Helbiz, Inc.

Thank you for standing by and welcome to the Hellbiz 3rd Quarter and 9 Months 2022 Earnings Conference Call. Currently, all participants are in the Synony mode. As a reminder, today's program will be recorded. If anyone objects, please disconnect now. I'd like to introduce your host for today's call, Gary Dvorak, Managing Director of the BlueSherp Group. Mr. Dvorak, please go ahead.

Thank you, Operator, and hello, everyone. Welcome to Hellbiz third quarter, nine months, 2022 results conference call. We issued our financial results press release today after the market closed. It's available via news wires and on our website, it's investors.hellbiz.com. A replay of this conference call will be available later today on the investor relations page of our website. With us today, our founder and chief executive officer, Salvatore Pallella, chief financial officer, Giulio Profumo, and Chief Operating Officer Jonathan Hanstead. The team will first discuss results, then we will answer some top questions submitted to us via the Robin Hood app. Please note that our press release and this conference call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors. Health Biz can give no assurance that these statements will prove to be correct. We have no obligation to update these statements. I will now turn the call over to Salvatore to begin. Salvatore?

Thank you, Gary, and good day, everyone. Thank you for joining us to review our business performance and financial resource for the third quarter and first nine months of 2022. I will first update you with the exciting quarterly progress in our business. Then Jonathan will elaborate more on cost optimization. Lastly, Giulio will give us the financial perspective. In the third quarter, we made significant progress in improving cost efficiency and margins. And therefore, we started in the earnest in the second quarter. We trimmed unnecessary costs in operations, administration, headcounts, and marketing. For example, we started to work with a third-party staffing company instead of hiring directly. All these efforts and these will be more are starting to drive us to profitability. Cost reduction are positively impacting cost revenue in our core mobility business. While Jonathan will elaborate more on this and I will call out that we anticipate operating efficiency in micromobility. Cross-functional operating got smoother and we increased sleep productivity. Also, externalizing some of our European operations contributes to better mobility cost of revenue. We anticipate even higher operating efficiency in mobility after we close the acquisition of wheels. Before we take a deeper review in mobility, I would like to highlight our year-to-date revenue growth of 30%. In this difficult time, I'm proud that our team could achieve this remarkable performance. In mobility, we expanded our operating area in the U.S. We expanded operation in Miami-Dade County and adding our newest e-bike model to the local fleet. In Europe, we extend beyond Italy to cover Spain by launching our first e-scooter fleet there. With our commitment to bring everyone modern and sustainability transportation solutions, we will continue expanding into more cities, allowing more people to benefit from our micro-mobility products and services. Our third quarter and nine-month mobility revenues leap due to the economic end-wish. With most of our mobility revenue coming from Europe, the depressing of the euro against the U.S. dollar caused lower revenue. In addition, delayed deployment affected our mobility revenue. The over-licensed renewal process means longer than expected pending time, so operators are holding the deployment of the vehicle and waiting for approval. We expect the situation to improve in the quarter ahead, and we anticipate redeployment of our vehicle, especially e-mobile. Mobility cost of revenue was reduced substantially as a buffer against lower revenue to some extent. Now let's discuss about new taxi service. Last quarter, we announced our on-demand taxis available on all our app users. Complete Medet offering last week, we announced a partnership with Vuitaxi, a leading taxi operator in Italy. Now help this user can book taxi ride whether individual or share it directly from our app. A key feature is being show the maximum price they could be charged before riding. We made meaningful progress in the wheels acquisition during the quarter. After a throw-out due to diligence a couple of weeks ago, we signed a merger agreement. We are working on closing of the deal as we speak. We expect to see synergy in operations and financial after closing. We should boost our near-term stop-line and margin while driving forward eventually bottom-line profitabilities. The increase in our nine-month top line was primarily attributed to higher media revenue. However, recall that we are launching the media business last August, so the highlight growth rate in media on a one-year-over-year comparison basis is less meaningful. Additionally, due to the substantial cost of revenue associated with media, We achieved the high media revenue by sacrificing our margin potential. Therefore, we are rethinking how we will operate our media business. Our main focus needs to be on our core micro-mobility business. We extended our partner ecosystem with notable progress in mobility and live media. We partnered with OneFootball to bring Sirius BKT to Italy and the US by cooperating with more international entertainment companies. Sirius B is now available in more countries in Asia and Africa. In mobility, we extended our cooperation with Movit and started a partnership with the target-based MSSA platform, Keen2Go, which improves user by offering faster and easy access to vehicles while pursuing a more sustainable lifestyle. Now I want to hand this offer to Jonathan to talk about our cost optimization. Jonathan.

Thanks, Salvatore. Let me elaborate on software as it relates to our cost optimization and ability to grow. First, we strive to find improvements and efficiencies in the way we build our software. This means building technology that allows for more efficient allocation of resources, whether they be digital or hardware. This also means having our team on the ground run more efficient routes, prioritize tasks, deploy inventory to areas more likely to see ridership, be alerted earlier to vehicles requiring maintenance, and generally more responsive to needs before they become costly problems. With all this work, we're on track for nearly completely automated operations by next year that will manage all tasks, drivers, and operational teams. The advantages we have gained from automation to date are already resulting in lower mobility operation costs. Second is that we're building mobility software solutions that set the standard for the industry. In terms of safety and compliance, we're able to exceed the regulatory requests and needs of the cities we operate in. With our focus on AI and computer vision, we have been able to launch features such as our technology that certifies parking compliance in real time and helmet selfie verification, AI tech, that are flexible to meet the needs of each city. And we're able to quickly adapt to the change in request of regulators. Cities are moving away from pilot programs and now want to lock in long-term providers, so they're more specific in what they seek from operators. Since our approach is software based and relies on the existing deployed hardware, it's much quicker and cheaper to deploy solutions that are custom built in each location we operate. This flexibility and innovation has allowed us to build a track record of success that makes us an attractive operator to city officials. This is why we have won licenses over larger competitors and why our licenses stay active while others expire. We're confident this will continue to be a differentiator for us. The time and energy we put into building our technology platform up front is what gives us a competitive advantage. Creating a flexible system that is adaptable to each city and the investment in R&D will pay off in the future as we're able to respond quickly, tailor our approach to each city, and not have to acquire new hardware. Lastly, we're looking at software solutions to extend what mobility means to the average user. As we grow in communities, we're able to build a solution that solves many transportation-related needs, thus encouraging users to call on us more often. Whether it is connecting to taxis, local transit, or insurance, our platform is built to connect easily with third parties to extend our offerings. This low-cost way of expanding our services keeps our margins down but allows us to raise the utility of our offerings. Now, let me turn the call over to our CFO, Giulio Profumo, to discuss our financial performance. Giulio?

Thank you, Jonathan. Our detailed financials can be found in our earnings release and thank you filing, so we will concentrate on discussing the drivers of financial performance. Keep in mind that all figures given are for the third quarter or nine months of 2022, and all comparisons are made on a year-on-year basis, unless I note otherwise. We achieved solid top-line growth year-to-date through September 30, 2022. Revenue was impacted by headwinds in mobility, primarily due to the unfavorable FX impact. However, we continued driving towards bottom-line profitability. Net loss at the company level narrowed by 13%, primarily due to lower mobility cost of revenues. First, I want to review the top line. Mobility revenue declined because of fewer trips and the Euro-US dollar exchange rate impact. Nevertheless, in Q3 2022, it still contributed 67% of total revenue, a decline of 37%. Revenue was still dominated by pay-per-ride, but subscriptions gained traction. Overall, the strengthening of the US dollar had an unfavorable impact on revenue. In constant currency, mobility revenue would have been a 12% higher in Q3 2022. That's what we reported. Looking ahead, we expect that our acquisition of wheels will create more synergies down the road and improve the operating efficiencies of our fleet and customer management. In Q3 2022, we continued to reduce mobility cost of revenue, which was down by 20%, thanks to better operating efficiency and the externalization of a portion of the European operation. That helped reduce the overall cost of revenue by 15% in the past quarter, in line with our strategic focus on profitability. Will is expected to further improve the efficiency and achieve more cost optimization. Moving to media, media recorded a 42% top-line increase during Q3 2022, which was a driver of our total revenue growth. know that we started the media business in the middle of Q3 2021, so the comparison is a rough number. What is more meaningful is to look at the margin brought by media. When breaking down our total cost of revenue, you will see media counted for 32% during Q3 and 46% during the first nine months, both higher than the value of revenue brought during the same period. As Salvatore mentioned, considering relatively fixed and substantial costs associated with the medium, we are rethinking our approach to this business. Helbets Kitchen revenue significantly increased during the third quarter and first nine months, but it's still a minor contributor. To improve it, we are in active dialogue with potential partners. Now, turning to the other costs and expenses, I want to reiterate that our priority remains to be hitting profitability as quick as possible. We will continue to improve operating efficiency while cautiously investing in growth in the context of the economic environment. Indeed, we made meaningful progress on cost reductions in Q3. Please note that the operating expenses were up sequentially due to an impairment of fair value of mobility assets caused by the economic slowdown. The impairment accounted for 39% of our total office. The impairment was primarily due to the decline in our market capitalization, the cutback on operating e-mopeds, and the current adverse macroeconomic environment. Beginning to operating expenses for the quarter, we made significant costs in sales and marketing expenses, demonstrating our commitment to slimming down costs while building a higher quality business. We incurred approximately $800,000 in non-cash equity-based compensation expenses, which accounted for almost 3% of the total operating expenses. Turning to our balance sheet and liquidity, at the end of Q3, cash and equivalents were $3.3 million. Cash investments during the first nine months were mostly related to fleet expansion, to support further growth, and our acquisition of wheels. Finally, we recently entered into an equity line of credit that provides us with the option, but not the obligation, to issue and sell up to $13.9 million in common equity at the time of our choosing during the term of the agreement. Looking ahead, we expect the fourth quarter to be up quarter by quarter and full-year revenue up year over year as we benefit from a balanced business landscape that can weather the uncertainties and economic headwind. everyone is faced with. We're also excited about further expanding our mobility offering into more locations and launching of the new insurance business. We look forward over the coming quarter to discuss the progress we have made. We're now going to take questions from shareholders that Gary will moderate. Gary?

Thanks, Giulio. So, Hellbiz received questions from our shareholders on the Robinhood app thanks to the Say Technology shareholder Q&A platform. The selection of the top upvoted questions will be addressed now. We'll continue this platform and extend to others so that we can continue to address shareholder questions in the future. I'm passing the questions one by one for the Hellbiz management team to answer. So the first question, knowing your company can only trade under $1 for six months, are you aware of possibly being delisted in the near future? And are you planning to do a reverse split?

Thank you for your question. We're currently monitoring the situation and intend to pursue a request for an extension of the grace period with NASDAQ to cure the stock price deficiency and return to compliance with the continued listing standard. We intend to consider available alternatives, including but not limited to a reverse stock split. subject to stockholder approval if necessary to cure the stock price non-compliance.

Okay. Can you describe how recent partnerships will positively impact the business and bottom line?

Thank you. That is a very good question. The goal with our partnerships is to extend our user base, reach customers in new ways, and to rely on the expertise of our partners. To point to some examples across our business, We taxi, as we talked about today, allows her mobility offerings to expand and relies on the deep market penetration in Italy. One football provides a new platform for fans to subscribe to help his life and deliver room greatly expanded our user base of customers ordering from help his kitchen. These impact our revenue positively while requiring less overhead on our end.

Okay. Thanks. But the new taxi service is held as trying to compete with Lyft and Uber?

Thank you. Our goal has always been to lessen car ownership and be the resource for people looking to commute around their communities. We taxied help us establish a wider mobility ecosystem, integrating various services into one app, including ours. That means we are constantly developing and offering our user value-added service and more transportation alternatives. So we see these as an additional to our core business of micromobility.

Great, thanks. How does the current macroeconomic environment affect Helbiz?

So we're not immune to the realities of inflation and a slowing economy. However, we are confident in our ability to continue navigating macroeconomic headwinds and deliver strong long-term business results. Great, thanks.

So the final question, what's the most important initiative for Helbiz looking into 2023?

There will be multiple initiatives, and the goal will be the growth of offering that we start this year. The answer of these will be after the closing of wheels merger, working with their vehicle and expanding the B2B and monthly subscription offering, which has seen success in New York City already. As well, we will continue to grow the partner offering around mobility, such as taxi and insurance.

Great. Thanks. Okay. And with that, we're going to turn the call back to Salvatore for closing remarks. Salvatore?

Thank you, Gary. While the overall mal-economics environment remains uncertain, we are confident and motivated in driving towards financial and operating profitability. We intend to scale micromobility and offer new, innovating services to drive top-line growth. Meanwhile, ongoing cost optimization and adding of wheels are expected to bring our operating efficiency to the next level. We are grateful to our team's dedication and to our shareholders' support. We are excited about the future and look forward to sharing more on our progress in multiple phases of our business. Thank you all for joining the call.

Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect.