Getaround, Inc. (NYSE:GETR) Q2 2024 Earnings Call Transcript

Getaround, Inc. (NYSE:GETR) Q2 2024 Earnings Call Transcript August 12, 2024

Operator: Good afternoon. And welcome to Getaround’s Second Quarter 2024 Earnings Conference Call. Today’s webcast includes management’s prepared remarks along with a hosted Q&A session. As a reminder, this event is being recorded. I would now like to turn the conference over to Barry Hutton, Managing Director of The Blueshirt Group. Please go ahead.

Barry Hutton: Thank you, operator. And thank you, everyone, for joining us today. Hosting the call with me are Getaround’s Chief Executive Officer, Eduardo and Getaround’s Chief Accounting Officer and Interim Chief Financial Officer, Patricia. On this call, management will be making projections or other forward-looking statements within the meaning of federal securities laws, which are based on our current expectations and assumptions and are subject to risk and uncertainty. Forward-looking statements generally relate to future events or our future financial and operating performance. Our assumptions, expectations and beliefs regarding these matters may not materialize and our actual results in future periods are subject to risks and uncertainties that could cause those actual results to differ materially from those projected.

These risks, which include those set forth in the press release that we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this announcement are based on information available to us as of the date hereof and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that other than revenue, or as otherwise specifically stated, the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release that is available on our website.

With that, let me turn the call over to Eduardo.

Eduardo Iniguez: Thank you, Barry. And good afternoon, everyone. As you know, I rejoined Getaround as CEO in late February. Since then, I have been working with our team on multiple initiatives to lay the foundation for growth and profitability. I believe Getaround has several advantages that uniquely position us to continue improving our competitive position within the car sharing space. These include our proprietary Connect technology, which enables fully remote management of bookings, our growing global presence that allows customers to book in the US. and in Europe and our incredibly loyal and talented team that continues to focus on executing our mission. To date, we have completed the following: reviewing and streamlining our operations across every function to lower our cost structure; focusing heavily on improving margins, which include making the difficult decision to suspend operation in markets where profitability is challenging due to regulatory requirements, such as New York; enhancing our governance and leadership team by appointing industry experts to new board member seats and senior executive positions; and obtaining a commitment of $50 million in additional financing with $40 million of this already secured to execute our business plan.

Q&A Session

There are other initiatives in flight, including pursuing ISO certification as part of a renewed focus on strategic partnerships with OEM automakers and their connected cars; aggressive expansion of our gig business, including both our [HyreCar] by Getaround and Drive with Uber operations; new ways to get into a car in addition to our seamless connect experience, including delivery to a driver’s location or point of interest and iterating on our AI based TrustScore model to better assess and price risk. I am pleased to report that these efforts are beginning to translate into financial performance, particularly with respect to margin improvement. On a year-over-year, our Q2 trip contribution margin improved from 43% to 53%. This reflects a new aggressive focus on controlling our trip support costs, including claims and customer support expenses.

We have also completed extensive restructuring of people, teams, processes and systems, which have and are expected to continue to improve our bottom line. As a result, second quarter year-over-year adjusted EBITDA loss improved 49% to $11.4 million. Total net revenue was consistent with the same period in 2023 at $18.6 million while gross booking value fell by 1% to $53 million. It is important to note that we achieved similar year-over-year total revenues in the second quarter despite facing several headwinds. These include suspending all operations in New York, one of our largest markets, as well as legacy challenges from 2023 that impacted supply operations and acquisitions, and reduced global marketing investment that impacted demand. Revenue benefited from the acquisition of HyreCar assets completed in May 2023 and we continue to invest in our gig operations, which makes Getaround now the country’s largest peer to peer car sharing marketplace for gig drivers.

In Q2, synergies from the HyreCar acquisition expanded our Drive with Uber program, integrated skilled operational leadership to other business areas and provided insights into managing a healthy margin business while focusing on high vehicle utilization, longer duration rentals and high velocity product development. Our gig and global technology platform updates completed in the first quarter have been encouraging. With the launch of new features, such as key exchange, which allows owners and drivers to connect in person, providing owners more agency and drivers with more choice in order to improve liquidity. I anticipate our 2025 global platform implementation across all business operations to further drive significant top line growth. During the first half of 2024, we executed on opportunity to increase efficiency and rightsize fixed costs.

For the remainder of 2024, the team is laser focused on maintaining our positive momentum on improving margins and growing in markets and segments with profitable unit economics. Now, I’ll turn it over to Patricia Huerta, our Chief Accounting Officer and Interim Chief Financial Officer, to review our financial results.

Patricia Huerta: Thank you, Eduardo. And good afternoon. As Eduardo mentioned, we’ve seen revenue consistent with the same period year-over-year with an uptick in profitability, signaling positive momentum from our ongoing efforts to enhance performance. Top line revenue was flat relative to Q2 2023 at $18.6 million while gross margin from service revenue continued its upward trend reaching 88% in Q2 2024. Trips for the second quarter were 235,000, down from 257,000 in Q2 2023. The reduction in trips is largely attributed to the suspension of operations in New York State. Year-over-year, net revenue was consistent with Q2 2023 despite headwinds from exiting the New York market effective April 1, 2024 and our exit from certain other unprofitable geographic markets.

That impact was partially offset by the revenue contributed by our acquisition of HyreCar assets in May 2023. On the cost side, we have improved gross margin from service revenues to 88% in Q2 of 2024, an improvement of 300 basis points year-over-year. Trip contribution profit was $9.7 million, up 23% year-over-year, driven by reductions in support costs. This improvement in our unit economic reflects the meaningful impact of many operational and cost actions we’ve taken this year and we believe there’s further room for margin improvement while sustaining healthy top line momentum. Operating expenses totaled $40.7 million in the second quarter, a decrease of $6.6 million compared to Q2 of last year due to reducing and optimizing marketing spend, operations, support expenses, as well as general and administrative costs.

Our adjusted EBITDA ended the quarter at $11.4 million loss, favorable to the $22.4 million loss during the same period last year, mostly tied to optimizing our marketing, operations and support expenses. Our cash position was $30.9 million at the end of Q2 2024 and we are in the process of improving that position. Finally, we have used the existing Mudrick Capital debt facility to add $20 million of cash in July 2024. As Eduardo outlined, we’re taking significant steps to reset our company’s leadership, business direction and operations. These changes are now in place and the benefits are beginning to be reflected in our financial results. As our efforts continue, we look forward to providing ongoing business updates. At this time, I’ll return the call to Barry Hutton to host our Q&A session.

A – Barry Hutton: Great. Thank you, Eduardo. Thank you, Patricia. We’ve asked — we’ve received a number of questions from investors over the course of the quarter, especially in the last day or two. As we’ve fielded those questions, we’ve recognized that many of the questions are similar and really concentrate around a few key topics. And so we wanted management to take a few moments to address those primary topics right now publicly for the entire audience. So I will ask these topics to Eduardo to get his comments. First question is related to the stock exchange listing. Effectively, Eduardo, can you explain the company’s decision to withdraw the appeal to the New York Stock Exchange and what is likely to happen next?

Eduardo Iniguez: Look, I understand the move from the NYC may appear to be high profile change. But if you’ve been following Getaround’s journey as a public company, you’ll be familiar with the fact that the company hasn’t been compliant with the NYSE’s listings requirements for some time. It seems since going public in late 2022, the company has had several operational and financial challenges that have impacted our finances and ultimately our status with the NYSE. But however, we are today and we will continue to be a public company. We fully plan to follow the expected SEC public company requirements. As outlined during the call, we have installed new executive team, several new board members along with making operational changes and successfully securing financing.

Our immediate near-term focus is to transform the company into sustainable operational model to better serve our drivers, car owners and investors. I believe and the team believes that when the time is right, we will reevaluate our exchange listing options.

Barry Hutton: The next question, in addition to your efforts to streamline the business operations, what are the near term and midterm opportunities to improve your key growth metrics?

Eduardo Iniguez: I think As Patricia and I shared on the call, we’re pleased with cutting our quarterly net loss by more than half year-over-year but we will not sacrifice growth to continue optimizing our cost structure. It is important to remember that we have a proven business model and we know that car sharing can be profitable. So we firmly focus on balancing cost optimization with profitable growth. As you recall and if you’ve followed Getaround, like I mentioned before, previously and I was here during that time, the company was focused on growth at all costs, but now the management team is aggressively pursuing market segments that are aligned with our business model. For some context, the company’s estimate of total serviceable market is over $100 billion and there is only a handful of global players.

So the question is how we grow profitably and that’s what my team and I are here to do. To give you some growth examples, we continue building on our technology and support infrastructure to drive loyalty. increasing repeat Getaround customers, our proprietary technology with Connect is key here, making it incredibly convenient to rent; focusing on aggressive geographic expansion and profitable North American European country this quarter; and pursuing longer distance rental by attracting a new customer segment of renters.

Barry Hutton: Looking bigger picture, how does Getaround differentiate itself from competitors in the car sharing market and what are the key challenges and opportunities that you foresee for the industry?

Eduardo Iniguez: At the top of my head, I could think of four and I’ll review them as I continue, but I want to start with, first we align all of our functions around creating a cohesive driver and owner experience that’s seamless, intuitive and adds value to community we’re part of. To us, customer experience is what differentiates us from the competition whether in car sharing or compared to traditional rental agencies. We see four areas that we differentiate ourselves. One is our Connect technology, which is targeted to our drivers. We want to continue making it incredibly easy for them to search, book and drive. For example, our drivers do not have to wait in long lines and physical location to get into a car and they could just use the app, connect to the vehicle and pick up the car without having anyone there.

Second place is our TrustScore technology which is AI machine learning technology, which focuses on owners. The way TrustScore works is we want to ensure that drivers take good care of the cars, because it’s important to our owners. So we continue to iterate our risk underwriting to make it more rewarding to rent Getaround than any other marketplace. The third piece is our global platform. I believe for both North America and Europe, we are now a single global technology platform that we believe is best in class, unlocking efficiency at scales as we continue to release new features to our customers. And the last piece is our internal talent. We’ve done a really good job internally over the past few months to attract industry experts who are passionate about changing the car sharing world.

They are the ones who are really leading the implementation of changes to better serve our customers. As far as the challenge goes, we continue to face — we have faced state legislation that makes certain markets challenging to operate for car sharing, suspending our operations in New York as a result of legislation is one example. This takes away from the opportunity for our communities to drive, earn and reduce congestion.

Barry Hutton: And lastly, some of the audience has recognized that given Getaround’s business model, the company must have a significant amount of data from its drivers and its car owners. Has the company tried to leverage any AI capabilities or features through your technology or your platform?

Eduardo Iniguez: It’s true. Getaround has significant amount of data from over a decade of operating in the car sharing space. But it’s not just connect data, it’s also general marketplace dynamics and there are always opportunities to better leverage data. One way we are doing business is by exploring how AI can help improve the customer experience. For example, how we generate AI will help liquidity. We can use data for personalization, improving the research experience for drivers so they can better navigate the marketplace experience. For risk management is another area where we can deploy specifically by incorporating our data sets, how we price risk with our TrustScore model, as well as how we base price with more accurate dynamic pricing.

Another one I could think of is we can incorporate AI in how we interact with our customers. Another example of that would be we can — with the chat experience to assist bookings and have instant customer support. As we all know AI, the new way for it to compete and differentiate ourselves and AI presents a new frontier for our business. And honestly, I’m really excited to share more about it and how we are using it and particularly the impact of the business, but more of this will come in future calls.

Barry Hutton: Our audience recognizes that it’s been very busy and dynamic few months with the company. We appreciate management, given this business update today and addressing several of the key topics that most of our investors have been asking about. So at this point, we want to thank the audience and our investors and other stakeholders for your interest in the company and listening in today. And we look forward to updating all of our stakeholders with future development as appropriate through various communications channels, including not limited to our next quarterly report at the end of the third quarter. So again, thank you for your interest. And at this time, we can disconnect and end the call.