HyreCar Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Hire a Car 2020 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star and the one key on your touchtone telephone. Please be advised that today's conference may be recorded. If you recall our participants, please press star then zero. I would now like to hand the conference over to your speaker host, Joe Fernavi. Please go ahead, sir.

Thank you, operator. And welcome, everyone, to our 2020 fourth quarter and four-year earnings 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 business 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-K. 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 annual results. A year ago, in March of 2020, we said, we are living in unprecedented times in our work and home life as we confront the global pandemic of COVID-19. But these times will test and prove the value of our business model as a platform for people and companies to participate, in the rapidly changing transportation industry. Fast forward to today, and these words proved accurate. HireCar's effort to expand the platform by identifying opportunities in prepared food, package, and grocery delivery, and by rapidly expanding our emphasis on delivery in March last year proved to be the right move by our team. As a result, net revenue increased 59% to $25.2 million for the fiscal year, up from $15.9 million in 2019, and rental days increased 63% to $1,014,000 for the fiscal year, up from $621,000 in 2019. I want to recognize the collective efforts of the entire HireCar team. Thank them for their hard work in making this happen and the support of our stakeholders, investors, partners, and advisors during what was an incredibly challenging year. We could not do this without all of your efforts, and we thank you. A main source of higher car strength has been continued robust driver demand. For the year, 15,100 new unique drivers picked up a car on our platform, a 29% year-over-year growth rate. Our expansion to include food, grocery, and delivery, plus our focus on increasing customer retention, drove revenue and rental day growth rates. helping us sustain during the lockdown and continuing to recover as we look to a post-COVID world. As evidence of continued strength in the delivery business, DoorDash and Grubhub said that they are seeing an acceleration in their businesses. One of the key metrics given was their expectation for driver incentives. Their expectation is that driver incentives remain flat for the foreseeable future. which is a good indication that demand for delivery, grocery and prepared food is still strong and drivers are flocking to their sites to earn income. We foresee continued growth in gig rental demand as more consumers and businesses adopt delivery as a service. We believe that the use of these services by a wider audience is sustainable because it represents the acceleration of a trend that COVID enhanced. As a result, TAMs on delivery platforms will continue to grow. For example, Uber Eats grew over 200% year-over-year last quarter, and they've only penetrated 30% of restaurant delivery opportunities in the U.S. Even small independent restaurants have adopted delivery services to serve more customers as evidenced by 70% year-on-year growth in Grubhub's Daily Average Grubs Index, noting an acceleration of adoption in Tier 2 and 3 cities and rural areas. Two-thirds of higher car drivers are now predominantly delivery-oriented, and we see COVID as having accelerated the opportunity in the local delivery-as-a-service environment, not just for food, where micro logistics and lower basket sizes now have a flywheel effect moving forward, but everyone is now starting to move into adjacent lanes, alcohol delivery, hemp products, pharma, and packages, For example, Amazon said they are increasing their investment in local assets as they start to reimagine local fulfillment and distribution centers away from airports. Sourcing a vetted supply of drivers in local environments is how we've been able to sustain our growth. And strong delivery platform demand suggests higher car driver economics will remain attractive, creating a sustainable environment supporting larger and larger driver pools. In addition to gains from delivery, Uber and Lyft have recently said their rideshare business is increasing week over week, and they are having their best week since the pandemic. They have also said they expect increased driver incentives to help drivers return to rideshare and is a great indication of demand as states expand their reopening trends. So as we move into the next phase of COVID, which we hope is full recovery and reopening, the combination of delivery service and recovering rideshare volumes will further strengthen the demand side of our platform. On the car supply front, we are starting to see increased vehicle supply onto the platform from our previously announced partnerships and specialty fleet suppliers. On January 28th, we announced an expanded partnership with AmeriDrive Holdings. That announcement included new relationships with Cogent Bank for innovative financial services, a national fleet supplier, and an automotive aftermarket retail and service chain with over 900 locations nationwide. AmeriDrive is leveraging these locations for higher car AmeriDrive branded parking spaces and vehicle logistics. We're currently operating out of five stores in the southeast and expect to operate in 35 stores by the end of the year. I am happy to say that these new partnerships are delivering the expected increase in vehicle supply. We've gone from an average of a little over 3,000 average daily rentals, or ADRs, in Q4 to sequentially trending toward an ADR average of 3,500 in the month of March, with a run rate of over 4,000 ADRs expected in April, as the first 1,000 cars from this initiative are onboarded and continue moving through the reconditioning pipelines. We did encounter some logistical constraints that hampered our efforts to scale as quickly as we would have liked with our expanded AmeriDrive initiative in March. Record-breaking inclement weather in the southeast, complicated vehicle transportation, preparation, and titling efforts. We fully expect to have our initial AmeriDrive vehicle supply goal reached in April. I believe that we're on a strong and steady run rate that will continue through the second quarter. and will further ramp into the back half of the year as dealer supply and state reopenings accelerate tailwinds. In addition, franchise and independent dealers are experiencing vehicle shortages due to the lack of new car supply and record used car prices. With vehicle purchase demand high, there are fewer retail dealers listing gig rentals than originally anticipated. Part of the unprecedented demand for used vehicles is driven by significant interruptions in new car production due to COVID-related supply chain issues and pent-up demand from lockdowns. This will only get stronger as government stimulus flows through the economy. However, while dealer-sourced vehicle supply is temporarily constrained, we are seeing vehicle platform growth from specialty fleet and rental car companies who want to find other ways to utilize their vehicles. In fact, our internal sales team have been successful with increasing vehicle supply from existing customers. Separately, we're finding incremental revenue opportunities. One opportunity is to leverage our growing customer base to generate incremental revenue. We previously announced one of the first major non-rental revenue initiatives this quarter, our collaboration with the leading automotive research and consumer buying website, Trucar. In internal surveys, over 30% of our renter customers tell us they intend to purchase a vehicle in 90 days or less. I firmly believe that HireCar is in the infancy of unlocking the value from our customers that ultimately buy, finance, and insure vehicles. We are also rolling out a new initiative that will allow us to assist our fleet partners and drivers to get the financing they need to purchase and operate vehicles. As part of this initiative, we launched a new program this past quarter to help customers buy a vehicle while earning income on our platform. The new program is called Earn to Own. We are working with specific financial partners that welcome gig customers and provide competitive financing options that consider our drivers' rental payment history to help them qualify for loans. We believe this is an industry first. The gig driver is a highly underserved consumer and often has multiple barriers to buying and owning a car. A key component was recently put in place with the launch of our first financing partnership, ACC Consumer Finance. And we have other initiatives in development. It's important to state that these initiatives are designed to improve hire car's value proposition for vehicle dealers and provide more reasons for good drivers to rent on hire car's platform. Initial data proves that this program is resulting in longer driver rental periods. We're in the early innings of these initiatives, but by leveraging existing opportunities that have not been monetized in the past, we're looking at these programs as a way to create stickiness to the hire car platform for both owners and drivers. resulting in increased lifetime value and higher satisfaction rates of customers. Lastly, our business development team is incorporating more electric vehicles onto the HireCars platform. It is our goal to join Uber and Lyft in their objectives to be carbon neutral by 2030. Uber has begun to incentivize drivers through additional bonus pay for driving EV vehicles, which enables them to earn up to 10% to 15% more. This is a trend we see accelerating into 2021 and beyond. Additionally, there are significant government incentives for fleet operators and OEMs to include zero emission vehicles in their fleets. These incentives increase the margins for operators on the higher car platform and encourage EV car supply growth. So with that, I'd now like to turn the call over to Scott Brogy, our Chief Financial Officer, to walk us through some key financial elements from the fourth quarter and fiscal year. Scott?

Thanks, Joe. 2020 was a difficult year in so many ways, but by expanding our platform to rideshare plus delivery, the hire car team was still able to meet the original goal we had set going into 2020 of exceeding one million rental days in the year. Rental days increased 63% to approximately 1,014,000 rental days for the 12 months ending December 31, 2020, from 621,000 for the prior 12 months ending December 31, 2019. For the three-month period ending December 31, 2020, rental days increased by 41% to 277,000 rental days from 197,000 rental days in the prior year's fourth quarter, and sequentially were flat from the third quarter ending September 30, 2020, as the impact of a second wave of COVID was felt through the ride-sharing segment of the business in several of our key geographies through the early winter. Net revenue grew 59% to $25.2 million for the 12 months ending December 31, 2020, from $15.9 million to for the prior 12 months ending December 31st, 2019. Fourth quarter revenue grew 46% to a quarterly record $7 million for the three months ending December 31st, 2020 from $4.8 million for the prior year's fourth quarter and sequentially represents a 3% increase from $6.8 million in the third quarter ending September 30th, 2020. Cost of sales increased for the year ended December 31, 2020, to $16.9 million from $9.8 million the prior year, as insurance expenses continue to account for the majority of cost of goods sold, primarily due to some seasonal shifts in insurance costs to support higher levels of car supply through the winter quarter. We expect new partnerships with the best insurers brokers, and administrators to continue to enhance our program and make HireCar the platform of choice for domestic vehicle operators. As a result, gross profit for the 12 months ending December 31, 2020 was $8.3 million, increasing 38% from $6 million in the year-ago period ending December 31, 2019. Gross profit margin was 33%, for the 12 months ending December 31st, 2020, down from 38% in the year-ago period ending December 31st, 2019, as we accelerated insurance claims to shrink processing time and get more cars on the platform sooner. We continue to expect our gross profit margin to increase to 45 to 50% on a going-forward basis as we improve insurance processes and increased other revenue from high margin subscription and referral income. Operating expense increased to $23.5 million for the 12 months ended December 31st, 2020, from 18.7 million in the same period the prior year, or by 26% year over year. This was primarily due to increased operations, sales, and technology expenses to drive higher business levels and invest in operations and technology, in particular to further accelerate the platform into 2021. After $3.3 million in non-cash stock-based compensation in 2020, up from $2 million the prior year, cash operating expenses totaled $20 million for the year, in line with our 2020 quarterly target OPEX range of $4.5 to $5 million. We anticipate increasing operating leverage into 2021 as we significantly increase revenue, and so we estimate slightly higher quarterly cash op-ex of $5 to $5.5 million in 2021. Our net loss increased to $15.2 million, or 87 cents per share, for the 12 months ended December 31, 2020, from $12.5 million, or 90 cents per share, the prior year. After backing out non-cash items, negative adjusted EBITDA of $11 million was slightly above the prior year's $9.6 million. Cash totaled $4.9 million as of December 31, 2020, a decrease of $5.7 million for the year from $10.6 million at December 31, 2019, and a sequential decrease of $1.9 million from $6.8 million for the prior quarter. We also completed a significant equity financing of $29.7 million last month. So as of today, we have over $25 million in cash and investments in the bank, primarily with JPMorgan Chase. Now I'd like to turn the call back to Joe for final remarks.