HyreCar Inc.
Q2 2018 Earnings Call Transcript

Published: 14 Aug 2018

[Operator:]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the HyreCar, Inc. Second Quarter 2018 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the call will be opened for questions. If you have a question, please press the star key, followed by the digit one on your touchtone phone. If you would like to withdraw your question, please press the star key, followed by the digit two. If you are using speaker equipment, please lift the handset before making your selections. This conference is being recorded, today, August 13, 2018 and the earnings press release accompanying this conference call was issued at the close of market today. On our call today is HyreCar, Inc.’s Founder and CEO, Joe Furnari, and Greg Falesnik, Managing Director of MZ North America, HyreCar’s Investor Relations Firm. I will now turn the call over to Greg to read a disclaimer about forward-looking statements.

[Greg Falesnik:]

Thank you, Operator. Before we get started, I will read our disclaimer about forward-looking statements. This conference call may contain, in addition to historical information, forward-looking statements within the meaning of the Federal Securities Laws regarding HyreCar, Inc. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by Management. These statements are not guarantees of future performance and involve risks and uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in the report and other documents which we filed with the SEC. In addition, such statements could be affected by risks and uncertainties related to factors beyond the Company's control. Matters that may cause actual results to differ materially from these in the forward-looking statements include, among other factors, the loss of key Management personnel, availability of capital and any major litigation regarding the Company that may arise. In addition, this conference call contains time sensitive information that reflects Management's best analysis only as of the date of this conference call. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arrives after the date of this call. Further information concerning issues that can materially affect financial performance related to forward-looking statements contained in this presentation can be found in the Company's periodic filings with the SEC. At this time, I'd like to turn the call over to Joe Furnari, the Company's founder and Chief Executive Officer. Joe, the floor is yours.

[Joe Furnari:]

Great. Thank you, Greg, and thank you, everyone, for joining us today. I would like to welcome everyone to our first earnings call as a public Company. We're extremely pleased to be here to provide a corporate update, our financial results and, ultimately, how we will deliver value over the long term to our shareholders. On June 29, we successfully completed our IPO and began trading on NASDAQ under the symbol HYRE which raised gross proceeds of $12.6 million through the sale of approximately 2.5 million shares at a price of $5 each. Given our asset light business model, this capital is expected to last us well over a year even if we assume the lack of operational execution. Luckily, and as expected, we have performed tremendously and continued the momentum we established in our business as we've become a much more mature company and a critical piece of the massive opportunity that exists in the car sharing market today. Before we discuss financial results and the progress we're making on our operational initiatives, I'd like to remind everyone of our core mission which is to build roads to financial freedom, one driver, one vehicle, one road at a time. We plan to achieve our mission by growing our platform for both drivers and owners to connect. The marketplace allows car owners to rent their idle cars to ride sharing service drivers by conveniently sourcing vehicles from individuals and small fleet owners such as dealerships, part-time drivers may easily enter and exit the growing ride sharing market. Accordingly, our business model provides us with the opportunity to satisfy fluctuating transportation demand in cities all around the United States by enabling ride sharing drivers, many of whom do not own qualifying vehicles, to participate. We're the only company doing this to scale across the United States today. The demand is obvious as all ride sharing companies have one thing in common

[Operator:]

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] We will take our first question from Daniel Carlson with Tailwinds Research. Please go ahead.

[Daniel Carlson:]

Hey Joe, congrats on the progress you have made so far.

[Joe Furnari:]

Thanks, Dan.

[Daniel Carlson:]

Just a couple quick questions on the overall market. I saw that Avis has signed a deal with Lyft. Can you talk about what that means from your perspective?

[Joe Furnari:]

Sure. Lyft was the last of the big three rental car companies in the U.S. to jump into this space. Their presence definitely validates the market we've seen. I don't have a lot of information on the program but I think Avis still runs into the same problems that have plagued the Hertz and the Enterprise programs. Number one, they're only going to rent you 25 years of age or older, drivers. HyreCar is renting to 21 and up. The cost basis on the cars is really high and the mileage that are being put on the cars depreciates a new car asset faster than a typical rental which typically means that their traditional business models of buying new cars in bulk and then renting them out, selling them in the aftermarket for a profit, typically doesn't work in this case. Three, they have a pretty high operating cost. I mean, prepping, warehousing, and insuring and maintaining those vehicles in a brick-and-mortar type building versus HyreCar's asset light model where we're providing found [ph] revenue for dealers and individuals—if the car isn’t rented, it sits on the dealer lot or in an individual's driveway. I think we have a low cost solution for drivers as well. Once more information on the program comes to market, I can comment further. This is all a lot of speculation at this point right now until we see it rolled out.

[Daniel Carlson:]

Yes, I got you. It makes sense. Then a question about what's going on with city regulators, I know there has been a lot of chatter in New York recently about what they are doing with Uber so can you just comment on how that effects the market?

[Joe Furnari:]

Sure. In NYC specifically, it's certainly a positive for the current operators in that market because if you got there--the regulators are essentially limiting vehicle supply and I think that ultimately increases wages for drivers and income for vehicle owners so higher rental rates is a good thing for this business as long as it's supported by higher wages for drivers which I think will be the ultimate consequence of this legislation. Specifically, for HyreCar, our business model isn't really affected by this ruling because we're not operating meaningfully in the city. There are some interesting M&A opportunities there and we're exploring that market right now.

[Daniel Carlson:]

Got you. That makes sense to me. The higher wages would drive more potential drivers to you guys, that’s good. Then the last question, just about the stock, can you comment on the [indiscernible] weeks since the IPO [indiscernible]?

[Joe Furnari:]

Yes. I mean, I'm a little disappointed with the stock performance but I think, as you can see, from Company performance, there doesn't really seem to be a correlation between the two. At these levels, it looks like a great buying opportunity, in my opinion. I had a professor tell me in college once that the only thing a public company should be concerned about is shareholder value and I would add to that sustainable shareholder value. To maximize sustainable shareholder value means my team is solely focused on executing the business plan. We execute, shareholder values take care of itself.

[Daniel Carlson:]

That makes sense. Thanks, Joe. Keep up the execution. It was a good quarter. Thanks.

[Joe Furnari:]

Thanks, Dan.

[Operator:]

Thank you. We will take our next question from Robert Agriogianis with Agro Consulting.

[Robert Agriogianis:]

Hi, Joe. Congratulations on a great quarter. I actually have two questions. Can you give a little clarity? Earlier you had said that the demand for cars on the site outpaced cars that are available. Can you talk a little bit about that ratio and what it means to meet the current demand that you’re currently seeing, if it does outpace the vehicles on the site and how big can that get? How fast can you grow the demand for cars?

[Joe Furnari:]

Yes. Good question. Great question, actually. If I look back, last month the site generated about 18,000 driver leads last month and that's compared to about 750 new cars listed last month. There's a major supply side crunch on the platform right now and that's why we're announcing the partnerships that we're announcing like NIADA and DriveItAway. I mean, DriveItAway in particular gives us access to a tremendous dealer network and we're beginning to add those cars on the platform and so to touch on what that means, I mean, simply meeting the demand that we currently have with vehicles in those areas, I mean, you see a 9x, 10x growth potential there without us really doing anything. It's a good problem to have. We just need to execute at this point and I think that’s—you’re going to start to see news events coming out, announcing that progress. Stand by there.

[Robert Agriogianis:]

As far as—and I understand that and thanks for that answer but as far as continued growth for people looking for cars, eventually there’s got to be a crossover, right? I mean, you can't go from 20,000 to 50,000 and not have the cars so I guess all you can do is keep adding, right? Partnerships?

[Joe Furnari:]

Yes, I mean, at this point, we are seeing an insatiable demand across the country, not only in the primary markets but also in the secondary and tertiary markets. It's just a matter of--that’s why I like the dealer aspect of what we are doing because you have dealers in markets like Pittsburgh where we have--I think we have--last I checked, we had two cars available but we're having 60 to 100 new applicants every single month coming on board. We go to DriveItAway and John, he leverages this black book and we onboard dealers and that's exactly what we're doing right now.

[Robert Agriogianis:]

Great. The second question was, can you tell us a little bit, is Getaround a competitor of yours? Just a little clarity on the difference between that company and yours?

[Joe Furnari:]

Getaround is very similar to Turo, they are peer to peer car sharing marketplaces. Getaround does it a little bit different. It's almost like the Zipcar model where it's a keyless entry. They have a small pilot going and I don't even know if it's still active right now or, up in San Francisco where they were trying to rent cars to Uber and Lyft drivers but for the most part, Getaround is a peer to peer marketplace.

[Robert Agriogianis:]

Not a competitor, it sounds like.

[Joe Furnari:]

Not a competitor at all at this in point, or anybody I would think would be meaningful competitor at this point.

[Robert Agriogianis:]

Great. Thank you, Joe.

[Operator:]

Thank you. [Operator Instructions] We will take our next question from Michael Mortensen with West Park.

[Michael Mortensen:]

Hey, Joe. Thanks for taking my call. Listen, I have two questions. First question is regarding the exchange of the bridge loan for the common shares. Can you tell us a little bit about that? Are they free trading or are they locked up or what's your place there?

[Joe Furnari:]

With the bridge note holders, they converted into common and you can actually see, that's the one-time amortization of the debt discount expense that's hitting our revenues this quarter but that's why I would consider that one-time. That's not going to happen moving forward. In terms of free trading, yes, they were free trading and so I think that's probably one of the reasons why the stock is down a little bit. Does that answer the question?

[Michael Mortensen:]

Yes, pretty much. There were no warrants given with that bridge in those common, were there?

[Joe Furnari:]

They did have 50% warrant coverage but they haven't—they had a five-year expiration on those, at 125%, I believe, above conversion so around $3.18 or so.

[Michael Mortensen:]

Wow, so there’s probably a lot more shares outstanding. How about Turo? Are you familiar with the—of course, large player in your game, Turo? Are they—what type of comparison could you give us to your Company and theirs as far as revenues are concerned?

[Joe Furnari:]

I'm not sure about revenues. I know, just from a business model perspective, Turo is peer to peer car sharing. Their business model is focused on car rentals and for leisure, whereas HyreCar, because of the nature of the proprietary insurance, we're focused on ride sharing drivers because we are renting cars and generating insurance in the name of the driver. That’s a unique in the market. It's not being done right now and so that's the main business difference there.

[Michael Mortensen:]

Okay. Thank you very much.

[Operator:]

Thank you. That does conclude today's question-and-answer session. I would like to turn the conference back over to Mr. Joe Furnari for any additional or closing remarks.

[Joe Furnari:]

Yes. Thank you, guys. Thank you, all, for joining the call. We appreciate it.

[Operator:]

Thank you and that does conclude today's conference. Thank you, all, for your participation. You may now disconnect.