Helbiz, Inc. (NASDAQ:HLBZ) Q3 2022 Earnings Conference Call November 14, 2022 5:00 PM ET
Company Participants
Gary Dvorchak – Investor Relations, Managing Director of The Blueshirt Group
Salvatore Palella – Founder & Chief Executive Officer
Jonathan Hannestad – Chief Operating Officer
Giulio Profumo – Chief Financial Officer
Conference Call Participants
Operator
Thank you for standing by, and welcome to the Helbiz Third Quarter and Nine Months 2022 Earnings Conference Call. Currently, all participants are in listen-only mode. As a reminder, today’s program will be recorded. If anyone objects, please disconnect now.
I’d like to introduce your host for today’s call, Gary Dvorchak, Managing Director of The Blueshirt Group. Mr. Dvorchak, please go ahead.
Gary Dvorchak
So, thank you, operator, and hello, everyone. Welcome to Helbiz third quarter and nine months 2022 results conference call. We issued our financial results press release today after the market close. It’s available via newswires and on our website at investor.helbiz.com. A replay of this conference call will be available later today on the Investor Relations page of our website.
With us today are Founder and Chief Executive Officer, Salvatore Palella, Chief Financial Officer, Giulio Profumo; and Chief Operating Officer, Jonathan Hannestad. The team will first discuss results. Then, we will answer some top questions submitted to us via the Robinhood app.
Please note that our press release and this conference call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only predictions and may differ materially from actual future events or results due to variation factors. Helbiz can give no assurance that these statements will prove to be correct. We have no obligation to update these statements.
I will now turn the call over to Salvatore to begin. Salvatore?
Salvatore Palella
Thank you, Gary, and good day, everyone. Thank you for joining us to review our business performance and financial results for the third quarter and first nine months of 2022. I will first update you with the exciting quarterly progress in our business. Then, Jonathan will elaborate more on cost optimization. Lastly, Giulio will give us the financial perspective.
In the third quarter, we made significant progress in improving cost efficiency and margins. And therefore, we started in the earnest in the second quarter. We trimmed unnecessary costs in operation, administration, headcount and marketing.
For example, we started to work with a third-party staffing company in standard hiring directly. All these efforts and this will be more — are starting to drive us to profitability. Cost reduction are positively impacting cost revenue in our core mobility business.
While Jonathan will elaborate more on this, I will call out that we — and say operating efficiency in micromobility, cross-functional operating go smoother, and we increased the fleet productivity. Also, externalizing some of our European operations contribute to better mobility cost of revenue. We anticipate even higher operating efficiency in mobility after we closed the acquisition of Wheels.
Before we take a deeper review in mobility, I would like to highlight our year-to-date revenue growth of 30%. In this difficult time, I’m proud that our team would achieve this remarkable performance. In mobility, we expanded our operating area in the US. We expanded operation in my limited counting and adding our newest e-bike model to the local fleet.
In Europe, we expand beyond Italy to cover Spain by launching our first e-scooter fleet there. With our commitment to bring everyone modern and sustainability transportation suction we will continue expanding into more cities, allowing more people to benefit from our micro-mobility products and services.
Our third quarter and nine-month mobility revenues slipped due to the economic enriched. With most of our mobility revenue coming from Europe, the decreasing of the euro against the US dollar caused lower revenue. In addition, delayed with deployment affect our mobility revenue.
The over license renewal process means longer-than-expected ending time. So operating are holding the deployment of the vehicle and waiting for approval. We expect the situation to improve in the quarter ahead, and we anticipate redeployment of our vehicle, especially e-moped. Mobility cost of revenue was reduced substantially as a buffer against lower revenue to some extent.
Now let’s discuss about new taxi service. Last quarter, we announced our on-demand taxes available on or our app users. Commitment debt offering last week, we announced a partnership with WeTaxi, a leading ax operator in Italy. Now has this user can book taxi ride, whether individual or shared directly from our app. A key feature is being shown the maximum price that could be charged before riding.
We made meaningful progress in the Wheels acquisition during the quarter. After produce this Wheels jets a couple of weeks ago, we signed a merger agreement. We are working on closing of the deal as we speak. We expect to see synergy in operations and financial after closing. We should boost our near-term top line and margin, while driving toward eventually bottom line profitability. The increase in our nine-month top line was primarily attributable to higher media revenue.
However, recall that we are launching the media business last August. So the highlight growth rate in Media on a year-over-year comparison basis is less meaningful. Additionally, due to the potential cost of revenue associated with media, we achieved the high media revenue by surprising our margin potential. Therefore, we are rethinking how we will operate our media business.
Our main focus needs to be on our core micro-mobility business. We extended our partner ecosystem with notable progress in mobility and live media. We partner with one football to bring Serie BKT to Italy and the US by cooperating with more international entertainment company. Series B is now available in more countries in Asia and Africa. In mobility, we extended our cooperation with Moovit and started a partnership with a target based MSSA platform [ph] into go, which improved user trip by offering faster and easy access to vehicle while pursuing a more sustainable lifestyle.
Now, I want to hand it off to Jonathan to talk about our cost optimization. Jonathan?
Jonathan Hannestad
Thanks, Salvatore. Let me elaborate on software as it relates to our cost optimization and ability to grow. First, we strive to find improvements and efficiencies in the way we build our software. This means building technology that allows for more efficient allocation of resources, whether they be digital or hardware. This also means having our team on the ground run more efficient routes, prioritized tasks, deploy inventory areas more likely to see ridership, be alerted earlier to vehicles require maintenance, and generally more responsive to needs before they can cost problems.
With all this work, we’re on track for nearly completely automated operations by next year that will manage all tasks, drivers and operational teams. The advantages we have gained from automation to date are already resulting in lower mobility operation costs.
Second is that we’re building mobility software solutions that set the standard for the industry. In terms of safety and compliance, we’re able to exceed the regulatory requests and needs of the cities we operate in. With our focus on AI and computer vision, we have been able to launch features such as our technology that certifies parking compliance in real-time and helmet selfie verification AI tech that are flexible to meet the needs of each city, and we’re able to quickly adapt to the change in requests of regulators.
Cities are moving away from pilot programs and now want to lock in long-term providers, so they’re more specific in what they seek from operators. Since our approach is software based and relies on the existing deployed hardware, it’s much quicker and cheaper to deploy solutions that are custom built in each location we operate. This flexibility and innovation has allowed us to build a track record of success that makes us an attractive operator to say the officials. This is why we have won licenses over larger competitors and why our licenses stay active while others expire. We are confident this will continue to be a differentiator for us.
The time and energy we put into building our technology platform upfront is what gives us a competitive advantage. Creating a flexible system that is adaptable to each city and the investment in R&D will pay off in the future as we are able to respond quickly, tailor approach to each city and not have to acquire new hardware.
Lastly, we’re looking at software solution to extend what mobility means to the average user. As we grow in communities, we’re able to build a solution that solves many transportation related needs, thus encouraging users to call on us more often. Whether it is connecting to taxes, local transit or insurance, our platform is built to connect easily with third parties to extend our offerings. This low-cost way of expanding our services keeps the margins down but allows us to raise the utility of our offerings.
Now, let me turn the call over to our CFO, Giulio Profumo to discuss our financial performance. Giulio?
Giulio Profumo
Thank you, Jonathan. Our detailed financials can be found in our earnings release and 10-Q filing. So we will concentrate on discussing the drivers of our financial performance. Keep in mind that all figures given are for the third quarter or nine months of 2022. And all comparisons are made on a year-on-year basis, unless I note otherwise.
We achieved solid top line growth year-to-date through September 30, 2022. Revenue was impacted by headwinds in mobility, primarily due to the unfavorable FX impact. However, we continued driving towards bottom line profitability. Net loss at the company level narrowed by 13%, primarily due to lower mobility cost of revenue.
First, I want to review the top line. Mobility revenue declined, because of fewer trips and the euro-US dollar exchange rate impact. Nevertheless, in Q3 2022, it still contributed 67% of total revenue, a decline of 37%. Revenue was still dominated by pay per ride, but subscriptions gain traction.
Overall, the strengthening of the US dollar had an unfavorable impact on revenue. In constant currency, mobility revenue would have been at 12% higher in Q3 2022. That’s what we reported.
Looking ahead, we expect that our acquisition of Wheels will create more synergies down the road and improve the operating efficiencies of our fleet and customer management.
In Q3 2022, we continue to reduce mobility cost of revenue, which was down by 20%, thanks to better operating efficiency and the externalization of a portion of the European operation. That helped reduce the overall cost of revenue by 15% in the past quarter, in line with our strategic focus on profitability. Wheels expected to further improve the efficiency and achieve more cost optimization.
Moving to media. Media recorded a 42% top line increase during Q3 2022, which was a driver of our total revenue growth. Now that we started in the media business in the middle of Q3 2021, so the comparison is a rough number. What is more meaningful is to look at the margin brought by media. When breaking down our total cost of revenue, you will see we accounted for 32% during Q3 and 46% during the first nine months, both higher than the value of revenue process during the same period. As Salvatore mentioned, considering relatively fixed and substantial costs associated with the media, where we’re thinking our approach to this business.
Helbiz Kitchen revenue significantly increased during the third quarter and first nine months. But is still a minor contributor to improve it, we are in active dialogue with potential partners.
Now, turning to the other costs and expenses, I want to reiterate that our priority remains to be hitting profitability as quick as possible. We will continue to improve operating efficiency, while cautiously investing in growth in the context of the economic environment. Indeed, we made meaningful progress on cost reductions in Q3.
Please note that, the operating expenses were up sequentially due to an impairment of fair value of mobility assets, caused by the economic slowdown. The impairment accounted for 39% of our total OpEx. The impairment was primarily due to the decline in our market capitalization that come back on operating emotes and the current adverse macroeconomic environment.
Beginning into operating expenses for the quarter, we made significant costs in sales and marketing expenses, demonstrating our commitment to slimming down costs, while building a higher-quality business. We incurred approximately $800,000 in non-cash equity-based compensation expenses, which accounted for almost 3% of the total operating expenses.
Turning to our balance sheet and liquidity, at the end of Q3, cash and equivalents were $3.3 million. Cash investments during the first nine months were mostly related to fleet expansion to support further growth and our acquisition of Wheels.
Finally, we recently entered into an equity line of credit that provides us with the option, but not the obligation to issue and sell up to $13.9 million in common equity at the time of our choosing during the term of the agreement.
Looking ahead, we expect the fourth quarter to be up quarter-by-quarter and full year revenue up year-over-year as we benefit from a balanced since last April that can weather the uncertainties and economic headwinds everyone is faced with.
We’re also excited about further expanding our mobility offering into more locations and launching of the new insurance business. We look forward over the coming quarters to discuss the progress we have made.
We are now going to take questions from shareholders that Gary will moderate. Gary?
Question-and-Answer Session
A – Gary Dvorchak
Thanks Giulio. So, Helbiz received questions from our shareholders on the Robinhood app, thanks to the Say Technology Shareholder Q&A platform. The selection of the top up-voted questions will be addressed now. We’ll continue this platform and extend to others so that we can continue to address shareholder questions in the future. I’m passing the questions one by one for the Helbiz management team to answer.
So, the first question knowing your company can only trade under $1 for six months, are you aware of possibly being delisted in the near future? And are you planning to do a reverse split?
Giulio Profumo
Thank you for your question. We’re currently monitoring the situation and intend to pursue a request for an extension of the grace period with NASDAQ to cure the stock price deficiency and return to compliance with the continued listing standard. We intend to consider available alternatives, including, but not limited, to a reverse stock split, subject to stockholder approval, if necessary, to cure the stock pricing on compliance.
Gary Dvorchak
Okay. Can you describe how recent partnerships will positively impact the business and bottom-line?
Jonathan Hannestad
Thank you. That is a very good question. The goal with our partnerships is to extend our user base, reach customers in new ways, and to rely on the expertise of our partners. To point to some examples across our business, We Taxi, as we talked about today, allows our mobility offerings to expand and relies on the deep market penetration in Italy.
OneFootball provides a new platform for fans to subscribe to Helbiz Live, and Deliveroo greatly expanded our user base of customers ordering from Helbiz Kitchen. These impact our revenue positively, while requiring less overhead on our end.
Gary Dvorchak
Okay. But the new taxi service is Helbiz is trying to compete with Lyft and Uber?
Salvatore Palella
Thank you. Our goal has always been to listen our ownership and be the source for people looking to commute around their communities. We Taxi established a wider mobile — mobility ecosystem, integrating various service into one app, including our. That means we are constantly developing and offering our user value-added service and more transportation alternatives. So, we see this as an addition to our core business of micro-mobility.
Gary Dvorchak
Great. Thanks. How does the current macroeconomic environment affect Helbiz?
Salvatore Palella
So we’re not immune to the realities of inflation and a slowing economy. However, we are confident in our ability to continue navigating macroeconomic headwinds and deliver stronger long-term business results.
Gary Dvorchak
Great. Thanks. So the final question, what’s the most important initiative for Helbiz looking into 2023?
Salvatore Palella
There will be multiple initiatives and the goal will be the growth of offering that we start this year. The ensuring of this will be after the closing of Wheel’s merger. Working with their people and expanding the B2B and monthly subscription offering, which has seen success in New York City already. As well, we will continue to grow the partner offering around mobility such as taxi and insurance.
Gary Dvorchak
Great. Thanks. Okay. And with that, we’re going to turn the call back to Salvatore for closing remarks. Salvatore?
Salvatore Palella
Thank you, Gary. While the overall microeconomic environment remain uncertain, we are confident and motivate in driving towards financial and operating profitability. We intend to scale micromobility and offer new innovating service to drive top line growth. Meanwhile, ongoing cost optimization and adding of Wheels are expected to bring our operating efficiency to the next level.
We are grateful to our team’s dedication and to our shareholder’s support. We are excited about the future and look forward to sharing more on our progress in multiple phases of our business. Thank you all for joining the call.
Operator
Thank you. This concludes today’s conference call. Thank you for your participation and you may now disconnect.
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