utilization that, I mean, you received that you have been operating for more than six months to a year?
spk05: Yeah, some but not all in Miami are operating at that level. The trucks that are in the new markets are still below that level. So to my previous comment, we still have a way to go you know, to reach that level of utilization with the existing fleet. So we, you know, we do plan to take delivery of some trucks in 2023, and we're in the process of evaluating that. And it will depend on how many new markets we open and how quickly we do that next year.
spk03: Thank you. And then you mentioned cost control, too, and then, I mean, with your operating expenses I mean, increasing slightly quarter, actually 3.4 to 3.476, slightly quarter over quarter. Do you plan to curtail some previously expected marketing expenses? Should we ramp up your operating expenses meaningfully for future marketing? Or is it on hold or maybe just flat for the time being?
spk05: Yeah, I think the marketing, you can assume that it'll be flat. We're not planning any increases in marketing going forward.
spk03: And, Mike, you mentioned, I believe you mentioned evaluating some new products and technologies. And I don't know if you can, with partners, I don't know if you can comment on it, but can you comment on what are the suite of products and technologies and maybe competitors and other, well, not competitors, but other on-demand fueling companies in other states provide or any additional detail that you can? Yeah.
spk04: Opportunities besides just petroleum so mobile car wash Anything related, you know automotive as far as maintenance related to those things because we have the consumer we have their Auto information and we have their credit card on file. So there's some natural Synergies there that we are talking with some of those partners some of the things we're looking at As far as rolling that out as also on the technology side, you know, we just introduced an upgrade on our fleet portal which has a lot of information for our fleet customers and that we'll be continuing to add enhancements to that on the tech side and be able to monetize that to give our fleet customers a lot more information and knowledge about their fleet and how they're operating and fuel consumption and those kind of things, providing them information that from what we have seen and the feedback we've gotten from our fleet customers that they haven't seen from other fuel providers, the level of tech and the level of information that we've been providing. So that'll be an emphasis for us, you know, continuing to invest in the tech side of things, and then rolling out some of these other revenue sources as well.
spk03: Okay, thank you. And is Florida, will you be ahead of other states in terms, or are you already ahead of other states in terms of the on-demand fueling market, or have other states grown their market for on-demand fueling faster, introduce more technologies? Can you talk a bit about national landscape for your market, or is Florida more developed? compared to, let's say, Kansas or California?
spk04: You know, I think it's still very scattered. You know, and there's not a lot of companies to really compare to a benchmark out there. From what we've been told from our customers who've been using, especially on the fleet side, you know, from the technology space, we're definitely probably ahead of where most people are at, that we're at least the ones that we're aware of as far as the national scale and the growth as far as mobile fueling. haven't seen or heard a lot as far as expansion from competitors or other people like that as far as other places around the country. So I think, you know, we're still in the early stages of this, but it's, you know, getting a lot of attention and ramping up quickly as far as, you know, a way to fuel, you know, going forward for consumers and fleets.
spk03: Okay, thank you. And then just last for me, a new previous guy, I mean, you had about a million gallons delivered in 3Q, but with the timing of the hurricane in Florida and maybe some halting to boat refueling, should there be, was there more, I mean, refilling of tanks after the storm, or how did the timing of the storm impact the number of gallons delivered? And could some of what you might have delivered in normal situation in 3Q22 slip to 4Q22s?
spk04: Yeah, there's no question. I mean, some of our fleet customers closed, you know, and with that, obviously we weren't fueling them at that particular point in time. But I think, you know, we were able to help a lot with the relief efforts, you know, as far as doing some things there. So that was definitely a replacement as far as gallons go. But I think we will see, you know, this continued growth and trajectory that we've been showing quarter over quarter in gallons. You know, percentage-wise and those kind of things, we feel very optimistic that we'll continue to be able to show that kind of growth going forward. But you'll probably have some, you know, definitely we have some spillover and a fast start to Q4, you know, with a little bit of pent-up demand with some of the businesses that closed and then reopened right after. Thank you, Arthur. Thank you, Michael. Thank you, Tate. Yes, thanks.
spk01: Thank you. Our next question is coming from Jason Colbert with Dawson James. Please go ahead.
spk02: Hi, guys. Thank you for your service during the hurricane. We really appreciate it. One question that comes out about service is, is there any discussion maybe with the state of Florida and with other states to kind of have this service ready in advance for the next emergency or maybe the next hurricane, which seems like it's coming pretty soon?
spk04: Yeah, yeah, yes. No, definitely there are some discussions. You know, I think as we called out, you know, we got a mention from the governor's office, so we've got a relationship and rapport established there. You know, typically a lot of the fuel providers are these big tankers that try to come in and get gas stations up and running. But what we've discovered with our fleet, which is smaller and more nimble with 1,200-gallon tanks, is we can get areas where some other fuel providers can't. So we were able to provide a lot of services to some of the businesses, to hospitals, to their employees, so they could help people during this time. But absolutely, I think formalizing more of this and seeing what we can do on a go-forward basis is definitely part of our plans, especially now that we've grown outside of Miami. We're much more attentive to a lot of the other markets that we're in with Tampa, West Palm Beach, Orlando, and now Jacksonville. we've got a much farther reach and can make a bigger benefit in those kind of things. But the short answer is yes, we have some initiatives to expand that relationship going forward.
spk02: And switching to the numbers, what's the limiting factor in terms of growing the revenue numbers, which have been growing at a spectacular rate, but at what point, you know, is it, is it the ability to hire drivers? Is it capital constraints? You know, what are the factors that you're looking at in order to, or the hurdles to overcome in order to continue to support this high growth rate?
spk05: Sure. Yeah, Jason, I'd say the biggest hurdle is capital because to start with at least two trucks and hired drivers. And, you know, on day one, even if we go with an anchor tenant, both the trucks and the drivers are going to be underutilized until we sell more business. So, you know, every new market we go to has significant negative cash flow before, you know, before we have significant growth. So, Yeah, I would say capital is probably the number one factor that limits our ability to expand to new states, which require even more capital and more effort than expansion within Florida.
spk02: And I guess this is a little bit of a loaded question, but with the midterms coming down today, there could be a shift in the energy policies in the U.S. and that could drive the market a little bit. So maybe that's an area that would alleviate some constraints in terms of market cap and ability to raise capital.
spk04: We certainly hope so. Yeah, we do too.
spk02: Thank you so much. Appreciate it. Yep.
spk01: Thank you. As there appear to be no further questions in queue, I will hand it back to management for any closing comments.
spk04: I just want to say thank you all for joining us, and we look forward to reporting back to you in the fourth quarter. Have a great day, everyone.
spk01: Thank you, ladies and gentlemen, and this does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day, and we thank you for your participation.
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