Q1 2022 HyreCar Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen.
Thank you for standing by welcome to the highest car Inc. Twenty-twenty till first quarter conference call.
During todays presentation, all parties will be in a listen only mode. Please note. This conference is being recorded.
Following the presentation the conference will be opened for questions.
If you have a question. Please press the star followed by the one on your Touchtone phone.
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The earnings press release, a copy of this conference call. It was issued at the close of the market today May 16 2022.
Our call today is high as car T O Joe when Nabi, President, Brian Nolan and CFO search the Buck I will now turn the call over to Scott Arnold of core IR, the company's Investor relations firm.
Please go ahead.
Thank you operator, and welcome everyone to hire catch first quarter 2022 conference call before we get started I would 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 higher car incorporating forward looking statements include but are not limited to statements that express the company's intentions.
Lease 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 could differ materially from those projected or implied during this call.
Taking it as described in our risk factors included in the documents 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 Companys 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.
As of today, and we undertake no obligation to update them, except as required by applicable law or.
Our discussions today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to you and that is the substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results can be found in the earnings release and supplemental materials filed with the SEC and can also be found on the Investor relations portion of the company.
Website, now I would like to turn it over to Joseph <unk> CEO .
Great. Thank you Scott and welcome everybody I am pleased to report that higher car had a strong start to 2022 building off the momentum from a record year in 2021.
We saw strong car share demand to support gig based services and despite persistently elevated prices in the used car market. We also maintained available supply on the platform and a substantial increase in new owner accounts.
We are now the only platform crowdsourcing vehicles for gig drivers in the United States and as a dedicated provider of drivers for ridesharing delivery platforms. <unk> is uniquely positioned to help these platforms cover anticipated driver shortages as demand returns to pre pandemic levels.
March of this past quarter was our strongest revenue month in company history and that momentum has continued through April and May.
We anticipate macro tailwind to continue to drive revenue and ADR is higher as used car prices level off car supply is anticipated to flow from our warehouse initiatives.
<unk> continues to grow for gig services, and we continue to build the hire car ecosystem.
<unk> revenue grew 28% year over year to $9 6 million for the quarter.
Driving demand for cars remains strong with total drivers sign ups, increasing 10% quarter over quarter in line with the increasing consumer demand for ridesharing delivery services observed by platforms such as <unk>.
Reflecting the higher year over year growth in mobility versus delivery bookings observed by Uber Harcar also saw a shift in driver by service type with a 5% decrease in percentage of rental days attributed to delivery and a 5% increase in rental days attributed rideshare driver demand continued to be higher car.
Strongest tailwind as we move into Q2.
Our supply related operations improved significantly with median time to verification decreasing by 75% year over year.
Driven by initiatives to make it faster and easier for owners to complete the listing process.
We also improved the quality of selection, reducing the percentage of new cars bailing verification by 18% over the same period in 2021.
We see our performance in March as a pivotal trend reversal for our supply of vehicles on our platform for a number of reasons number one we have maintained organic momentum into Q2 with strong utilization rates and high rental days in April and the first half of them right now.
Number two you used car prices seem to be stabilizing making it slightly easier for our owners to source vehicles and number three we have set the hire car platform for success by building capacity into the technology processes and systems.
In the coming months the anticipated warehousing line of credit will be leveraged for our larger partners to operate and additional markets with a steady and growing supply of cars from all of our fleet partners, we will be able to fully take advantage of system wide demand increases from travelers.
Because of the tailwind, we anticipate a record quarter in Q2.
As we continue our organic growth trends.
We are committed to building an ecosystem to make it even more profitable to do business on our platform to that end. We are excited to announce several technology powered features that continue to make higher card the most owner and driver friendly platform for car sharing.
Some examples of these initiatives include the beta launch of citation visibility and management provides an automated solution to one of the biggest pain points for owners the management of parking vacations and camera violations.
Number two in order to increase trust and transparency in the market. We are implementing new ride share and delivery specific verification measures that will further enhance owner confidence in applicants and.
And number three to increase scalability of our customer support and success teams. We are implementing automated chat that will allow us to absorb the operational impact of the increased supply.
These initiatives in flight are expected to enhance higher cars core business for what should be a record set in Q2.
And finally, as we get closer to a higher cars. Most significant initiative for 2020 to securing the warehousing line I look forward to sharing details in an upcoming call.
With that let me bring in Bryan Allen to expand on our vehicle initiatives for 2022.
Thank you Joe as Joe mentioned, we have many growth related projects underway I'd like to start by providing an update on our <unk> initiatives.
We have continued to focus on increasing the supply of electric and hybrid vehicles to address growing demand from our driver base and ridesharing delivery platforms.
Record high gas prices paired with higher driver pay.
For the more efficient vehicles has made the availability of electric and hybrid options on our platform.
Priority with number of fully electric vehicles on the platform increased 62% in the first quarter of 2022 versus fourth quarter of 2021, representing 30% of total electric cars available.
Average daily rates for Evs has increased 63% year over year, reflecting not only higher quality views on the marketplace.
Also a greater willingness to pay for these cars due to the increase in gas prices.
EV rentals have continued to gain momentum into quarter two of this year with the total number of EV rentals in April equal in the total number of EDI rentals for all of fourth quarter 2021.
And with significantly higher daily rates.
44 <unk>.
Ft $7 over that period.
We are particularly pleased with the progress we've made with our screen three EV partnership, which has allowed our owners to more easily acquire evs or the higher car platform.
As evidence of increasing adoption the number of orders through this program was 48% higher in April than all orders combined during the first quarter.
We anticipate that this significant growth will expand EV vehicle availability across the country and generate more platform revenue, while driving higher retention.
As mentioned during last quarter's earnings call, we continue to engage with the progressive buy here pay here dealers to increase vehicle supply, while providing our drivers with an incentive to rent for longer periods.
We are partnering with select dealers in our most active markets to launch this initiative and plan to expand as we validate the program.
In addition to our strategic initiatives to increase vehicle supply.
We have also observed an unexpected trend and owners shifting a greater share of their inventory from other platforms to hire cars a competitive advantage unique to hire car is the car sharing for rideshare and delivery services have longer rental periods, resulting in lower operational cost.
Ross and more consistent revenue for owners.
Higher cars rental periods compare favorably to other platforms that typically average 1% to three days versus weeks and months on our platform. In fact, the average rental period in quarter. One was two to three weeks.
As Joe mentioned, we recently launched a beta feature for proactively managing parking ticket inside patients based on feedback from our owner community about their greatest pain points. We also launched unabated communications for <unk>.
Owners that has made it easier and faster to improve driver applications from their vehicles.
In addition, we have expanded owners self service capabilities by piloting the feature that allows owners to directly invoice drivers for miscellaneous charges, thus, reducing higher cost internal operating costs.
We recognize the increasing self service capabilities across our platform will increase market scalability customer satisfaction and ultimately profitability.
To support our larger fleet operators, we've rolled out multi location management as a part of our higher cocoa business solution. Following a successful pilot.
Innovative feature provides large operators with greater efficiency and visibility, while offering our smaller operators and incentives to grow their fleets and increased market presence.
These enhancements will continue to drive retention and loyalty from our medium and large fleet operators, whose cars drove over 70% of rental days in the first quarter.
Finally, I'd like to provide a market outlook on vehicle supply for the near term, while we have seen used car prices gradually softened from a January peak based on Manheim used car pricing index.
Falling for three consecutive months prices are still up 60% from April 2019, making it extremely difficult for potential gig workers to purchase a vehicle.
Fortunately our platform provides drivers with the opportunity to participate in rideshare and ore delivery, who may be priced out of the market today.
Higher cars marketplace provides vehicle options and increasing the supply of available gig drivers, which we believe benefits our ridesharing delivery partners as the country recovers from the pandemic.
So with that I'd now like to turn the call over to search Dubai, Our Chief Financial Officer to walk us through some of the key financial highlights from the first quarter.
Serge.
Thank you, Joe and Brian overall higher cost performed the turbulent vehicle supply environment, maintaining vehicle inventory levels. Despite those constraints.
We continued to reduce operating expenditures for the third quarter in a row, leading to a cash burn in line with expectations.
First let's address volume.
Intel days and for the first quarter of 2022 increased 5% year over year from 300000 rental days in Q1 of 2021 and rental volume was relatively flat on a per day basis compared to the prior quarter and that despite of vehicle inventory supply conditions.
Our utilization rates for fleets of 'twenty Carso more continue to flip debate between 80% and 90%.
Indicating strong driver demand across the vast majority of markets.
<unk> X is driving demand for higher car vehicles continues to be strong with attractive economics for the driver.
A driver can rent a car on a platform of $59 per day on average split between higher car and the vehicle owner and $39 per hour driving 20, plus hours on the Uber platform as highlighted you Bruce most recent earnings call.
This continues to validate the drivers opportunity for success.
Turning to financials year over year net revenue in Q1 grew 28% $9 6 million from $7 4 million in the same quarter of last year.
And is relatively flat to the previous quarter.
The year over year favorable revenue growth Delta of 23 points or 5% increase in rental days continues to stem from.
Rising and risk confronts announcements, including dynamic pricing and the favorable market trends in daily rental rate, reflecting constrained car supply.
Revenue growth organically accelerate in Q2 boosted by increasing rental volume and is currently trending between 10, <unk> and $10 $7 million, which would deliver higher cars highest revenue quarter. So far.
Daily average net revenue, which represents net revenue divide by rental base increased from $24 in Q1 of 2021 to $30. In Q1 of 2022, we expect <unk> revenue to grow further in 2022 based on current market trends and continued optimization of our dynamic.
Pricing model with additional analytics resources hired this quarter.
On the cost side.
Q1, gross margin experienced a slight seasonal downturn hitting 31% from 34% in Q4 of 2021 due to more accidents per rental day in the winter season, as well as continued trends in depletion for car parts and vehicles.
We have more than offset these inflationary.
Inflationary trends over the past three quarters by focusing on cost control better processes and appropriate risk pricing.
We expect to continue being able to pull those levers positively impacting profitability in the future.
Meanwhile, we have maintained most of the Q3, and Q4 gains and customer satisfaction balancing risk control and retention of profitable drivers.
Looking ahead, we are still on target to past, 40% gross margins by the end of the year based on ongoing initiatives targeting insurance product improved driver screening and incentive for our drivers with low risk profiles and no claims history.
Operating expenses totaled $8 3 million in Q1 of 2022.
The decrease of viewpoint 2 million over Q4 of last year.
Compared to Q1 of 2021, we cumulatively reduced our operating expenses by close to $2 million or approximately 20%.
On a cash basis, we are close to reaching our target of $7 million a quarter earlier than expected with cash operating expenditure reduced from $7 4 million in Q4 of 2021 to $7 1 million in Q1 of 2022.
The Q1 savings were achieved through renegotiating agreements and continued focus on reducing non growth related expenses.
Our adjusted EBITDA maintained most gains made in Q4.
$4 $1 million loss substantially down from the five 1%.
$1 million loss in Q3, and a $7 1 million loss in Q2 of 2021.
This resulted from our continuous improvement and managing cost of revenue specific reinsurance while at the same time, maintaining a sufficient cash operating expenditure and infrastructure to support growth at scale.
We expect continuing positive adjusted EBITDA trends in Q2 of 2022 and beyond with economies of scale through topline growth increased gross margins and maintaining operating expenditure efficiency gains.
Our cash position was $11 million at the end of Q1 2022.
We are aiming to strengthen that position in the next quarter in conjunction with our investment in growth as we continue to pursue and support larger financing opportunity for our fleet operators and optimize our cost structure.
Looking ahead, we have entered Q2 of 2022 with renewed organic growth and increased revenue forecast between 10 <unk>.
And $10 $7 million for the quarter as well as improved margin from seasonal patterns and continued cost and pricing improvements.
We're aiming to maintain our cash operating expenditure around $7 million with our current estimated cash flow breakeven point still.
Still add between 6000 507000 cars rented on our platform.
Our run rate revenue between 65 and $70 million based on our projected cost structure.
Our primary financial objectives in 2022 remains to stimulate car supply on the platform and top line growth to reach cash flow breakeven as rapidly as possible.
Back to Joe for final remarks.
Yeah.
Hey, Serge and to summarize.
Higher car had a strong start to the year with significant and growing momentum as we enter the second quarter financials reflected strong year over year growth consistent with increasing demand and supply.
While we continue to rollout innovative products and features for both drivers and owners to increase marketplace liquidity, while reducing operating expenses and increasing customer satisfaction.
As we look forward to the rest of 2022.
Excited to substantially increase supply in order to satisfy demand, especially with the increase in expected driver demand from gig services.
Thank you everyone for taking the time to join US for our call. We will look to update our shareholders periodically on the progress we are making with that operator, please let us move to Q&A.
Thank you well now begin the question and answer session. Joe asked a question you ladies practice part and then one on your telephone keypad.
Are using a speaker phone.
You had said before pressing the key jewelry.
<unk> Joe.
Great.
Alright, thank you.
At this time, well pause momentarily to assemble all of those.
And our first question comes from Mark Argento Lake.
Alright.
Hey, guys nice quarter, just a couple of quick ones for me one I just wanted to touch on.
Kind of the key levers on the gross margin line I know it was a little bit below what we saw in Q4 still up.
Lee from levels of last year, but maybe just remind us what what are some of the key drivers of the gross margin line.
Absolutely Mark.
On the gross margin line, obviously, the biggest expense insurance costs, we had insurance premium and then also claims expenditures and what we see in Q1 was actually a reduction and increase in accidents per rental day due to the winter. She is very typical and the insurance industry and that set us back a bit in the quarter.
<unk> does not.
Takeaway that our improvement in the margin and over two quarters of last year, we've managed to improve the gross margin by 10 points. So I think we're still on track.
To improve our gross margin above 40% exiting this year and this is mostly a seasonal trend.
One other thing that I want to.
On the margin side is one it's a seasonal trend. We've also seen the industry an increase in the price of car parts and vehicle and that has impacted as well our cost to upgrade but so far we will be able to more than offset by pricing actions and being able to improve our processes and risk selection.
The drivers.
Alright, that's helpful. And then just turning to the activity on the platform. It looked like overall rental days were up about 5% on a year over year basis.
Down a little bit sequentially from Q4 could you talk a little bit about number of cars you have on the platform and then should we.
When could we see actually rental days, maybe tick up and not rely so much on our approved for the revenue.
Yes.
Staying on a macro basis, we're seeing some green shoots in the car marketplace in used car marketplace, and I think Brian can touch a little bit on it.
But at a high level, you're starting to see prices kind of leveling off or <unk> coming down in some categories and so that is enabling our fleet operators. The top 40, essentially that we have in our higher copper business accounts able to purchase cars.
And to have some stability out there and pricing.
Kind of noteworthy gone so I know Brian has been really close to it. He is talking to all 40 of those of those major suppliers on our platform and drive what do you think about that.
Well I agree with you of course Joe.
<unk> opportunity.
Referred to it.
In the prepared remarks.
We actually have an opportunity to get a larger share of wallet.
Of inventory that's already out there.
So even though market supply may be.
Tight.
Certainly in most markets, we can get cars from other platforms.
From.
Operators that currently are part of a hire car ecosystem and we are already seeing a nice and surprising shift because of our uniqueness that our renters rent for longer periods of time.
So we're seeing more of that now with the longer rentals and larger supply and.
Of course, we're starting to share that message with other opportunities other owners for the opportunity for them to our more consistent income and have very high utilization of their inventory.
Sure I can add that.
Essentially we had an increase in our guidance and you can see the revenue coming out of Q2, and where we expect it to end and that's a mix of both rental days and also pricing action, but rental days it would be on the upswing and thats a very positive factor.
Do you anticipate.
When you factor in the rental increases that assume more vehicles are on the platform or how do you think about actual vehicles.
Yes, more and more.
Vehicles.
Higher retention of those vehicles as we focus on various objectives to keep drivers and cars risk underwriting those drivers appropriately et cetera. So all of the above I think are trending in the right direction.
Great. Thanks, guys I'll hop back into queue.
Thanks Mark.
Again, if you have a question. Please press Star then one.
And our next question comes Tom Mike and Genco.
Great.
Excuse me Mike you May go ahead.
Sorry about that guys I was on mute.
Can you come back so quick just.
One more question on.
The vehicle availability that warehousing line you guys referred to it.
In your prepared remarks any update there on where you are in that process. Thanks.
Yes, we are.
Really close I mean, we.
Essentially agreed in principle.
Two the majority of the business.
The business attribute to the deal and we're jumping through the last few hurdles to be able to get there.
Our best estimate is in weeks at this point.
Alright, thank you.
Thanks, Cathy if you would like to pose a question. Please press star one.
This concludes our question and the first question I would like to turn the conference back over to Joe Furnari for any.
Closing remarks.
Well, thank you everyone for joining.
Looking forward to an exciting 2022, so we will.
Kate you periodically on the progress we.
Have a great week.
Yes.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Well thank you.
Ladies attainment.
Sure.
Well Jeff.
Hello.