PARTS ID, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following management's discussion and analysis of financial condition and
results of operations should be read together with our unaudited condensed
consolidated financial statements, together with the related notes thereto,
included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our
audited consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2021 (our "2021 Form 10-K").


PARTS iD, Inc. is a technology-driven, digital commerce company focused on
creating custom infrastructure and unique user experiences within niche markets.
The success of the Company has inspired pursuit of our long-term strategy to
scale into similar markets via our proprietary built, modular digital commerce
technology platform. While our core focus continues to be automotive, in August
2018, we launched seven additional verticals (including,, and more) which demonstrate the fungibility of
our technology platform. These verticals address similar market challenges and
focus on the enthusiasts' needs through our seamless shopping experience using
proprietary tools and techniques.

Although the COVID-19 pandemic has caused economic disruptions on a global
scale, and created significant uncertainty, we believe it increased the adoption
of online shopping by consumers and, for periods during which stimulus payments
were disbursed by the government, particularly between April 2020 and April
2021, increased demand for the products of the Company with a positive effect on
our revenue and profitability. However, there was a decline in traffic after the
first quarter of 2021, primarily due to an increase in the average
cost-per-click in the Company's search advertising programs and lower consumer
discretionary spend that adversely impacted marketing productivity.

COVID-19 and related containment measures have disrupted the supply chain,
negatively affecting the Company and our industry. In the first quarter of 2022,
continued spikes in the price of materials, low in-stock rates by our key
suppliers, workforce shortages and shipping and seaport delays led to increases
in the cost of goods sold, which negatively impacted gross margins of the
Company. Supply chain challenges increased order cancellations and shipping
costs. Our real-time multi-sourced inventory model helped us mitigate some of
the risk by sourcing certain products from secondary and tertiary sources, but
these measures resulted in increased costs. We continue to pass a portion of the
increased costs through to our customers, while balancing the need to maintain
price competitiveness.

Management continues to focus on efforts to drive growth, including product
cultivation, vendor optimization, distribution network expansion and marketing
diversification with a greater emphasis on the additional adjacent verticals,
original equipment ("OE") and repair parts businesses. We have also been focused
on increasing our presence in the DIFM (Do-It-For-Me) segment of the automotive
aftermarket industry. More than 5,000 new locations have been added to our tire
installation network, an important step in our efforts to build an omnichannel
customer experience and attract customers in the $225+ billion DIFM segment
our platform.

Russian-Ukrainian Conflict

In February 2022, the Russian Federation launched a full-scale invasion against
Ukraine, and sustained conflict and disruption in the region is ongoing.The
Company's engineering and product data development team as well as back office
and part of its customer service center are located in Ukraine. The conflict
could have a material adverse effect upon the Company.

Since the onset of the active conflict in February, most the Company's
contractors have been able to continue their work, although at a reduced
capacity and/or schedule.  The Company's websites and call centers have
continued to function but could be more negatively impacted in the future. Some
of the Company's contractors have moved outside of Ukraine to neighboring
countries where they continue to work remotely. Some of the Company's
contractors who have remained in Ukraine have moved to other areas in Ukraine,
but their ability to continue work is subject to significant uncertainty and
potential disruptions.


The situation is highly complex and continues to evolve. The Company cannot
provide any assurance that its outsourced teams in Ukraine will be able to
provide efficient and uninterrupted services, which could have an adverse effect
on the Company's operations and business. In addition, the Company's ability to
maintain adequate liquidity for our operations is dependent on a number of
factors, including our revenue and earnings, which could be significantly
impacted by the conflict in Ukraine. Further, any major breakdown or closure of
utility services or any major threat to civilians or international banking
disruption could materially impact the operations and liquidity of the Company.

Main financial and operational indicators

We measure our business using financial and operating metrics, as well as
non-GAAP financial measures. See "Results of Operations - Non-GAAP Financial
Measures" below for more information on non-GAAP financial measures. We monitor
several key business metrics to evaluate our business, measure our performance,
develop financial forecasts and make strategic decisions, including the

Traffic and engagement indicators

For the three months ended March, 31st,

                                 2022              2021             Change          % Change
Number of Users                 32,529,076        34,535,770        (2,006,694 )         (5.8 )%
Number of Sessions              55,104,987        64,749,311        (9,644,324 )        (14.9 )%
Number of Pageviews            210,003,667       285,876,353       (75,872,686 )        (26.5 )%
Pages/Session                         3.81              4.42             (0.60 )        (13.7 )%
Average Session Duration          00:02:59          00:03:26          (0:00:29 )        (13.9 )%

We use the metrics above to gauge our ability to acquire targeted traffic and
keep users engaged. This information informs us of how effective our proprietary
technology, data, and content is, and helps us define our strategic roadmap and
key initiatives.

Results of Operations

                                          Three months ended March 31,                                  Change
                             2022          % of Rev.           2021           % of Rev.          Amount             %
Revenue, net             $ 94,892,148                      $ 109,073,628                      $ (14,181,480 )       (13.0 )%
Cost of goods sold         76,397,920            80.5 %       86,240,019            79.1 %       (9,842,099 )       (11.4 )%
Gross profit               18,494,228            19.5 %       22,833,609            20.9 %       (4,339,381 )       (19.0 )%
Gross Margin                     19.5 %                             20.9 %
Operating expenses
Advertising                 9,701,292            10.2 %       10,499,386             9.6 %         (798,094 )        (7.6 )%
Selling, general &
administrative             11,672,727            12.3 %       11,358,707            10.4 %          314,020           2.8 %
Depreciation                1,954,462             2.1 %        1,773,773             1.6 %          180,689          10.2 %
Total operating
expenses                   23,328,481            24.6 %       23,631,866            21.7 %         (303,385 )        (1.3 )%
Loss from operations       (4,834,253 )          (5.1 )%        (798,257 ) 

(0.7)% (4,035,996) 505.6%

  Interest expense                  -             0.0 %            6,490             0.0 %           (6,490 )      (100.0 )%
Loss before income tax     (4,834,253 )          (5.1 )%        (804,747 ) 
        (0.7 )%      (4,029,506 )       500.7 %
Income tax benefit           (881,066 )          (0.9 )%        (159,934 )          (0.1 )%        (721,132 )       450.9 %
Net loss                 $ (3,953,187 )          (4.2 )%   $    (644,813 )          (0.6 )%   $  (3,308,374 )       513.1 %



Revenue for the three months ended March 31, 2022, decreased by $14.2 million,
or 13.0%, compared to the same prior year period, primarily attributable to a
lower number of orders due to decreases in traffic and the site conversion rate,
partly offset by an increase in the average order value and an increase in
Marketplace revenue. Compared to the same prior year period, traffic declined by
14.9% in the three-month period ended March 31, 2022, the site conversion rate
decreased by 13.9% and average order value increased by 9.4%.

We believe that the decrease in traffic and the site conversion rate was
primarily attributable to a reduction in discretionary spending by consumers.
The decrease was exacerbated by a lack of government stimulus as compared to the
first quarter of 2021, a delay in the issuance of IRS refund checks, which have
historically benefited first quarter revenue, as well as an increase in product
costs due to high inflation. The increase in average order value in the first
quarter of 2022 compared to the same prior year period was primarily
attributable to increases in inflation and shipping charges to the customers.

Cost of Goods Sold

Cost of goods sold is composed of product cost, the associated fulfillment and
handling costs charged by vendors, if any, and shipping costs. In the three
months ended March 31, 2022, cost of goods sold decreased by $9.8 million, or
11.4%, compared to the same prior year period. This decrease in cost of goods
sold was primarily driven by decreases in the number of orders or products
and related shipping costs.

For the three months ended March 31, 2022, cost of goods sold was 80.5% compared
to 79.1% of revenue in the respective prior year period. The 1.4% increase in
cost of goods sold as a percentage of revenue was primarily attributable to
changes in product categories mix and ongoing supply chain disruptions
associated with the COVID-19 pandemic. During the three months ended March 31,
2022, we continued to source select products from alternate vendors at higher
price points and we did not pass all of the associated increased costs to the
consumer. Management currently expects these cost pressures to ease as our
supply chain should regain efficiencies as the COVID-19 pandemic and related
containment measures abate. We also continued to make investments in the
adjacent verticals, repair parts and original equipment businesses.

Gross profit and gross margin

Gross profit decreased by $4.3 million, or 19.0%, for the three months ended
March 31, 2022, compared to the same prior year period, primarily due to a 13.0%
decrease in revenue and increases in product and shipping costs associated
supply chain disruptions.

Gross margin of 19.5% for the three months ended March 31, 2022, was lower than
the gross margin of 20.9% for the three months ended March 31, 2021, primarily
attributable to a change in the product category revenue mix as discussed above
and increases in product and shipping costs associated with ongoing supply

Operating Expenses

Advertising expenses decreased $0.8 million, or 7.6%, for the three months ended
March 31, 2022, compared to the three months ended March 31, 2021, primarily due
to lower traffic and number of clicks.

Advertising expenses as a percentage of revenue were 10.2% and 9.6% for the
three months ended March 31, 2022 and 2021, respectively. The increase in
percentage was primarily attributable to increases in cost-per-click, a change
in the mix of advertising channels and investments in certain marketing
initiatives. Management believes investment in advertisement is one of the key
drivers of revenue, and measures advertising efficiency in terms of revenue
advertisement dollar spent.

Selling, general and administrative ("SG&A") expenses increased $0.3 million, or
2.8%, for the three months ended March 31, 2022, compared to the three months
ended March 31, 2021. This increase was primarily attributable to an increase in
non-cash share-based compensation expense of $0.8 million, partially offset by
decreases in public company operating expenses of $0.3 million and in merchant
services provider processing fees of $0.3 million.

Depreciation charges increased $0.2 millionor 10.2%, for the three months ended March 31, 2022compared to the three months ended March 31, 2021.


Interest Expense

Interest expense decreased by $6,490or 100%, for the three months ended March 31, 2022compared to the three months ended March 31, 2021.

Income Tax Expense

Income tax benefit was $0.9 million for the three months ended March 31, 2022,
compared to $0.2 million for the three months ended March 31, 2021. For the
three months ended March 31, 2022, the effective income tax rate was (18.23)%,
compared to (19.87)% for the three months ended March 31, 2021. The change in
rate was primarily attributable to changes in state taxes and expenses not
deductible for income tax purposes.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

This report includes non-GAAP financial measures that differ from financial
measures calculated in accordance with U.S. generally accepted accounting
principles ("GAAP"). These non-GAAP financial measures may not be comparable to
similar measures reported by other companies and should be considered in
addition to, and not as a substitute for, or superior to, other measures
prepared in accordance with GAAP. Management uses non-GAAP financial measures
internally to evaluate the performance of the business. Additionally, management
believes certain non-GAAP measures provide meaningful incremental information to
investors to consider when evaluating the performance of the Company.

To this end, we provide EBITDA and Adjusted EBITDA, which are non-GAAP financial
measures. EBITDA consists of net income (loss) plus (a) interest expense; (b)
income tax provision (or less benefit); and (c) depreciation expense. Adjusted
EBITDA consists of EBITDA plus costs, fees, expenses, write-offs and other items
that do not impact the fundamentals of our operations, as described further
below following the reconciliation of these metrics. Management believes these
non-GAAP measures provide useful information to investors in their assessment of
the performance of our business. The exclusion of certain expenses in
calculating EBITDA and Adjusted EBITDA facilitates operating performance
comparisons on a period-to-period basis as these costs may vary independent of
business performance. Accordingly, we believe that EBITDA and Adjusted EBITDA
provide useful information to investors and others in understanding and
evaluating our operating results in the same manner as our management and board
of directors.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:

? Although depreciation is a non-monetary expense, depreciated assets can

need to be replaced in the future, and EBITDA and Adjusted EBITDA will not

reflect the capital expenditure needs for these replacements or for new ones

capital expenditure requirements;

? EBITDA and Adjusted EBITDA do not reflect changes in our working capital;

? EBITDA and Adjusted EBITDA do not reflect tax payments that may

represent a reduction in the cash available to us;

? EBITDA and Adjusted EBITDA do not reflect depreciation and interest expense

    associated with the lease financing obligations; and

? Other companies, including companies in our industry, may calculate

EBITDA differently, which reduces its usefulness as a comparative measure.


Due to these limitations, you should consider EBITDA and Adjusted EBITDA along with other measures of financial performance, including various cash flow measures, net income (loss), and our other GAAP results.

The following table reflects the reconciliation of net earnings (loss) to EBITDA and adjusted EBITDA for each of the periods indicated.

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