HyreCar Inc.
Q4 2021 Earnings Call Transcript

Published: 15 Mar 2022

[Operator:]

Good day, and thank you for standing by. Welcome to the HyreCar Inc. 2021 Fourth Quarter and Year-End Conference Call. The earnings press release accompanying this conference call was issued at the close of the market today, March 15, 2022. On our call today is HyreCar's CEO, Joe Furnari; President, Brian Allen; and CFO, Serge De Bock. I will now turn the call over to Mr. Jason Nelson of Core IR, the company's Investor Relations firm. Please note, this event is being recorded. Mr. Jason Nelson, please go ahead.

[Jason Nelson:]

Thank you, operator, and welcome, everyone, to HyreCar's Fourth Quarter and Year-end 2021 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 HyreCar 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 the earnings release and supplemental materials, which will be furnished with the company's Form 10-K that was filed with the SEC and will also be found on the Investor Relations portion of the company's website. Now I would like to turn it over to Joe Furnari, CEO.

[Joseph Furnari:]

Thanks, Jason. HyreCar had an eventful year in 2021. We continue to capitalize on our position as a unique and essential provider for the gig economy, a market that grew considerably despite the challenges caused by COVID-19 and its ripple effects. We adapted quickly to accommodate the growing delivery space as the rideshare industry continued its recovery. We expanded our leadership team and improved our operating cost model. We added enhanced features to our platform to connect supply and demand more efficiently and effectively, and we established a strong foundation of strategic partnerships to create value for our driver and our communities. With that, I'm pleased to report that our fiscal year revenue grew 41% to $35.7 million, up from $25 million in fiscal year 2020. We listed over 18,000 new VINs to our platform, up from 11,000 VIN in 2020, an increase in gross car listing volume of 64%. And take rates have increased significantly as robust driver demand and fewer driver alternatives were creating incremental margin pickup in our daily rates. HyreCar's enhanced pricing brought take rates up to 51% of our gross daily pricing, an equivalent of $30 per day in Q4. The supply chain and its impact on car supply remain top of mind as we believe it will take time for car supply to recover and relieve pressure on used car availability. In the meantime, the rideshare industry continues to recover at a steady pace, and rentals for delivery services remain robust on the platform. Even with the easing of COVID-19-related restrictions, our driver intent data indicates that the use of delivery services will be more prevalent than originally expected. HyreCar is an essential solution for helping expand the mobility as a service workforce that is choosing to become part of the revolution of independent workers and rideshare and delivery. We have heard from new drivers who left the job that force them to work longer hours with less flexibility due to labor shortages. They were surprised to see how much they could earn in rideshare and delivery and now enjoy the flexibility of choosing when and how long to work. What once may have been a temporary gig is now seen as an opportunity for these drivers to create their own schedules while still earning a good living. The HyreCar platform allows drivers without cars to participate in the gig economy and those with cars to do so without incurring the excessive wear and tear, mileage and insurance costs associated with using their own vehicles. It also allows small business owners of a few cars to new fleets to large fleets and dealerships to access these longer-term renters. To help meet this increasing demand, we are preparing for new ways to grow as well. We are pleased to have appointed AJ Lee to the new position of Senior Vice President of Growth, who will be responsible for sustainable marketplace growth and the customer journey. The new growth organization under AJ will be responsible for increasing rental days while reducing the cost of acquisition by at least 15% and increasing Net Promoter Score for drivers and owners. We spent last year strategically positioning the company for 2022, which we believe will be a year of significant growth. These activities have included the launch of enhanced dynamic pricing to scale revenue and an increased focus on driver risk profiles. We transitioned our claims management platform to better serve our owner community, and we implemented other initiatives designed to reduce insurance costs and claims-related expenses. In November, we expanded our partnership with AmeriDrive and Cogent Bank to help drive vehicle supply on our platform. Under the terms of the agreement, Cogent has agreed to expand its lending capacity to allow AmeriDrive to continue building its fleet and add electric vehicles to offer on our platform to maintain and increase the integrity of our marketplace, we are focusing on the retention of our best drivers and owners. This will provide HyreCar with a stable and willing community of users to test new features and initiatives. We invested in our platform's back-end architecture, allowing us to easily scale supply to meet increasing demand. These investments were made alongside of rightsizing of the company's operating cost structure through automation efforts and restructuring of the organization. We entered into an official agreement with Uber in 2021 as a fully integrated solution to Uber's driver partners. What's particularly exciting is that Uber drivers can now see our listings in the Vehicle Solutions section on the Uber app and rent with us directly through Uber's platform. We are also committed to increasing electric and hybrid vehicle supply on our platform, which we believe will lead to new driver acquisition and complement the green initiatives of rideshare and delivery services. And finally, we have significantly improved margins while providing enhanced customer service and claims handling processes. With the changes in initiatives I've already mentioned as well as some to be mentioned shortly, I believe we are on track to reach a gross margin of 40% by the end of 2022. For 2022, we are focused on levers that will allow us to scale. In order to grow, we are focused on 3 strategic priorities

[Brian Allan:]

Thank you, Joe. Having spent most of my career in the retail automotive sales and service space for one of the most successful automotive groups in the world, I know that a company's success can only follow the customers' Success. Thus, removing friction and pain points across the owner and driver journeys while adding value are key objectives for our team this year. As Joe mentioned, our plan consists of 3 areas of focus

[Serge De Bock:]

Thank you. Joe and Brian. We just put behind us a year of growth, foundational investments, change, both externally and internally, as well as exciting partnerships that will carry us into 2022. Shifting towards reviewing the fourth quarter of 2021 financial performance. Overall, Q4 volume and revenue levels continue to be impacted by constraints affecting the car market supply. On the profitability side, we continue to improve our gross margins, reduce cash operating expenditure in line with our guidance and reinvested some of those savings into scaling our platform. First, let's address volume. Rental days for the fourth quarter of 2021 increased 14% year-over-year from 277,000 rental days in the prior year's fourth quarter and were relatively flat compared to the prior quarter at 323,000 despite car inventory supply conditions. We achieved close to 1.3 million rental days in 2021, up from 1 million for the full year 2020. Our utilization rate for a fleet of 20 cars or more picked us over 85% in Q4 and highlighted the lack of inventory to satisfy driver demand in the vast majority of markets. Uber and Lyft have also shown strong Q4 results in terms of revenue, gross bookings and profitability while giving further strong rideshare and food delivery demand and hence driving it. In Q4, Uber stated at nearly 325,000 individuals started to work on the Uber platform in the quarter, bringing its total global active earner base to $4.4 million, the largest it's been in the second quarter of 2020. We anticipate these trends will continue into 2022, providing HyreCar with more opportunity than ever to scale with the proper car inventory supply. While our rental days increased 14% year-over-year, year-over-year net revenue in Q4 grew 36% to $9.6 million from $7 million in the same quarter last year and is relatively flat to the previous quarter. The year-over-year favorable revenue growth delta of 22 points over the 14% increase in rental days continues to stem from pricing and risk control enhancements, including dynamic pricing, and a favorable market trend daily rental rates, reflecting the constrained car supply. Our full 2021 revenue equals $36 million and increased year-over-year by over 41% from $25 million in 2020. Specifically, we have driven an increase in daily average net revenue, which represents net revenue divided by rental base from $24 historically and in Q1 to $27 in Q2, $29 in Q3 and now $30 in Q4. This coincides with our net revenue to gross billings ratio increasing from 45% in Q3 of 2020 to 48% in Q3 of 2021 and now 51% in Q4, an accelerated increase in our take rate. We are continuing to optimize and expand our dynamic pricing model and are planning to invest further in our data analytics function to continue making the right pricing tradeoffs to drive profitable growth. Moving to the cost side. We continue to optimize in cost of revenue, which decreased quarter-over-quarter from $8.3 million in Q2 to $6.7 million in Q3 and now $6.2 million in Q4. We achieved this cost reduction by continuing to leverage our 4-pronged approach. First, we improved internal claims processing and policies to clarify and minimize out-of-policy claims disbursement. Second, we focus on cost control, collaborating with our claims processing partner to tailor their process to HyreCar. Third, we developed a claims internal prescreening process to reduce overall processing costs. And fourth, we continue to focus on the appropriate risk pricing charging more effectively based on driver risk profiles meanwhile, we have maintained most of our Q3 and Q4 gains in customer satisfaction, balancing risk control and retention of profitable drivers. We have achieved our gross margin guidance consecutively in Q3 and Q4, improving gross margin by over 10 points for 2 quarters, a solid achievement considering vehicle replacement and cost increases due to global supply chain shortages and their negative impact on claims. We delivered an increase from 24% gross margin in Q2 normalized for one-off expenses to 30.7% in Q3 and 34.3% in Q4. These gains were achieved with a combination of cost saving and pricing . Looking forward to 2022 gross profit margins, despite seeing some seasonal uptick in claims in Q1 of 2022, we're still aiming to gradually increase gross margin with our goal to surpass 40% at the end of 2022 and beyond. We plan to achieve that through improving our pricing and product offering for premium coverage plans and incentives for our drivers with low risk profiles and no to little claims history. Operating expenses totaled $8.5 million in Q4 of 2021, an increase of $2.4 million at 38% over $6.2 million recognized in Q4 of last year. Compared to Q3 of 2021, we reduced our operating expenses by 6% in Q4 after reducing them by approximately 10% between Q2 and Q3. On a cash basis, we went from over $9 million in cash operating expenses in Q2 to $8.1 million in Q3 and close to $7.5 million in Q4. We are continuing our path towards a level of cash OpEx of close to $7 million in the next 2 quarters, to enable a breakeven at the lower revenue level, the Q4 savings mostly resulting from optimizing sales, customer service and marketing spend through reorganizing our teams and automating processes along with a focus on marketing efforts towards the reactivation of existing customers. We have also experienced a gradual return to a more normalized basis of our technology spend as we reach platform development milestones needed for accelerated growth. Our adjusted EBITDA continued to improve for a second consecutive quarter and in Q4 at the loss of $3.7 million, substantially down from $5.1 million loss and a $7.1 million loss in Q2. This resulted from our continuous improvement in managing cost of revenue, specifically insurance while, at the same time, means sufficient cash operating expenditure and infrastructure to support growth at scale. We expect continuing positive adjusted EBITDA trends in 2022 and beyond with increased gross margin, reduced operating expenditure and economies of scale to top line growth. Our cash position continues to remain healthy at $14.5 million at the end of Q4 with sufficient liquidity to fund recurring operations during the majority of the year. While we have increased our current facility with Cogent Bank in Q3 and Q4, we continue to pursue larger financing opportunities for our fleet operators and HyreCar to create financial leverage and optimize our cost of capital. Looking forward, we have entered Q1 of 2022 with an improved revenue and profitability model and further opportunities to gradually improve gross margin with a goal to reach 40% by year-end of 2022. We continue to rightsize our cash operating expenditure to align with our current estimated cash flow breakeven point of 6,500 to 7,000 cars rented on the platform or a run rate of revenue between $65 million and $70 million based on our projected cost structure. Our primary financial objective in 2022 will be to stimulate car supply to the platform and drive top line revenue growth while continuing to optimize our cost structure to reach cash flow breakeven as rapidly as possible. Back to Joe for final remarks.

[Joseph Furnari:]

Thanks, Serge. Well, to summarize, we have solidified our platform, and we are focused on creating value beyond our marketplace, expanded our strategic partnerships and relationships and are continuing increased vehicle supply while more effectively engaging and retaining our drivers. . Thank you, everyone, for taking the time to join us for our call. We will look to update our shareholders regularly on the progress we are making. With that, operator, please let us move to Q&A.

[Operator:]

. Our first question comes from Tom White with D.A. Davidson.

[Tevis Robinson:]

This is Tevis on for Tom. Just two, if I may. First of all, I wanted to know if you can elaborate a bit about the possibility of improving used car supplies. And hopefully, that happens sometime later this year. Wondering what that impact will have on your business. And then secondly, curious to see whether you're seeing any impact to your business from the rising gas prices and if there are opportunities or risks related to these higher gas prices and if you could update maybe like your efforts on how you're helping deploy more electric vehicles on your marketplace.

[Joseph Furnari:]

Great. Thank you, Tevis, for coming on. I think maybe I'll take a swipe at that those questions and then bring in Brian and Serge, if you have anything, I'll pass it to you. But from a used car supply perspective, we've actually seen prices coming down recently. I think that, that was a function of OEMs delivering on their contractual obligations to the rental car companies and then the rental car companies being able to. But I think that in the near term, with stuff going on in Europe that we are going to start to see maybe a hardening of those margins. So I'm going to bring in Brian to talk about that. He's now just recently out of his conference at the NADA where you've got a fresh perspective on what's happening in the industry. So Brian, maybe I can turn that over to you.

[Brian Allan:]

Sure. And Tevis, we actually have a couple of strategies. No doubt there is certainly constraints on vehicle availability. But oddly, we've got a couple of unique options that we're going to take advantage of. First, some of our larger fleets actually use a couple of the car sharing platforms in addition to HyreCar. And they're finding that one of our competitive advantages of longer-term rentals is getting more of them to give us a better, I guess, share of wallet, if you will, more allocation of their fleet being assigned to our fleet. So that's one that's really built in that is a benefit for us. Secondarily, we have an opportunity with buy here pay here dealers. And this really just the last 4 days at NADA, the dealer convention, we had a lot of interest where that subsegment of retailers said, "Hey, I'm used to dealing with a customer, in some cases -- in most cases, probably subprime. And we read a lot about you, and we'd like to rent some cars first and then eventually sell them." And I was able to share with them, we already had a few dealers, buy here, pay here dealers successfully doing this, and it really rang a balance. I know there's over 24,000 by payer dealers, and that's really an untapped potential, and just getting a fraction of that to rent vehicles would be a huge plus. So we think it's a great opportunity to make a strategic effort to reach out to these dealers and share with them the incremental revenue opportunity. So that's another strategy. The other is that vehicles are out there in the marketplace. The new car shortage is probably the most difficult thing, and that's not as much of an effect on our business model. The opportunity we have is with used cars. And the used car -- the average age of the used car is now older, but we've got people that need to sell some of their cars because they've gotten . And our fleet owners are finding they can buy them. And probably that's another benefit to buy here, pay here dealer. They are less sensitive to the elevated market pricing because they traditionally make money on the loans, and have incremental rental revenue is only a plus. But we think that with some strategic effort, we can mitigate the car shortage that certainly is out there affecting the rental world.

[Joseph Furnari:]

And then to address your question on rising gas prices, we haven't -- I haven't heard a lot of that from our drivers, certainly top of mind, especially out here in Los Angeles for gas is $5.50, $6 a gallon at this point. But so I was -- I would point you to Uber and Lyft who are increasing wages a bit due for compensation of the higher gas prices. I think that is something that will continue to be an issue as we move forward. But I don't really see that affecting our demand. Demand is stronger than ever at this point.

[Serge De Bock:]

This is Serge De Bock. I'll just add on the car supply. I think we talked about potential financing in the past that we're working on different ways to finance fleet at least in the short term and finding profitable economics for our large fleet operators to be able to bring car dedicated to the platform. We already have some agreements and are disclosing our 10-K with some of the largest operators, including AmeriDrive, and we continue to push for -- we're bringing more cars to the platform and bring that inventory up as long as the economics are favorable to us. That's going to be a key for us to be able to drive towards our breakeven point.

[Joseph Furnari:]

Yes. And then to address the last question on EVs. EVs are certainly one of our main priorities. We have a partnership with Spring EV, who's brought on about 56, 57 electric vehicles as part of that partnership. I think the issue has been that it's hard to find electric vehicles. Same with used cars as well, right? It's hard to find those cars at optimal prices, but it's a big position for us. So we've said that we are going to -- we want to help Uber and Lyft be fully electric by the end of 2030. And so we're going to start taking tangible steps towards that goal as well.

[Operator:]

Our next question comes from Mark Argento with Lake Street.

[Mark Argento:]

Just wanted to drill down a little bit more on kind of current trends you're seeing car pricing coming in. So do you think there's more cars available if you can get the financing to bring them on the platform? And then on the demand side a little bit, I know you saw a little bit of headwind of Omicron in Q3, but where do you see that at this point now? And then, lastly, kind of what do you see revenue breakeven at?

[Joseph Furnari:]

Thanks, Mark. So in terms of car availability, I think the cars are there. It's just they're 40% more expensive than they were last year. And so the way we have addressed that with our larger fleet operators is by trying to facilitate finding options with them, namely our warehousing line that we're working on right now. I think that warehousing line is very close. As fast as we can, in the very, very near future, we'll be giving you an update on that. As part of that financing line, you're swapping about 75 different unique documents, and they're marrying a couple of different precedents. To be clear on that, HyreCar is a third-party gainer on that financing. And so that main line is being written by -- written to our large food operators. And they're going to go out and buy cars. And what they're telling us is that car prices -- they were seeing car prices in there. Kind of buying criteria have trended down slightly. But I think per Brian's comments, I think we're going to start to see them move up a little bit. That being said, it's profitable for them to operate at those basis levels for car purchases. So we're excited about that. In terms of the kind of the -- I'm sorry, Mark, that would be -- you had a couple of other questions

[Serge De Bock:]

Demand. I can address the demand, yes. Oh, I'm sorry. So I can address some of the demand. I think what we've seen and as we mentioned in the scripted portion, we did see tuition rates spiking above 85%, which are with a little bit of friction on the platform, it's pretty close to the ceiling that we can see in Q4, which means that we've been renting as many cars as we can that come on the platform, and that really indicates that we have untapped and satisfied demand. And bringing those cars on the platform would be the key to unlocking that. And which you -- breakeven, and I think the last question you had was reaffirming the breakeven point in terms of revenue. And we still believe it's going to be somewhere between $65 million and $70 million in terms of run rate revenue to be able to get there. So we need to double the cars rented on the platform and that current revenue that we experienced in 2021 to be able to achieve that.

[Operator:]

The next question comes from Mike Grondahl with Northland.

[Michael Grondahl:]

Just so I can add my bearings a little bit. I think at the end of 3Q, there was about 3,700 rentals on the platform. What was that number at year-end? And roughly, what is it today?

[Joseph Furnari:]

Mike, in Q4, we had some ups and downs with our active rentals. I think if you were to average it out, it was slightly lower than Q3, but we more than made up for it with our margin we've had to do that because it's been hard to find car supply. Yes. We'll probably get the financing done. That's when we're going to see a real kind of uptick in that in the car supply growth. We have been trending up. It's still early in Q1, and I don't want to prebate those results, but it has been looking good compared to like a Lyft and an Uber where they're out there giving -- upping their guidance as well. So we're excited about what Q1 has to look like -- what starts to look like. And then I'm really excited about what Q2 looks like as we're getting the year completed this financing warehousing .

[Michael Grondahl:]

Got it. And Joe, maybe help us on that. If you complete that financing, how long does it take before it can kind of grease the skids and finance some cars for third parties? What do you think -- if it gets done on x date, how long until it's financing cars?

[Joseph Furnari:]

Yes. I anticipate that we would authorize a turnaround and have the partners by a couple of thousand cars and they start adding 500 car chunks on a pretty consistent basis. That partnership leverages a footprint with our third-party partners like pathways, et cetera, that enable us to intake those cars. So what we found in the past is that 500 car chunk, 2,000 car chunk, 5,000 car chunk, they are -- they require a certain amount of infrastructure and scale to be put in place. So I think we have the right partners right now to be able to do that. We'll start really slow and ramp up very, very quickly.

[Brian Allan:]

Absolutely. And I think just to add to that, once we have the cars on the platform, which really typically happens relatively quickly with titling, with large volumes typically, it takes between 45 and 60 days for our fleet operators to get back to optimal utilization levels with in the platform. So if we pick those right spots for us to locate the cars, and we partner with them very carefully, we'll be able to reach utilization within the 60 days after the cars are added to the platform. And like Joe mentioned, I think once we close on some of those financing options. We'll be able to go very quickly in the market and purchase the via our partners.

[Michael Grondahl:]

Got it. And throwing the first quarter out, do you think you can add 500 to 1,000 cars net in 2Q? Is that a reasonable goal?

[Joseph Furnari:]

Yes, I think so. I think that's reasonable. I think we need to -- it's very almost binary based on this financing. If financing closes, absolutely If financing, financing gets delayed a little bit longer. It might be a little bit tough. But I think, Brian -- the reason I wanted Brian, on the call, Mike, is because he's also -- I mean, he's been chasing down all of these initiatives for the last couple of years. And so I think he has a pretty good sense of the market and where supply is going to come outside of this warehousing line and the 1 or 2 premier partners. And so Brian, what are you seeing on that?

[Brian Allan:]

Yes. I can add some interesting anecdotal evidence on this weekend again. We had some dealers deep fleet we saw some tremendous opportunities with vehicle valuations. And this weekend, I said, oops we went too far. We had a shorter-term view than we should have, sold some cars and now we really missed the recurring revenue. So what keeps me very optimistic about a relatively quick re-onboarding of cars to grow the fleet is that these owners need the recurring revenue. The cars that they sold a few months ago and probably celebrated with a glass of champagne at the profits was quickly forgotten when the monthly recurring revenue dropped precipitously. So they're hungry to get reloaded cars as they get the capital to do it.

[Serge De Bock:]

Yes. And one thing okay.

[Michael Grondahl:]

I'll let you finish, Serge. But any hurdles we should be aware of to getting the warehouse facility done?

[Joseph Furnari:]

Hurdles in terms of what I think from our perspective right now, it's just the documents are there. We just need to review. The lawyers are going to go through it right now. We're running through the steps of opening a major evergreen warehousing facility. And so that takes some time.

[Michael Grondahl:]

Got it. Okay. I was going to add some...

[Serge De Bock:]

Yes, yes, yes. I just want to talk a little bit more about long term as well. while the warehousing facility allows us to bring cars in the short term, be able to bridge that gap and those conditions in the market that are unprecedented with the car shortage. As soon as those conditions resolved, we'll have a lot of organic growth coming back to the platform from dealers for additional opportunities. All these things are going to come back online. But this warehousing facility and finally helping us finding our partners to grow is going to be crucial really in the short term. Getting that car supply, it gives us to breakeven. Let's not forget the long-term vision, the fact that we still have a lot of organic growth coming back. As soon as we have, we go past this low in terms of car supply with all the latent demand we have.

[Operator:]

. Our next question comes from Jack Aarde with Maxim.

[Jack Aarde:]

Great. A lot of my questions have been asked, to be honest. So Joe, maybe can you talk about your Uber partnership and the application integration there? Are you seeing any evidence of this driving increased demand from potential rental drivers for HyreCar solutions?

[Joseph Furnari:]

Well, the Uber integration is going as planned. I think at this point, right now, what Uber is looking for is our EV contribution. And so we're starting to ramp that up. It's a pretty complicated API integration. And so we're moving at the speed of Uber at this point. So but what we are seeing for those drivers that do convert through those marketing channels is that they have obviously a lower customer acquisition value and certainly a longer lifetime value. These are vetted primary leads where we are getting the first look at them. Where in the past, we wouldn't necessarily beginning to first look on the leads. They'd be going to our competitors. And then they'd start looking around after they saw the true cost of what the competitors were charging on a weekly basis, and then they find HyreCar. And so obviously, better leads makes us look at -- we have the luxury of being able to get those types of drivers out and be more just concerning because I think we are going to start to see more and more of it coming from that channel as we continue to integrate. So it's pretty exciting. We have been looking for that partnership for the last 5, 6 years that we've been seeing this maybe that deal and getting it online and at least getting a pilot going has been really exciting for us and so stand by in the next couple of quarters as we start to really ramp that up.

[Jack Aarde:]

Got it. That's helpful. And then maybe switching gears. I'm not sure who this question is best for. But gross margin-wise, it sounds like you're on track to get to 40% by the end of 2022. So that's good. I didn't quite catch what was said about the software or the SaaS offerings during the prepared remarks. So maybe if you could just please rehash what the SaaS opportunity is. And then also, is that a driver of this gross margin expansion by the end of 2022?

[Brian Allan:]

Hi there. I'll take it. It's Brian. So the SaaS opportunity really is products that make it easier for the operators to do business. And it lowers their operating costs. In the meantime, it's a revenue opportunity for us because we have economies of scale over a large body of owners. For them, to do certain things, it would be cost prohibitive. And as you know that anything you can do to improve value for the customer is going to be better for everybody. So it's from better driver vetting better areas where the market, areas where they frankly have your business things that we can analyze, use our data analytics to tell the customers how to do their business better and give them dashboards, frankly, some of these owners, they're entrepreneurs that aren't as sophisticated as big, large corporations, and we kind of fill that gap for them and do the heavy lifting. And we can be compensated for that at a great value to those owners.

[Serge De Bock:]

And I think from a financial perspective, I think, obviously, SaaS opportunities have some upside. We haven't fully baked that into our projections. When we think about gross margin, when we really think about our core business, there'll be potentially additional upside, and we'll realize that once we're able to validate and provide a solid business model that we can scale. But I think there's definitely value in retaining our top line customers, drivers, owners by implementing those initiatives, making things easy for them. And at the same time, there will be extra profitability upside as we scale. But right now, I think, to your question, the 40% margin is focused more on our core business.

[Operator:]

This concludes the question-and-answer session. I would like to turn the conference back over to the management for any closing remarks.

[Joseph Furnari:]

Great. Thank you, operator. And thank you, everybody, for joining. I'm looking forward to 2022 and making sure that we keep all of you informed as we move forward. So appreciate your time, and look forward to speaking next quarter. Thank you, operator.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.