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Edited Transcript of HYRE.OQ earnings conference call or presentation 11-Nov-20 9:30pm GMT

·29 min read

Q3 2020 HyreCar Inc Earnings Call Nov 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Hyrecar Inc earnings conference call or presentation Wednesday, November 11, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Joseph Furnari HyreCar Inc. - CEO & Director * Robert Scott Brogi HyreCar Inc. - CFO ================================================================================ Conference Call Participants ================================================================================ * Jack Vander Aarde Maxim Group LLC, Research Division - Senior Technology Analyst * John David Godin Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst * Jon Robert Hickman Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst * Michael John Grondahl Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the HyreCar Inc. Third Quarter 2020 Earnings Conference Call. (Operator Instructions) This conference is being recorded today, November 11, 2020. And the earnings press release accompanying this conference call was issued at the close of the market today. On our call today is HyreCar's CEO, Joe Furnari; and CFO, Scott Brogi. I would now like to turn the call over to Joe Furnari. -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [2] -------------------------------------------------------------------------------- Thank you, everyone, and welcome to our third quarter 2020 conference call. Before we get started, I'd like to take this opportunity to remind you that during this call, we will be making forward-looking statements within the meaning of federal securities laws regarding HyreCar Inc. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions or any other statements relating to its future earnings, activities, events or conditions. These statements are based on current expectations, estimates and projections about the company's businesses based in part on assumptions made by management. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors included in our documents that the company files with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we take -- undertake no obligation to update them, except as required by applicable law. Our discussions today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results will be found in our earnings release and supplemental materials, which will be furnished with our Form 10-Q that will be filed with the SEC and will also be found on the Investor Relations portion of our website. Now to turn to our quarterly results. The third quarter validated our business model in a post-COVID world, and the results serve as a bold statement by the HyreCar team in the face of adversity. The performance of our business model is a continuation of our efforts in the face of an unprecedented business environment. Our conscious effort to expand the platform to delivery services by identifying opportunities in delivery service platforms and by rapidly expanding our emphasis on delivery in late March proved to be the right move by our team, and the results speak for themselves. Revenue grew 22% sequentially and over 84% year-over-year. We saw over 273,000 rental days in the quarter, an increase of over 20% sequentially and over 90% growth in rental days year-over-year. The company fully expects to see growth through the rest of 2020, even with the differing city and state approaches to reopening. And we remain steadfast that HyreCar will continue to persevere in the new COVID world. One of our main sources of strength has been continued robust driver demand. The strong driver demand comes primarily from customers seeking vehicles for delivery as delivery services are heavily supplementing rideshare driver income during the slowdown. In the third quarter, 5,100 new unique drivers picked up a car on our platform, an 11% increase sequentially and 37% year-over-year growth. Increasing customer retention was key to revenue and rental day growth rates, helping both recover in the third quarter. We foresee continued growth in driver demand as consumers are changing their behavior in the COVID-19 environment. Mom-and-pop have adopted delivery services into their daily routine. And as a result, TAMs on delivery platforms have exploded. For example, Uber Eats is now a $35 billion run rate business and grew this past quarter 120% year-on-year. Grubhub's revenue was up 53% year-on-year in the third quarter and that growth continued to accelerate. Strong delivery platform demand means driver economics will remain strong, creating an environment sustainable to larger and larger driver pools. Additionally, we're in the early innings of this growth. Uber Eats has only penetrated 30% of restaurants in the U.S. So as we move into the ninth month of COVID, the combination of delivery service platform economics remaining strong and the promise of rideshare bouncing back to normal as states reopen is making our business even bigger than we had anticipated. Car supply is the main gating factor to our growth today. Q3 results validate HyreCar's expansion into food and package delivery that allowed HYRE to continue to fare better than the 55% rides decline our TNC partners are seeing in their businesses. In this COVID world, what hurts ridesharing, helps delivery. And for us, it is a matter of new cars on the platform. So while the outlook for COVID is unclear, as I will discuss later, we have used this time to grow our partners so that we can significantly increase the availability of cars for the strong demand on our platform. New cars listed on the platform are being sourced from existing customers, some of whom are expanding their fleet operations significantly. However, franchise and independent dealers have seen a rebound in used car prices, which has supported their core used car sales business. With used car prices high, there are fewer vehicles listed for gig rentals. Expectations are that vehicle manufacturing is ramping up and will start to hit dealer lots shortly. Once new cars start coming online, used car prices should start to normalize into the first half of 2021. This will have the effect of creating more supply and driving fleets toward alternative use cases for dealerships. While dealer stock is constrained, we have seen growth from specialty fleet and rental companies who want to utilize existing vehicles. In late August, we announced a partnership with Midway Car Rental. The rental car agency held by the Hankey Group Family of Holdings with combined assets of over $9.5 billion. The pilot has moved cautiously with the need to integrate policy and procedures within the operations at our respective companies. We recently participated in the international car rental show, and HyreCar was featured in a discussion panel with Brett Lippel, Midway's President. Brett highlighted benefits to the partnership, including their ability to run cars in longer and more profitable cycles. This partnership is a great case study, an example of how larger rental car agencies can benefit from our robust driver demand. And we're seeing more interest from rental agencies amid the uncertain business environment that they are operating in today. Our team has been onboarding new partnerships that we believe can expand the number of cars on our platform from the current rate of 3,100 active daily rentals to an additional 6,000 active daily rentals count between now and the fourth quarter of 2021. New partnerships will include relationships with some of the largest automotive groups in America and go a long way toward replacing the inventory that came out of the rideshare and delivery with the exit of Hertz and Fair during COVID. That approximated almost 65,000 vehicles. Getting to 4,500 active daily rentals makes us profitable in the near term. So we believe we can directionally drive to both profitability and growth with these new partnerships as we grow in the fourth quarter of 2020 and into the first couple of quarters of 2021. A couple of notable initiatives we're working on today. First, HyreCar is restarting its COVID pause partnership with the Cox Automotive Mobility team and their clutch technology subsidiary, which will lead to more vehicle supply partnerships with retailers. Cox Automotive believes HyreCar can be an integral part of their plans to onboard their dealers to mobility platforms. Second, we'll shortly be announcing a national partnership to monetize customer leads that wish to buy a vehicle, 30% of higher car platform visitors indicate they plan to buy a vehicle. This partnership will put us in a position to earn complementary revenue streams, leveraging HyreCar's current platform. Third, we are excited about our new electric vehicle initiatives. We have made it our goal to share Uber's objective to be carbon-neutral by 2030. We are finalizing partnerships now that will put EV fleets in key markets. And last topic, certainly of major significance to our industry. Another larger macro political event since Assembly Bill 5 that was expected to go into effect on Jan 1, 2020, required companies to hire independent contractors to reclassify them as employees with a few exceptions. In response, our partners, Uber, Lyft, DoorDash and others helped from Prop 22 to preserve the independence and flexibility of these drivers. We are pleased that Prop 22 passed in California with a healthy margin. To echo what Uber said, this important question has now been settled in the most populous state in the country. California voters listened to what the vast majority of drivers want, new benefits and productions with the same flexibility. Going forward, drivers and delivery people in California are expected to be guaranteed a minimum earnings standard, health care contributions, accident insurance, increased safety productions and more. We feel strongly that this is the right approach. Uber and Lyft said that they expect to be adding benefits to gig work to make it better, not getting rid of it all together in favor of an employment-only system. We believe Prop 22 struck the right balance between preserving the flexibility that drivers value so much while adding protections that all gig workers deserve. With that, I'd now like to turn the call over to Scott Brogi, our Chief Financial Officer, to walk through some key financial details from the quarter. Scott? -------------------------------------------------------------------------------- Robert Scott Brogi, HyreCar Inc. - CFO [3] -------------------------------------------------------------------------------- Thanks, Joe. I'd like to start by saying thank you to all members of our military and to all veterans on Veterans Day for all you have done to protect our freedom. HyreCar continued to move closer to profitability this quarter. Adjusted EBITDA improved to negative $1.6 million or negative $0.09 per share in the third quarter as we grew revenue and controlled expenses. And we once again reduced our quarterly cash burn this time to less than $400,000 in the third quarter. Net revenue increased 83% to $6.8 million for the 3 months ending September 30, 2020, from $3.7 million for the 3 months ending September 30, 2019, and was up 22% sequentially from $5.6 million for the 3 months ending June 30, 2020. The revenue increase was primarily driven by increases in core rental days as well as slightly higher unit pricing. Rental days grew 87% annually to over 273,000 rental days in the third quarter from approximately 146,000 rental days in the third quarter of 2019 and 18% sequentially from approximately $231,000 in the second quarter of 2020. Cost of sales increased for the quarter ending September 30, 2020 to $3.9 million from $2.2 million the prior year ending September 30, 2019, and by $900,000 from $3 million the prior quarter ending June 30, 2020, primarily due to some seasonal shifts in insurance costs to support higher levels of car supply. As a result, gross profit for the third quarter was $2.9 million, doubling from $1.4 million in the year ago period ending September 30, 2019, and increasing significantly from $2.5 million for the prior quarter ending June 30, 2020. Gross profit margin was 43% for the third quarter, up from 40% in the year ago quarter ending September 30, 2019, and down slightly from 45% in the second quarter ending June 30, 2020. We expect our gross profit margin to increase towards 50% as we continue to improve insurance processes and products moving forward. Operating expenses decreased to $4.7 million for the 3 months ending September 30, 2020, from $5.2 million in the same period the prior year as expenses continued to be well controlled. Cash operating expenses totaled $4.5 million for the third quarter after adding back approximately $144,000 in noncash stock-based compensation toward the lower end of our quarterly target OpEx range of $4.5 million to $5 million as we start to realize efficiencies of scale. Our net loss decreased to $1.8 million or $0.10 per share for the 3 months ending September 30, 2020, from $3.6 million or $0.24 per share in the same period the prior year ending September 30, 2019, and also decreased sequentially from a net loss of $3.9 million or $0.22 per share for the prior quarter ending June 30, 2020. Adjusted EBITDA of negative $1.6 million or negative $0.09 per share was a dramatic improvement from negative $3.1 million or negative $0.20 per share the prior year ending September 30, 2019, as well as from negative $1.7 million or negative $0.10 per share in the prior quarter ending June 30, 2020. Cash totaled $6.8 million on September 30, 2020, a decrease of less than $400,000 from the $7.2 million we had last quarter on June 30, 2020. Over the past 2 quarters, cash has only decreased by approximately $1 million. And unlike the prior quarter, this was done simply based on improving operating cash flow without the support of the PPP program we enjoyed in the second quarter. Much of this is a result of our new automotive insurance program, Apollo 1969. As a reminder, we will have a balloon payment in early 2021, so we are maintaining our discipline on accruals as we grow. Now I'd like to turn the call back to Joe to wrap things up. -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [4] -------------------------------------------------------------------------------- Thanks, Scott. So to summarize the message, COVID has created an expanded opportunity for our platform, and HyreCar's Q3 performance was the validation that our business model can capitalize on that opportunity. The only gating factor to our growth is car supply, and we're moving at warp speed to secure fleet partners at scale. TAMs on delivery platforms are now just as big as the TAMs in rideshare, and this represents an expansion of our platform. We've shown that HyreCar is nimble enough for any business environment, now predominantly with delivery drivers. But as the recent news on vaccine shows, hopefully, this is a dawn of a new day where we can collectively put COVID-19 in our rearview mirror. We remain optimistic that as driver confidence starts to return, so too will rideshare. The combination of delivery and rideshare demand has created emerging tailwinds that are driving our business now and in the future. With that, let's move to Q&A. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Mike Grondahl with Northland Securities. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [2] -------------------------------------------------------------------------------- My first question is just if you could clarify a little bit, Joe, I think you talked about adding 6,000 cars, which is 2x what you have on the platform. Could you kind of talk about where those are coming from and how you expect those to ramp up? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [3] -------------------------------------------------------------------------------- Hey, Mike. Yes, you know what, if in a pre-COVID world, I think we would have been there this year, right? I think that we were -- as we're seeing a tremendous ramp in our dealer initiatives at the beginning of the year, and then we got COVIDed and all of those dealerships went into hibernation and were on life support for a little while there. And so as we're kind of moving along and we're in this ninth month, we have fleet and large fleet operators who have been affected by COVID, who have a lot of idle inventory sitting. They're looking to add scale -- looking to add fleet at scale and they're looking for that distribution channel that has disappeared from some of these players leaving the market, Hertz in particular. And so we're stepping in to hopefully fill that footprint. And so you're talking about 1 or 2 operators that could bring that amount of cars, those amount of cars to the platform. So I'm excited about what 2021 looks like. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [4] -------------------------------------------------------------------------------- And I guess a follow-up, how do you think those 6,000 cars ramp? Is that over the next year, over the next 6 months? And then if you could kind of, I think, normalized revenue then annual on 9,000 cars, give or take a little bit, it's about $80 million to $85 million. -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [5] -------------------------------------------------------------------------------- Right. And I just want to be clear, we're not giving guidance there, right? But we are in talks with these partners. So it is a very real possibility that we have that many cars. And they start to feather in month-over-month. So it ramps incrementally. I mean we are planning internally to really start to increase the supplier expecting that supply coming on in late Q4 of this year, Q1 of next year. So we're kind of anticipating a lot of that coming on, but I see realistically, it probably feathers in throughout the next 5 quarters. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [6] -------------------------------------------------------------------------------- Got you. Okay. And is anybody else filling that 65,000 car void kind of left from Hertz or Fair? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [7] -------------------------------------------------------------------------------- Avis has come into the market. I'm not really sure where they are right now in terms of cars. I think that they are super focused on ridesharing and what we're seeing in the market right now is ridesharing was starting to pick up. But now I think it's kind of flattening out with some of the city and states now rethinking reopening. And so Gavis is there, but that's -- and Getaround. But I think that's pretty much it. And then it's HyreCar. So we have greenfields now with -- when you look at the competition and what our opportunity is to move forward, we're there right now, and we're ready to start adding fleet at scale. So we're looking for partners to be able to help us do that. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [8] -------------------------------------------------------------------------------- Got it. And then maybe just lastly, as you add those 6,000 cars, do you need to layer in much for expenses? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [9] -------------------------------------------------------------------------------- Maybe I'll give the high level and then maybe bring in Scott on that one. From my perspective, we're kind of shifting to put a regional presence in a lot of our core geographies. That's a shift from what we've done in the past. We've traditionally had all of our account managers guys sitting in Los Angeles and managing vehicles -- managing our owner supplied vehicles. What we're looking at doing now is kind of shifting to a regional presence. And that regional presence, I think, should be neutral. We're going to give those opportunities to our internal staff right now first. And then if they don't want to move to New York, Orlando, Atlanta, Dallas, then we'll look to hire in those regions, but it should be minimal. -------------------------------------------------------------------------------- Robert Scott Brogi, HyreCar Inc. - CFO [10] -------------------------------------------------------------------------------- Yes, Mike, and this is Scott. Good to catch up again. And it's a really good question, I think. As we've talked about, we are really managing to stay within quarterly OpEx bands of kind of $4.5 million to $5 million, and we were at the lower end of that range this quarter. So talking about cash operating expense of a little over $4.5 million. And so I think we will look to add to a limited extent in some of those geographies so that we can really get the growth that we're looking from for the key markets, but we don't see it as a huge increase to OpEx. So thanks for the question. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [11] -------------------------------------------------------------------------------- Sure. Well, I guess that speaks to just operating leverage is pretty strong. And just to verify, I think you said 4,500 cars is breakeven. So when you get above that, it gets pretty interesting quick. -------------------------------------------------------------------------------- Robert Scott Brogi, HyreCar Inc. - CFO [12] -------------------------------------------------------------------------------- Yes. I mean we'd always kind of talked about 30,000 weekly rentals when we came back from (technical difficulty) COVID situation. So I think that still holds. And if you do the math, 30,000 weekly rentals, it's going to get you to about 400,000 rentals a quarter. And we still see that as the breakeven level because that would give you about $9 million in quarterly revenue at a 50% GP margin, and there's the $4.5 million in operating expenses, cash operating expenses that we had this quarter. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Our next question comes from John Godin with Lake Street Capital Markets. -------------------------------------------------------------------------------- John David Godin, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [14] -------------------------------------------------------------------------------- Congrats on the nice quarter. First, when you're talking about the fleet operators, have you guys been just having discussions with them? I mean, how have those kind of evolved over the past quarter? And from their perspective, what are kind of some of the key milestones they need to see in order to get over the hub as far as adding on higher volumes of new cars to the platform? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [15] -------------------------------------------------------------------------------- Well, in the larger fleets, they know it's profitable, right? They were running cars pre-COVID directly into the TNCs. So they're just looking for assurances that we can drive volume and scale. So that's one. With the current fleet operators, they're looking for profitability milestones and that we can provide a white glove type of service. And as we've kind of started to roll out new products, HyreCar for Business, specifically, we're showing them that we can service larger fleet at scale by giving them the tools to do that and then by also providing the account managers dedicated to their inventory. -------------------------------------------------------------------------------- John David Godin, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [16] -------------------------------------------------------------------------------- Got it. And then as far as pricing goes, have you guys noticed any changes there? Has it been relatively steady? I know you've mentioned potentially integrating some more granular level of driver data and pricing data in your platform. Is there any update on that? And what could that look like going forward? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [17] -------------------------------------------------------------------------------- Well, as I look at kind of our daily rates, they've increased slightly, normalized. We saw a dip in April and May as utilization on the site dipped, so did prices. But now we're up and bumping up against 85% to 87% utilization on the site. So prices are -- prices have normalized and ticked up slightly in Q3, but pretty close to COVID levels, pre-COVID levels. -------------------------------------------------------------------------------- Robert Scott Brogi, HyreCar Inc. - CFO [18] -------------------------------------------------------------------------------- Yes. And then, John, this is Scott. Maybe the only thing I'd add to that is now that we have more discrete insurance pricing on a state-by-state basis and also age weighted, we're actually pouring through that data to see if there's some risk adjustment that we should be doing in our fee schedule to account for a riskier population of drivers. So I think you may see some tweaks to our model heading into 2021 as we continue to refine it and make sure that we're getting the right kind of drivers that our commercial car supply really wants to see. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- Our next question comes from Jack Vander Aarde with Maxim Group. -------------------------------------------------------------------------------- Jack Vander Aarde, Maxim Group LLC, Research Division - Senior Technology Analyst [20] -------------------------------------------------------------------------------- Joe, Scott, solid quarter. Just couple of questions from me. I'll start with a question for Joe. Hoping to get some additional color on the partnership with Midway. You guys did provide some helpful commentary, but just a few more follow-ups to that. So as it relates to maybe your target to increase the active rentals on the platform by, I think, you said 5,000 or 6,000 in the upcoming 4 or 5 quarters, which I'm sure is a moving target. But can you share any comments maybe on what percentage Midway's 8 locations might be embedded within that target? Any comments there? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [21] -------------------------------------------------------------------------------- Yes, it's still early days. Like we said, we're moving cautiously because we really need to integrate all of their procedures -- policies, procedures. The platform originally was built -- our HyreCar platform was originally built for peer-to-peer vehicle supply. We've been shifting it to a dealer focus like the HyreCar for Business. There's an additional step that needs to be taken there to accommodate rental car companies who aren't used to specific -- renting specific VIN numbers. And so there's some technology in there that needs to be implemented. So give us some time there. But I mean, when you talk to Brett over at Midway, he's all in on this deal. And I'm really excited because they're purpose buying for us. So I'm excited on what that looks like. But I can't give you the specific percentages right now. -------------------------------------------------------------------------------- Jack Vander Aarde, Maxim Group LLC, Research Division - Senior Technology Analyst [22] -------------------------------------------------------------------------------- Sure. That's helpful. That's fair. Just one more question on that then, and maybe you can't provide any color here, but I figured I'll try. Did this partnership with Midway -- it was announced in August. Did this partnership actively contribute to your third quarter revenue, if you can provide that? And maybe what -- if so, and if the number of the cars were actively listed from Midway during the third quarter, what -- how small is that overall percentage of what that opportunity represents as you're looking into Q4 and then into 2021? Just wondering if like directional trends and if they contribute to revenue in the third quarter? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [23] -------------------------------------------------------------------------------- Yes, slight contribution. I wouldn't say outsized in terms of some of our other -- in comparison to some of our other larger fleets. I can't -- I don't have that broken out by percentage, but I can get it for you. -------------------------------------------------------------------------------- Jack Vander Aarde, Maxim Group LLC, Research Division - Senior Technology Analyst [24] -------------------------------------------------------------------------------- Okay. That's helpful. I appreciate that. And then a question for Scott, financials-related question. Looks like third quarter gross margin -- while the gross profit is -- obviously, you can't take a margin to the bank, you can take dollars to the bank, though. So it's good to see gross profit dollars really ramping up. But the margin level did dip to that 42.5%, below the 45% to 50% kind of target. You mentioned some -- I think, some seasonal changes with the insurance cost maybe. But just wondering what caused that fluctuation specifically? And will it always be lumpy? Is there always some element of mystery there that would cause it to fall below 45% again? Or just anything you can provide there? -------------------------------------------------------------------------------- Robert Scott Brogi, HyreCar Inc. - CFO [25] -------------------------------------------------------------------------------- Yes. I mean I think we saw a couple of things, right? It was interesting. I've read a few insurance or fintech reports recently that talked about -- I think everybody kind of thought that when travel was way down that like accidents would completely stop. And actually, what ended up happening is as there was less traffic, speed actually increased and accidents became more serious. So I think we are working to get that more normalized going forward. I think we have some exciting announcements that will be coming up here in the near-term future as we look to make both the auto for physical damage and the liability process more efficient. It's a real focus for our technology group. So I think we'll continue to work on. We did have some seasonality in it this quarter. And then I'm excited to really improve that on a going-forward basis. And then we haven't really talked about it, but there are some good opportunities on the subscription side of things with our new HyreCar for Business platform to start expanding in that area. So we expect to get back on that track to 50% that we've been talking about. -------------------------------------------------------------------------------- Jack Vander Aarde, Maxim Group LLC, Research Division - Senior Technology Analyst [26] -------------------------------------------------------------------------------- Got it. Okay. That's helpful. That's encouraging comments there. And then maybe just as a follow-up, maybe how does -- with the insurance program with Apollo and the upcoming balloon payment in early 2021, and then just given your comments just now on accidents and risk kind of related driving kind of was counterintuitive, maybe it increased a bit. Does that impact that level of the amount of the balloon payment you'll have to pay in early 2021? And also, what is your comments on the cash reserves you have on hand to satisfy that payment, whatever it might be if it increases or not? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [27] -------------------------------------------------------------------------------- Yes. The payment is actually just a direct result of the rental days in the period. So that really isn't impacted by, say, the type of claims that you're having in that component. So as we said, we've been accruing on it -- for that on a quarterly basis, and we have sufficient capital to take care of that and keep moving forward. So we feel pretty good about where things are right now. And I think the testament to that is that cash was almost neutral quarter-to-quarter, and it's only come down a bit in the last 6 months actually. So we feel good about where that is. -------------------------------------------------------------------------------- Jack Vander Aarde, Maxim Group LLC, Research Division - Senior Technology Analyst [28] -------------------------------------------------------------------------------- Okay. Great. Well, it's nice to see the business continue its rapid growth momentum and you're on track, it seems, to reach that sufficient positive cash flow generation in the upcoming quarters. So congrats, guys. That's it for me. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- Our next question comes from Jon Hickman with Ladenburg. -------------------------------------------------------------------------------- Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [30] -------------------------------------------------------------------------------- Most of my questions have been asked and answered. I just had 2 left. Is there any seasonality in the number of rental days during Q3? It seems like it's been flat since July. So I was just wondering if that was a factor. -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [31] -------------------------------------------------------------------------------- Yes. Good question, Jon. I -- what we see, and you've actually seen this in the third quarter last couple of years, that you do have some softness in August and September. And so that's probably what you're -- that's what you're seeing in those numbers. And expectation is that Q4 has always been one of the strongest quarters for demand. And so that's what hopefully you'll see in the fourth quarter. -------------------------------------------------------------------------------- Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [32] -------------------------------------------------------------------------------- Okay. And then going forward, could you give us some indication, the stock-based compensation, I mean, your -- will look pretty much like Q3 instead of past quarters? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [33] -------------------------------------------------------------------------------- Yes. I think we're getting back to kind of more of a normalized level at this point in time. So yes, I think this is kind of back to more of a steady state right now and it is largely what we'll see on a going-forward basis. That's what we expect to see. -------------------------------------------------------------------------------- Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [34] -------------------------------------------------------------------------------- Okay. And so just one more back to the first guy's question about 6,000 cars. You really feel this is a question of when, not if? I mean, you feel good enough about these discussions that it's not a kind of up in the air thing? -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [35] -------------------------------------------------------------------------------- Yes. Yes. We have commitments. They've talked to insurance carriers, they're gearing up to do this. So I'm excited. Everybody should be excited about this opportunity. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- That concludes today's question-and-answer session. I'd like to turn the call back to Joe Furnari for closing remarks. -------------------------------------------------------------------------------- Joseph Furnari, HyreCar Inc. - CEO & Director [37] -------------------------------------------------------------------------------- Thank you, everyone. That's all I had. Looking forward to showing results in the near future here. Thank you. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.