NXXT - NASDAQ

Good morning, ladies and gentlemen and welcome to the EzFill Holdings Third Quarter 2022 Earnings Call. At this time, all participants have been placed in a listen-only mode. [Operator Instructions] It is now my pleasure to turn the floor over to your host, John McNamara. Sir, the floor is yours.

Thank you. Good morning, everyone and welcome to today's conference call to discuss EzFill's 2022 third quarter financial results. With us today from management are Mike McConnell, Chief Executive Officer; and Arthur Levine, Chief Financial Officer. Before we begin, as usual, we would remind everyone that certain matters discussed during today's call or answers that may be provided to questions may constitute forward-looking statements as defined under federal securities laws. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company's annual report on Form 10-K filed with the SEC. Copies of these documents are available on the SEC's website as well as on the company's website. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these statements for revisions or changes after the date of this call except as required by law. With that, I'd like to turn the call over to Mike McConnell. Go ahead, Mike.

Thanks John. Good morning, everyone. Thank you for joining us today to review our third quarter 2022 results. A little more than one year ago, we became a public company. When we reported our third quarter results for the 2021 fiscal year, we reported revenue of $1.9 million and $5.2 million for the first nine months of the year. 60% of that revenue came from a single customer. We had 13 trucks and all of our customers were in the South Florida region. Today, we're essentially the same company, but we have significantly grown to meet the demand of what we see as enormous market potential. Our results for the third quarter of 2022 bear that out. We reported revenues of $4.1 million, a 120% increase from the $1.9 million we reported a year ago for our first quarter reporting as a public company. On a nine-month basis, revenues grew to $10.2 million from $5.2 million, a 95% increase. While we don't control the price of fuel and as you all know, the price has been very volatile this year, we've improved our margin per gallon by $0.06 or 16% since we became public. No one customer accounts for more than 30% of Q3 revenue, a significant improvement from where we were when we first became a public company. In fact, we've added more than 75 new fleet customers in 2022 with over 25 new fleet customers in the third quarter alone. We've also expanded to new locations with some of our existing customers. We've grown our fleet of trucks from the 13 we began with when we completed our IPO to 38 today. We've expanded our operations from a small footprint in South Florida to today in West Palm Beach, Tampa, Orlando and most recently, Jacksonville. As we said in our September announcement, Jacksonville is one of the largest cities by area in the U.S. We see tremendous opportunities for further expansion throughout Florida, while at the same time we'll be looking to grow to other states. We continue to focus primarily on growing our commercial business, which currently makes up over 80% of our revenue. The opportunity to expand our on-demand consumer and specialty markets, including marine, is still part of our strategy, and we'll be opportunistic about these as they present themselves. We're also planning to partner with other companies to introduce other products and services in the coming quarters to leverage our technology and improve our overall margin. As everyone knows, Hurricane Ian barreled into Florida into October and Florida residents are still assessing the damage. EzFill was there at the forefront of our efforts to provide assistance where needed. We had our trucks on site delivering fuel to firefighters and first responder vehicles as well as delivering fuel to residents in affected areas. We're very proud to have been recognized by the governor's office as one of the private sector companies providing needed emergency efforts. We've come a long way since our IPO in September of last year. We're proud of what we've accomplished in terms of growing the business in a challenging market. We're looking forward to continue to exit our business plan and expand the company's footprint and breadth of products and services in a manner that is consistent with the ultimate goal of consistently generating shareholder value. With that, I'll turn the call over to Arthur, who will walk you through the financial results. Go ahead, Arthur.

Thank you, Mike. As Mike noted earlier, revenue for the third quarter of 2022 increased 120% to $4.1 million from $1.9 million in the prior year period. The increase was driven primarily by a 71% increase in total gallons delivered 180,000 to 994,000 gallons in the third quarter of 2022. Our margin per gallon in the period increased by 16% to $0.43 per gallon in this year's third quarter. We've been successful at increasing our overall margin per gallon as we add new fleet customers at higher margins. We expect that we will maintain a healthy margin as we continue to add commercial fleet accounts and more consumers, including marine. Cost of sales was $4.2 million compared to $1.8 million in the prior year period. The increase in the -- from the prior year reflects the increase in sales as well as the hiring of additional drivers to support the growing business primarily in new markets. Depreciation and amortization increased to $0.48 million in the third quarter of 2022 from $0.24 million in the prior year period, primarily the result of the increase in the fleet of delivery vehicles. Operating expenses, excluding depreciation and amortization, were $3.5 million in the second quarter of 2022 compared to $1.8 million, a net increase of $1.7 million. The major increases were in payroll, sales and marketing, insurance and public company expenses. The Q3 marketing expenses also included an advertising campaign directed to residential and marine customers. Interest expense was lower in 2022 than the prior year period due to the early repayment in September 2021 of pre-IPO debt as well as lower cost financing post IPO. On a GAAP basis, we reported a net loss in the third quarter of $4 million compared to $2.4 million in the prior year period. Adjusted EBITDA loss in the third quarter of 2022 was $3.3 million as compared to a loss of $1.2 million in the third quarter of 2021. The increased loss in the third quarter of 2022 reflects increased spending on infrastructure to grow and expand the business in the operating expense areas previously noted. We used approximately $3 million in cash in operations during the third quarter. Like many fast-growing companies, we are working diligently to get to the point we reach -- where we reach breakeven cash flow. The key to significantly reducing our cash burn lies in continuing to increase our sales volume and improve customer margins, while also improving the efficiency of the drivers that have been hired as we ramp up sales in the new markets that we opened in 2022. We also plan to exercise very strict control over our operating expenses as we continue to scale, now that we have completed building out our core infrastructure. We expect our delivery truck fleet will be 42 at year-end. We have more than enough truck capacity for now, but we will evaluate before the end of the year, our need for additional orders for delivery during 2023. Finally, our cash position at quarter-end was $7 million, including investments compared with $16.9 million at year-end 2021. We have no long-term debt and outstanding borrowings under our line of credit of $1 million at the end of the quarter. With that, we'd be happy to take questions.

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Thank you. Our first question is coming from Tate Sullivan with Maxim Group. Please go ahead.

Thank you. A couple for me. Arthur, starting with your last comment on the truck target for the end of the year. Do you still have scheduled to take delivery of five trucks by the end of the current quarter? Or are you staying at 40? Or do you have any capital commitments to take any additional trucks, please?

Well, we're currently at 38, and we plan to take delivery of four in a year, which will bring our count to 42 at the end of the year.

Okay. Thank you. And then as you take delivery of the trucks with -- I mean, with the lower -- I mean -- and the additional cost of drivers, mean how quickly does that expectation, how quickly for those trucks to start to generate profits? I mean, let's say, in the new city that you enter in Florida. I mean, can it be six months? Can it be shorter? And what are the variables for win a truck, new freshly delivered truck can start delivering profits for you, please?

Yeah. Well, we -- what we call an anchor tenant, so that we're not starting with zero business, but our model is that we need a truck to be approximately 60% to 70% utilized in order for it to start generating positive cash flow. And that assumes that the truck is doing two 8-hour shifts per day.

And to get to that level, I mean, have you seen trucks do you already -- have trucks in your fleet at that level of utilization that I mean you receive that have been operating for more than six months to a year?

Yes. Some, but not all, in Miami are operating at that level. The trucks that are in the new markets are still below that level. So, to my previous comment, we still have a way to go to reach that level of utilization with the existing fleet. So, we do plan to take delivery of some trucks in 2023, and we're in the process of evaluating that. And it will -- clearly will depend on how many new markets we open and how quickly we do that next year.

Thank you. And then, you mentioned cost control too with the -- and then I mean with your operating expenses, have been increasing slightly quarter, actually 3.4 to 3.76, slightly quarter-over-quarter. Do you plan to curtail some previously expected marketing expenses, should we ramp up your operating expenses meaningfully for future marketing? Or is it on hold or maybe just flat for the time being?

Yeah. I think the marketing -- you can assume that it will be flat. We're not planning any increases in marketing going forward.

And Mike, you mentioned -- I believe you mentioned some -- evaluating some new products and technologies. And I don't know if you can with partners -- I don't know if you can comment on it, but can you comment on what are the suite of products and technologies and maybe competitors and other, not competitors but other on-demand fueling companies and other states provide or any additional detail color that you can...

Yeah. [Technical Difficulty] opportunities besides just petroleum. So, mobile carwash, anything related automotive as far as maintenance related to those things because we have the consumer, we have their auto information, and we have their credit card on file. So, there's some natural synergies there that we are talking with some of those partners, some of the things we're looking at as far as rolling that out. As also on the technology side, we just introduced an upgrade on our fleet portal, which has a lot of information for our fleet customers that we'll be continuing to add enhancements to that on the tech side and be able to monetize that to give our fleet customers a lot more information and knowledge about their fleet and how they're operating in fuel consumption and those kind of things. Providing them information that from what we have seen and the feedback we've gotten from our fleet customers that they haven't seen from other fuel providers, the level of tech and the level of information that we've been providing. So that will be an emphasis for us continuing to invest in the tech side of things and then rolling out some of these other revenue sources as well.

And can you -- is Florida -- will you be ahead of other states in terms of are you already ahead of other states in terms of the on-demand fueling market? Or have other states growing their market or on-demand fueling faster, introduce more technologies? Can you talk a bit about the national landscape for your marketer? Or is Florida more developed compared to, let's say, California?

I think it's still very scattered. And there's not a lot of companies to really compare to a benchmark out there. From what we've been told from our customers who've been using especially on the fleet side, from the technology space, we're definitely probably ahead of where most people are at, that we are at least the ones that we're aware of. As far as the national scale and the growth, as far as mobile fueling, haven't seen a herd a lot as far as expansion from competitors or other people like that as far as other places around the country. So, I think we're still in the early stages of this, but it's getting a lot of attention and ramping up quickly as far as a way to fuel going forward for consumers and fleets.

Okay. Thank you. And then just last for me, you previously guided and you had about 1 million gallons delivered in 3Q. But with the timing of the hurricane in Florida and maybe some halting to boat refueling, should there be -- was there more, I mean, refilling of tanks after the storm? Or how did the timing of the storm impacted number of gallons delivered? And could some of what you delivered -- might have delivered in normal situation in 3Q 2020 to slip to 4Q 2022?

Yeah. There's no question. I mean, some of our fleet customers closed. And with that, obviously, we weren't feeling them at that particular point in time. But I think we were able to help a lot with the relief efforts as far as doing some things there. So that was definitely a replacement as far as gallons go. But I think we will see this continued growth and trajectory that we've been showing quarter-over-quarter in gallons percentage-wise and those kind of things. We feel very optimistic that we'll continue to be able to show that kind of growth going forward. But you'll probably have some -- definitely, we had some spillover and a fast start to Q4 with a little bit of pent-up demand with some of the businesses that closed and then reopened right after.

Okay. Thank you, Mike.

Thanks Tate. Yes, thanks.

Thank you. Our next question is coming from Jason Kolbert with Dawson James. Please go ahead.

Hi, guys. Thank you for your service during the hurricane. We really appreciate it. One question that comes out of that service is, is there any discussion maybe with the state of Florida and with other states to kind of have this service ready in advance or the next emergency or maybe the next hurricane, which seems like it's coming pretty soon.

Yeah. Yeah. Yes. No, definitely, there are some discussions. I think as we called out, we got to mention from the governor's office, so we've got a relationship and report established there. Typically, a lot of the fuel providers are these big tankers that try to come in and get gas stations up and running. But what we've discovered with our fleet, which is smaller and more nimble with 1,200 gallon tanks as we can get areas where some other fuel providers can't. So, we were able to provide a lot of services to some of the businesses, to hospitals, to their employees, so they could help people during this time. But absolutely, I think formalizing more of this and seeing what we can do on a go-forward basis is definitely part of our plans, especially now that we've grown outside of Miami, we're much more attentive to a lot of the other markets that we're in with Tampa, West Palm Beach, Orlando and now Jacksonville. We've got a much farther reach and can make a bigger benefit in those kind of things. But the short answer is yes, we have some initiatives to expand that relationship going forward.

And switching to the numbers. What's the limiting factor in terms of growing the revenue numbers, which have been growing at a spectacular rate? But at what point -- is it the ability to hire drivers? Is it capital constraints? What are the factors that you're looking at in order to -- or the hurdles to overcome in order to continue to support this high growth rate?

Yeah. Jason, the -- I'd say the biggest hurdle is capital because to start with at least two trucks and higher drivers. And on day one, even if we go with an anchor tenant, both the trucks and the drivers are going to be underutilized until we sell more business. So, every new market we go to has significant negative cash flow before we have a significant growth. So, yeah, I would say capital is probably the number one factor that limits our ability to expand to new states, which require even more capital and more effort than expansion within Florida.

And I guess this is a little bit of a loaded question, but with the mid-terms coming down today, there could be a shift in the energy policies in the U.S. and that could drive the market a little bit. So, maybe that's an area that would alleviate some constraints in terms of market cap and ability to raise capital.

We certainly hope so.

Yeah. We do too. Thank you so much. Appreciate it.

Yeah.

Yes. I just want to say thank you all for joining us, and we look forward to reporting back to you in the fourth quarter. Have a great day everyone.

Thank you, ladies and gentlemen and this does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation.