HyreCar Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the HireCAR, Inc. Third Quarter 2020 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for your questions. If you have a question, please press the star followed by the 1 on your touchtone phone. If you'd like to withdraw your question, please press the pound key. If you're using speaker equipment, please lift the handset before making your selections. This conference is being recorded today, November 11, 2020, and the earnings press release accompanying this conference call was issued at the close of the market today. On our call today is HireCar's CEO, Joe Frenari, and CFO, Scott Brogy. I would now like to turn the call over to Joe Frenari.

Thank you, everyone, and welcome to our third quarter 2020 conference call. Before we get started, I'd like to take this opportunity to remind you that during this call we will be making forward-looking statements within the meaning of federal securities laws regarding HireCar, Inc. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions, or any other statements relating to its future earnings, activities, events, or conditions. These statements are based on current expectations, estimates, and projections about the company's businesses based in part on assumptions made by management. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors included in our documents that the company files with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law. Our discussions today will include non-GAAP financial measures, These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results will be found in our earnings release and supplemental materials, which will be furnished with our Form 10-Q that will be filed with the SEC and will also be found on the investor relations portion of our website. Now to turn to our quarterly results. The third quarter validated our business model in a post-COVID world, and the results serve as a bold statement by the HireCar team in the face of adversity. The performance of our business model is a continuation of our efforts in the face of an unprecedented business environment. Our conscious effort to expand the platform to delivery services by identifying opportunities in delivery service platforms and by rapidly expanding our emphasis on delivery in late March proved to be the right move by our team, and the results speak for themselves. Revenue grew 22% sequentially and over 84% year over year. We saw over 273,000 rental days in the quarter, an increase of over 20% sequentially, and over 90% growth in rental days year over year. The company fully expects to see growth through the rest of 2020, even with the differing city and state approaches to reopening. and we remain steadfast that hire car will continue to persevere in the new COVID world. One of our main sources of strength has been continued robust driver demand. The strong driver demand comes primarily from customers seeking vehicles for delivery as delivery services are heavily supplementing rideshare driver income during the slowdown. In the third quarter, 5,100 new unique drivers picked up a car on our platform, an 11% increase sequentially, and 37% year-over-year growth. Increasing customer retention was key to revenue and rental day growth rates, helping both recover in the third quarter. We foresee continued growth in driver demand as consumers are changing their behavior in the COVID-19 environment. Mom and pop have adopted delivery services into their daily routine, and as a result, TAMs on delivery platforms have exploded. For example, Uber Eats is now a $35 billion run rate business and grew this past quarter 120% year on year. Grubhub's revenue was up 53% year on year in the third quarter and their growth continued to accelerate. Strong delivery platform demand means driver economics will remain strong, creating an environment sustainable to larger and larger driver pools. Additionally, we're in the early innings of this growth. Uber Eats has only penetrated 30% of restaurants in the U.S. So as we move into the ninth month of COVID, the combination of delivery service platform economics remaining strong and the promise of rideshare bouncing back to normal as states reopen is making our business even bigger than we had anticipated. Car supply is the main gating factor to our growth today. Q3 results validate higher cars expansion into food and package delivery, that allowed hire to continue to fare better than the 55% rides decline our TNC partners are seeing in their businesses. In this COVID world, what hurts ride sharing helps delivery. And for us, it is a matter of new cars on the platform. So while the outlook for COVID is unclear, as I will discuss later, we have used this time to grow our partners so that we can significantly increase the availability of cars for the strong demand on our platform. New cars listed on the platform are being sourced from existing customers, some of whom are expanding their fleet operations significantly. However, franchise and independent dealers have seen a rebound in used car prices, which has supported their core used car sales business. With used car prices high, there are fewer vehicles listed for gig rentals. Expectations are that vehicle manufacturing is ramping up and will start to hit dealer lots shortly. Once new cars start coming online, used car prices should start to normalize into the first half of 2021. This will have the effect of creating more supply and driving fleets toward alternative use cases for dealerships. While dealer stock is constrained, we have seen growth from specialty fleet and rental companies who want to utilize existing vehicles. In late August, we announced a partnership with Midway Car Rentals. the rental car agency held by the Hanke Group family of holdings with combined assets of over $9.5 billion. The pilot has moved cautiously with the need to integrate policy and procedures within the operations at our respective companies. We recently participated in the International Car Rental Show, and HireCar was featured in a discussion panel with Brett LaPelle, Midway's president. Brett highlighted benefits to the partnership, including their ability to run cars in longer and more profitable cycles. This partnership is a great case study, an example of how larger rental car agencies can benefit from our robust driver demand. And we're seeing more interest from rental agencies amid the uncertain business environment that they are operating in today. Our team has been onboarding new partnerships that we believe can expand the number of cars on our platform from the current rate of 3,100 active daily rentals to an additional 6,000 active daily rentals count between now and the fourth quarter of 2021. New partnerships will include relationships with some of the largest automotive groups in America and go a long way toward replacing the inventory that came out of the rideshare and delivery with the exit of Hertz and FAIR during COVID. That approximated almost 65,000 vehicles. Getting to 4,500 active daily rentals makes us profitable in the near term, so we believe we can directionally drive to both profitability and growth with these new partnerships as we grow in the fourth quarter of 2020 and into the first couple quarters of 2021. A couple notable initiatives we're working on today. First, hire car is restarting its COVID pause partnership with the Cox automotive mobility team and their clutch technology subsidiary, which will lead to more vehicle supply partnerships with retailers. Cox automotive believes hire car can be an integral part of their plans to onboard their dealers to mobility platforms. Second, we'll shortly be announcing a national partnership to monetize customer leads that wish to buy a vehicle. 30% of HireCar platform visitors indicate they plan to buy a vehicle. This partnership will put us in position to earn complementary revenue streams leveraging HireCar's current platform. Third, we are excited about our new electric vehicle initiatives. We have made it our goal to share Uber's objective to be carbon neutral by 2030. We are finalizing partnerships now that will put EV fleets in key markets. And last topic, certainly of major significance to our industry, another larger macro political event since Assembly Bill 5 that was expected to go into effect on Jan 1, 2020, required companies that hire independent contractors to reclassify them as employees with a few exceptions. In response, our partners, Uber, Lyft, DoorDash, and others helped fund Prop 22 to preserve the independence and flexibility of these drivers. We are pleased that Prop 22 passed in California with a healthy margin. To echo what Uber said, this important question has now been settled in the most populous state in the country. California voters listen to what the vast majority of drivers want, new benefits and productions with the same flexibility. Going forward, drivers and delivery people in California are expected to be guaranteed a minimum earning standard, healthcare contributions, accident insurance, increased safety protections, and more. We feel strongly that this is the right approach. Uber and Lyft said that they expect to be adding benefits to gig work to make it better, not getting rid of it altogether in favor of an employment-only system. We believe Prop 22 struck the right balance between preserving the flexibility that drivers value so much while adding protections that all gig workers deserve. With that, I'd now like to turn the call over to Scott Brogy, our Chief Financial Officer, to walk through some key financial details from the quarter. Scott?

Thanks, Joe. I'd like to start by saying thank you to all members of our military and to all veterans on Veterans Day for all you have done to protect our freedom. HireCar continued to move closer to profitability this quarter. Adjusted EBITDA improved to negative $1.6 million. or negative nine cents per share in the third quarter as we grew revenue and controlled expenses. And we once again reduced our quarterly cash burn, this time to less than $400,000 in the third quarter. Net revenue increased 83% to $6.8 million for the three months ending September 30th, 2020, from $3.7 million for the three months ending September 30th, 2019 and was up 22% sequentially from $5.6 million for the three months ending June 30th, 2020. The revenue increase was primarily driven by increases in core rental days as well as slightly higher unit pricing. Rental days grew 87% annually to over 273,000 rental days in the third quarter from approximately 146,000 rental days in the third quarter of 2019 and 18% sequentially from approximately $231,000 in the second quarter of 2020. Cost of sales increased for the quarter ending September 30, 2020, to $3.9 million from $2.2 million the prior year ending September 30, 2019, and by $900,000 from $3 million the prior quarter ending June 30, 2020, primarily due to some seasonal shifts in insurance costs to support higher levels of car supply. As a result, gross profit for the third quarter was $2.9 million, doubling from $1.4 million in the year-ago period ending September 30, 2019, and increasing significantly from $2.5 million for the prior quarter ending June 30, 2020. Gross profit margin was 43% for the third quarter, up from 40% in the year-ago quarter ending September 30, 2019, and down slightly from 45% in the second quarter ending June 30, 2020. We expect our gross profit margin to increase toward 50% as we continue to improve insurance processes and products moving forward. Operating expenses decreased to $4.7 million for the three months ending September 30, 2020, from $5.2 million in the same period the prior year as expenses continued to be well controlled. Cash operating expenses totaled $4.5 million for the third quarter after adding back approximately $144,000 in non-cash stock-based compensation toward the lower end of our quarterly target OpEx range of $4.5 to $5 million as we start to realize efficiencies of scale. Our net loss decreased to $1.8 million, or 10 cents per share, for the three months ending September 30th, 2020, from $3.6 million, or 24 cents per share, in the same period the prior year, ending September 30th, 2019, and also decreased sequentially from a net loss of $3.9 million, or 22 cents per share, for the prior quarter ending June 30th, 2020. Adjusted EBITDA of negative $1.6 million, or negative 9 cents per share, was a dramatic improvement from negative $3.1 million, or negative 20 cents per share, the prior year ending September 30th, 2019, as well as from negative $1.7 million, or negative 10 cents per share, in the prior quarter ending June 30th, 2020. Cash totaled $6.8 million on September 30th, 2020, a decrease of less than $400,000 from the $7.2 million we had last quarter on June 30, 2020. Over the past two quarters, cash has only decreased by approximately $1 million, and unlike the prior quarter, this was done simply based on improving operating cash flow without the support of the PPP program we enjoyed in the second quarter. Much of this is a result of our new automotive insurance program with Apollo 1969. As a reminder, we will have a balloon payment in early 2021, so we are maintaining our discipline on accruals as we grow. Now I'd like to turn the call back to Joe to wrap things up. Thanks, Scott.