EVmo, Inc.
Q2 2021 Earnings Call Transcript

Published: 17 Aug 2021

[Operator:]

Good afternoon. And welcome to EVmo Second Quarter 2021 Financial Results Conference Call. As a reminder, this conference is being recorded. And all participants are in a listen-only mode. We will open the call for question-and-answer session following the presentation. On the call today are EVmo’s Executive Chairman and largest shareholder, Terren Peizer; CEO, Steven Sanchez; and CFO, Ryan Saathoff. The company would like to remind everyone that various remarks about future expectations, plans and prospects constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. EVmo cautions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated, including risks described in the company’s filings with the SEC. Any forward-looking statements made on this conference call speak only as of today’s date, Tuesday, August 17, 2021 and EVmo does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A replay of the conference call be available on the EVmo’s website at www.evmo.com. With that, I’d like to turn the call over to EVmo’s Executive Chairman and largest shareholder, Terren Peizer for opening comments. Please go ahead, Mr. Peizer.

[Terren Peizer:]

Thank you, operator. And welcome everyone to our second quarter call. And I'm just going to give a few opening remarks. And then we'll turn the phone over to Steven Sanchez, our Chief Executive Officer, and of course Ryan, or Chief Financial Officer. As you can tell by our press release this morning, it was a record quarter. We did $2.7 million, obviously in revenue for the quarter. I'd like to say, if you do a quick average, and round up, you would get roughly a million dollars a month. And I believe we're over that right now. And obviously trending up. And the important point in today's revenue although grew significantly over the last year. The key point is this is without effect due to the capital we've raised. Just to remind you, we did $15 million of debt financing, $7.5 million we took down initially and we'll take down the other $7.5 million if and when we do an equity raise. But which you can probably be assured we will at some point. And we also issue for the debt as we countenance tell you, at the margin of $10 million of capital, both debt and equity translates into roughly at the margin $80 million of revenue, and about $$20 million of EBITDA. So we for example raised $10 million more. That would be a total of $10 million of equity, just as an example. We do have an S-1 file that was cleared by the SEC. If we raise $10 million of equity, that'll give us roughly $25 million, which gets us up to $200 million revenue run-rate and $50 million of EBITDA. For some reason, our stock price doesn't reflect this. I'm not sure why? We demonstrated today not even at scale, that we have a 28% gross margin. We referenced that it's the best of other public company comparables. And as you may know, there's another company sort of in our space, we like our model better. And we think we will scale faster and more efficiently and have a much greater EBITDA and much greater revenue base and revenue growth. With that, I'm going to turn it over to Steven and Ryan, and I'll come on if there any questions at the end or with the closing comment, Steven?

[Steven Sanchez:]

Thank you, Terren. And good afternoon to everyone on the call. Thank you for joining us and taking the time to participate in our second quarter financial results call. We're excited to report yet another quarter of record revenue. Second quarter revenue exceeded pre-COVID-19 levels, demonstrating the strength of our business model and the rapidly growing demand for our services as the reopening of the economy continues. Importantly, the quarter’s revenue doesn't reflect the effect of our July debt financing and the capital deployed. Before we go into further details related to the second quarter, I'd like to take a step back to provide an overview of our business model for those on the call that are less familiar with our story. We have developed what we believe is an innovative business model in which we not only provide ride sharing and delivery gig drivers with the necessary technology to operate, but also the vehicles themselves should the driver not have a qualified vehicle to use. Further, as we continue our transition to all electric vehicles, we believe we're in the vanguard of a new era in commercial transportation, and that our early presence in this industry will further distinguish us from a competitive standpoint. In 2020, we entered into the delivery gig space, which has provided us with another form of service diversity. For vehicles operated by delivery gig drivers are significantly less onerous than those operated by rideshare drivers. The increasing demand for ride sharing and delivery gig services has produced an increase in demand by peer-to-peer transportation businesses for more ride sharing and delivery gig drivers and vehicles on the road at any given time. The growing opportunity for gig workers has drawn drivers to these industries to perform services for companies like Uber, Lyft, DoorDash and Grubhub. We estimate that these businesses are hiring more than 50,000 drivers a month to keep pace with the current commercial demand for ride sharing, and delivery gig services. According to Uber’s Q2 call, their Uber Eats division has grown at 100% compounded annual growth rate over the past four years and still has plenty of room to run. And its recent acquisitions of Postmates and other delivery service provide further validation of the growing interest in delivery of this as a service. We believe that many potential ride sharing drivers are deterred from applying for or are turned away from employment by certain operators due to the fact that their personal vehicles would fail or are failing to meet the qualification requirements imposed by these businesses. We address this directly by enabling these drivers to rent vehicles from us vehicles that meet if not exceed the qualification requirements imposed on prospective rideshare drivers. And with our cutting-edge technology and expertise, we enable the frictionless rental experience from intake to vehicle return. We have leveraged our partners and ship with best-in-class OEMs in the EV category to build a fleet of EVs at attractive lease terms, receiving favorable pricing and delivery commitments from multiple OEMs. These EV growth plans are fully aligned with the two largest ride hailing platforms in the U.S. We have attractive buyback agreements and the option to purchase vehicles at the end of the financing term. And have consistently been able to sell vehicles at a gain, given the strong residual value relative to attractive initial acquisition prices below MSRP. In the second quarter, the combined tailwinds of loosening COVID restrictions, increasing vaccination rates, higher rideshare demand and stable delivery demand pushed our business to the highest quarterly revenue in our company history. Our strong growth and record revenue is a result of the foundation we built in 2020, which included operational efficiency measures, increasing the size of our fleet, committing to an EV strategy, increasing our credit lines and entering the last mile logistics space. We continue to maintain strong gross margins, significantly better than any domestic public company comparables. Gross profit was up 158.1% over Q2, 2020, making the company's core rental operations profitable before taking into account corporate overhead and onetime costs. We expect our gross margins will continue to expand throughout 2021 as we substantially increase our fleet and transition to an EV model. Even before scale, our gross margins are better than public company comparables that are at a greater scale. It's important to note that our second quarter performance does not reflect the effect of the debt financing capital and commitment we received in July. Financing enables us to add 500 fleet units to our platform immediately, including the addition of more EVs that improve our EV car mix to 20%. Ultimately, our objective remains to be a fully EV company. With further financing, we will endeavor to deploy 10,000 vehicles over an 18 to 24-month period. Capital and the associated internal rates of return are the fuel to our potential exponential growth and profitability. Our capital formation strategy, which includes debt and equity capital is expected to translate into exponential revenue and EBITDA growth moving forward. At the margin, Terren said, every $10 million in debt and or equity capital raise should enable the company to purchase approximately 4,000 vehicles with an 85%-15% rough estimation car to van mix. This should translate to approximately $80 million in annual revenue for every $10 million of capital raised at the margin. The company anticipates scaling to a 25% EBITDA margin. I'll now hand the call over to Ryan Saathoff our CFO for a more detailed review of our financial results. Ryan?

[Ryan Saathoff:]

Thank you, Steve and good afternoon everyone. Total Revenue in the second quarter of 2021 increased 67.8% to a record $2.7 million, up from $1.6 million in the second quarter of 2020. Revenue growth in the second quarter was primarily driven by an increase in rental of the company's vehicle fleet. Cost of revenues in the second quarter of 2021 was $1.9 million up from $1.3 million in the second quarter of 2020. The increase was due to higher depreciation expense and insurance expense related to an increase in the company's fleet size. As a percentage of revenue cost of revenue decreased to 72.2 in the second quarter -- of 72.2%, in the second quarter of 2021, down from 81.9% in the second quarter of 2020, driven by higher fleet utilization. Selling and marketing expenses were $64,000 in the second quarter of 2021 an 18.1% decrease compared to the second quarter of 2020. The decrease is due to reduction and advertising as the company has maintained a high utilization rate for its vehicles. General and administrative expenses were $1.5 million up from $161,000 and Q2, 2020. The increase in G&A was primarily driven by higher professional fees, salaries and stock option expenses. Total operating expenses were $1.6 million in the second quarter up from $669,000 compared to Q2, 2020, driven by a combination of the factors just discussed. Net cash used in operating activities total $244,000 in the first 6 months of 2021, which was a decrease of $95,000 from the net cash expended in operating activities Q2, 2020. The decrease is principally due to the changes in operating assets and liabilities and non-cash expense items. That concludes the summary of our second quarter financial results. I would now like to turn the call back over to Steve for final remarks.

[Steven Sanchez:]

Thank you, Ryan. Appreciate it. As 2021 progresses, we anticipate strong revenue contribution from the capital we are deploying to purchase new EVs and cargo vans. Our July 2021 debt financing was just the beginning of our capital formation strategy. We anticipate $200 million in revenue at the scale with 25% EBITDA margin. EVmo currently has more than 600 cars and vans on its platform and we are actively in discussions with multiple new and existing lending partners to meet our anticipated growth in vehicles. Approximately 60% of EVmo drivers currently have more than 80 continuous rental days. We're on a mission to rent every car every day and provide excellent service in the process. We're committed to an environmentally friendly user platform. We buy ride, maintain high utilization through our maintenance excellence program, and forge key strategic relationships to drive our environment, environmental and economic initiatives. Our plans are bold and aggressive. And we believe that 2021 and particularly 2022 should be breakout years for EVmo. I want to thank our shareholders for their continued support, and thank everyone on the call today for their time and interest in EVmo. We would now like to open the call up for any questions.

[Operator:]

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. This concludes today's conference. And you may disconnect your lines. Thank you for your participation. And have a wonderful day.

[End of Q&A:]