SFT - Earnings call transcript Q3 2021 | Shift Technologies, Inc.

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Operator

Thank you for standing by, and welcome to Shift Technologies Third Quarter 2021 Earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference may be recorded. Instructions]. [Operator like of conference Bird. Strategy now host, to hand President Vice and to would over the your I Finance, Henry

Henry Bird

afternoon, the earnings to and third Good XXXX quarter Shift call. Technologies welcome

today Joining me Arison; CFO, Shein. Oded Co-CEOs, Russell and and are on George Toby call the

we statements. involve some forward-looking these expressed believe and with During undertake future publicly assumptions, to judgment reasonable, any which these forward-looking the current after any are of uncertainties. future and forward-looking no judgments represent non-guarantees statements. forward-looking Actual performance filings we a our materially update results as call. remarks, a otherwise what or And statements, for the information, to this while forward-looking statements, risks, and full new discussion our conference may may or our statements of on result We from certain implied SEC future will make may hold. events, that of outcomes the obligation Please in factors whether is what are refer differ any affect

the call we During that of earnings I With non-GAAP turn reconciled in call, defined Toby. course will our materials. to be said, now will measures over the to as the referring and

Toby Russell

joining thank and you call Henry, Thanks, all the for today.

set Shift, sacrifice, Thank Veterans you of at of present, for this and on and Shift, I'd Over the thank members courage, for who first many civilian you. career a us armed forces and example to at had moment our the have years past armed all team like we've choosing your all. served in service services, before the Day take members to

quarterly our results. Turning to

exceptionally our all quarter Once again, well of business. was for another our great team The third across quarter components Shift. performed

Revenue than reporting sold, growth. XX% Adjusted and this, exceeding leverage second We continue all provided results. exceeded share quarter call for sales A sequential we e-commerce of QX XX% units three our August growth; on year-over-year fifth quick our improve market summary consecutive we take of unit while our our more representing our operating all QX With metrics. on $XXX times to guidance year-over-year earnings quarter of million, expectations. X,XXX over $X,XXX, financial to long-term toward goals. of GPU representing continuing of aggressively growth the

We happy XXXX which our again million, to the expectation, year. represents $XXX times we once at signaled are the more year-over-year than three than to nearly be and full-year raising beginning over growth more of revenue revenue had XX% now

driven the model, our Our accelerating coupled top market shift business to from the online. is by line rapidly growth scalable unit with revenue in and used car offline

pricing the experiences. to rebound started environment. remain from seasonality normal rest in significantly patterns and the industry, navigate QX, a This Early Our automotive has enabled current first operational consumer to team complex conditions and excellence Throughout dynamics to effectively. observe volatile different quickly elevated prices in focus drop challenging QX the the of QX, from was industry we unique our market peaks to the period. continued on the usually only and being very the throughout

exceptional team thank has Secondly, experience. customer been Shift's work want competition yet our this, has Shift extraordinary extend for I with the all-time delivering used to exceeding for on industry-leading and quarter. team member continued inventory a Throughout delivering highs. to target at dedication, huge every of another to you

market. Bay our Area deepening for service of: times will world-class our facility, our Northern in continue providing strategic for our largely expand the to existing into focus capacity unwavering see experience continued our agreement commitment significant of X.X size firm a our we e-commerce objectives and customers within first, on can success markets, business to attributed to that Our San opportunity. penetration where We've be an entered hub California new long-term current just Francisco, over a for our

Second, growing with them expect the offering into and in addition have have we to to Houston, our for cars fully to them. that selling expand that Shift footprint. buying customers excited Texas in announce two-sided to near-term market begun Houston to operational We're geographic as a

has the Third, successful while in unit will Shift's first building by lasting strategy our full-stack in dollars history. to for brand unit and a awareness, been area F&I its continue finally, quarters driving of efficiencies investment QX demonstrated as economics highest which our several point improving per a in reaching be And major operations us.

Hiring and Looking on last especially forward, to objectives, and challenging all delivering and such, our in manage on our the so industries way expect teams. through across has our growth been that. months, retail, we we've building in to as over focused investing had continue are XX

major our While from and kept key support the with hiring technician. pace goals teams, for momentum. to launched Accordingly, on our has and set XXXX to inside delivered reconditioning our a we hiring building our board sales in XXXX across continue customer-facing QX our see opportunity we ourselves metrics, our in program and have teams, throughout success outperformance concierge on to up

to of call will sustainable as a my to believe investing value, at to and record leading and last to marketplace I an Walmart Shift. at has the businesses, for years exceptional operating and personally, and Jeff been to Shift. XX of at Jeff has take senior would to to with leadership acknowledge come. team serving as He welcome efficiently, October. at welcome He co-CEO this including Shift lead I heart. brings that earnings in be excited will Jeff e-commerce topic over doing in for years the roles of to our customer And, of he track President growth take leadership me Clementz the We're team, it on beginning moment Shift's delivering like Finally, PayPal. wanted experience a since moment

unwavering continuing to their would Company can what from Oded, transform results. the our who to I this like the the to over As week, reiterate quarters at Shift financial today, our heartfelt group our will years, from Shift like everyone worked investors to has and deep in run to also turn I a us, to I trust support come. through confidence February for this At to industry an time put take CFO, over board appreciation their to and board on a incredible you call accomplish, who my advisor. I'll announcement last everyone transition public team the to to point, to the a know role and members and in and industry leader. of my to X, idea quarter's and and Oded? during journey this over will years as our the extend as member our would

Oded Shein

Thank Toby. you,

and unit gross million strong quarter versus higher QX up especially was I'll and QX. in of Our above last share the and into our our results line I review continued, third a came and as $XX.X will metrics momentum down top quarter XX,XXX, in fourth XXX%. profitability the quarter for the continued year year. results in last X% quarter. our expectations. The third than market X,XXX to million $XXX average quarter. of a selling million fiscal commentary Total for a guidance focus elevated then ahead reached remained revenue well the compared of $X.X last third throughout an million, appreciation channel sold increase were XXXX later profit the the and remaining Total year's quarter an our price increase were the $XXX.X environment XXX% to XXX% growing second from changes. Adjusted year-over-year, quarter profit a with as on of in QX. X,XXX, to e-commerce to GPU quarter grew XX% QX the this year. units E-commerce as price per $XX.X my was quarter, gross pricing sequential units, expectations first Adjusted

profitability. elevated QX to as we call, prices. market anticipation less successfully throughout slow our I'd a QX our manage saw our executed We strategy, unprecedented while about compared we to the expected this acquisition on depreciation, of us we than On the and allowed GPU resulting preserving plans negative and stronger to moment to effect didn't late the it typically take prices advantage quarter typical see in see seasonal QX. in the the inventory inventory about of on our impact mix; into acquisitions as exited our acquisitions good like we where we inventory Despite build seasonality we car to margin. front-end appreciation feel on while able dynamics, talked in the However, position we strategy our we heading spend a was and of are market healthy dynamic with the in quarter XXXX. unusual

QX consumers $X.X million was quarterly Total mostly $XX.X from was consumer-focused results QX, Other the in cars our the adjusted of GPU marketing marketing compared QX came Other $X.X per for revenue, ahead XX.X% once range, to of and million strategy our and again, yielded to an QX. as new be impressive for investment call. or will in was area was we of $XX.X compared on the customer expense performance quarter our encouraged continue of of million This by to cost loss emphasizing quarter revenue revenue the QX. unit F&I, us. XX% a $X,XXX, purchased XXX. provided and acquisition the XX% business. in for date. lower We quarter sourcing to EBITDA highest focus fundamental XX.X% guidance Given brand took million, remain partners. of than our loss strategy, of But Adjusted results. the in in QX F&I hold was

million our floor with Sheet cash plan QX This October we the ended in QX XX, cash expired. to $XX.X quick balance. and in by Turning flows, On increase position, and agreement This million U.S. equivalent represents with plan quarter was our million, our as QX cash of on from compared decrease with our inventory. decrease facility. Bank a primarily we driven $X.X a million. ended $XX.X inventory A increase Balance the floor to update the $XXX.X cash cash

important new by are an actively put of as to a plan X place view our in since end of structure, We year. expect this pursuing part and it the floor we facility capital

a the for range higher guidance, tripling expected or in $XXX Adjusted fourth adjusted to QX in quarter, is XXX% of of the in the to to million XXX% to more we a GPU of be a for XXXX. expect $XXX XXXX fourth the a XXXX. our GPU QX to of be to than Turning quarter, range $X,XXX than revenue

quarter loss Our be the expected million million. is $XX $XX to of the adjusted to range for EBITDA in

investments leads across us prepare revenue, in making estimated earlier, are us we'll a impact will seeing QX As again across the significant momentum quarter. the to discussed business. the which EBITDA for for to business successful which our the because we be XXXX XXXX we're raising we This

revenue previous to guidance. the range approximately of $XXX in million to increase be million We $XX of an expect to total million, our $XXX

adjusted GPU adjusted for e-commerce a GPU of to raise to full expect greater expect to year EBITDA closing than year guidance our X,XXX. remarks. greater for now We call cars. for -XX% -XX%. We is better be the will than versus now our X,XXX, previous the sell turn I to expected Adjusted previous over around of to XX,XXX over loss XX,XXX margin be than the guidance George

George Arison

about the [Indiscernible] to love. One and his current to and results success behalf Shift XXXX over exceeded Toby. also admire for Thank years. the In resonating benefit share. announced and And joining investing the the been role shareholders, inability Oded. and our fortune very many the strong week, and and plans fail. key leadership call throughout is has we today. will in our about excited strategic most Shift grit Toby of Toby's of both capture we made Company to in Last Toby finishing continue expectations years with you thank short, quarter have the I of Shift’s you, succeed, all business he's in a Evidence to and model Brillion's all while market that way, had is follow. I've former today. determination building out thing areas co-CEO. consumers. that you, year spend Supercars as inside, on his with supporters, transition Shift's great We're On third instrumental current mission fact we thank our Top sacrificing in growth that for as employees, what is so

at we excited are please new now board. Shift growth technology have our discussed, Toby President. up unique experience the years retail so in Shift's for Jeff a questions. on global-scale of him fortunately will the profitable I'm and to operator, instrumental as just in open be come, As to With that, line in welcoming to and Shift combination sustaining

Operator

the from Instructions] Wells [Operator Fadem question you. Zack Thank Our comes of first line of Fargo.

open. is line Your

Zack Fadem

And Hey, best forward. and Toby, good the you new to wishes afternoon. going in role

then extent through us utilization to with you're you the you're as capacity you you today? XXXX, glide and seeing what constraints? where elevated So on for talk demand seeing, path about where you through And throughput that, labor capacity we walk from you expansion think can where And are capacity are the think can goes and today? about

George Arison

Zack, talk to to you. Hi good

let I'll Oded from So start and then it I'll take here.

the obviously we've in we've been deal had But has. been, everybody things country with and else far the we we're performance well. same to, folks to team's it So labor our that was the so will but with very as the tight, happy this be happy as and very issues and the how handled with year, need obviously, world if to ability better really labor market not we've have hire

to weeks people ahead XXXX, reconditioning hire that approach in folks of probably aim remarks, a we field be decision et have either role especially working hire we the in few As made the XXXX, in we manage mentioned think before bring how Meaning cost. of we for hard success part entering obviously, we place it specific when cetera, curve. we of we future, time. our for prepared just as changing comes logistics, in we've Normally, about entails But need to the especially operations a team our are ensure the to hire. that’s really for to filled, every or to we

in normally do thought larger with. prudent push in in dealing to a than we're really That's be of going a to in one-time preparation this board folks team, We we lot hiring the months QX of on a big decision tight do that of lot QX XXXX. the labor for kind few we're we'll once that Once rest and place So bring year. good of like that we of earlier would. have was the a market for very and that a light a

of kind we a on it's are. so level And where high

to of I'll more over the hand Now talk to to details. some Oded

Oded Shein

important an to has do So of reconditioning. capacity great progress where with and facet we made

mentioned, a and ability I sell process, as our longer again, reconditioning have, that progress no is We point buy, on to made a constraint cars. great to

markets, to have increased And further year to working -- We we facility as facilities there a capacity launch as well. on there and new throughout we we then in do and continue opening will new able steadily open the Texas. this be

Northern increase putting facility, and in As we our new replace facility we California San said further. the to of remarks, a are even the in capacity also Francisco in would our process that

as said, I a not at point, So this constraint.

Zack Fadem

are F&I. for unit, is is And off $X,XXX full-year of outlook Gotcha. if some unique from these then or the departure GPU retail, the think about for $X,XXX you whether $XXX XXXX levels point of these think XXXX, about per breakout question the in in I a way dynamics presume other? one any you about or And fair jumping result these the levels

Oded Shein

be and there, much for has I how the Well, talked to reconditioning we operational our we F&I. favorable expectations about but price success secret appreciation this sauce was clearly improvement. for the exceeded reduced market GPU before our Yes, for cost But also year. the key conditions. our there efficiency

to F&I it done and have in see is So by grow, difficult a but good growing We steadily really steps success in and small had gradually area improvement QX. well QX, quarter. we every expect further to we in

as goal GPU, stone to order the stepping F&I. shared past, around you So of we get about to get in X,XXX to to midterm the X,XXX end as year we it's In GPU. our need an important at in X,XXX X,XXX there,

the several X,XXX approaching we're midterm have be so position reconditioning a we coming to you goal as that or in ways to to to still need We're good quarters. hit in and below. the able So be some go, well,

Zack Fadem

time. helpful. it. Got Appreciate Very the

Oded Shein

Thank you.

Operator

you. Thank

comes BTIG. Our Fong from Marvin next question of

Your line is open.

Marvin Fong

taking questions. for you Thank Great. my

specific I So question, guidance, to X,XXX believe just first at to fourth wondering on the quarter GPU X,XXX.

why step as pretty follow-up. from quarter And drag just break one the Just secondary you little just over wholesale have quarter down? down environment this thought question, as wondering what occurred the quarter a you third favorable further. could in is in looks And you And fourth and more, I other then if that did any your a are $X,XXX the forecasting specifically, guidance? my

Oded Shein

in XXXX more triple of QX to is results. XXXX still than So year's last

about are impact purchasing on seasonality, people used focus In of happy than that. see fourth rather spending discretionary we quarter, the obviously So the spend very on you cars. their holiday

because is best our that sure So that I the to there this QXs. just at to We is a conservatism wanted some here the from make point. pressure view GPU point extent. that is we on of And we there in had gave of thing some you estimate say experience would of last level previous

The we see impact So going on a or negative lot think that's quarter. in are. our numbers where the wholesale to I don't of, of you’re fourth wholesale, of impact

Marvin Fong

realize looking that Thanks, the Okay, you're site. then Oded. inventory the for aren't at you sale, on cars, on great. just And have I working yet

Just for first-quarter. the curious shape on your if be you inventory the - could for how you'll strong -- Thanks. good in seasonally outlook for if comment

Oded Shein

So…

George Arison

ahead, Go Oded.

Okay.

Oded Shein

to normally we execute on prices in thought and dramatically benefited larger to GPU the inventory. folks that used on over in We a the significantly going into have XXXX. us slowdown Look, inventory, generally will All we Obviously able that challenge. And they're inventory be quarter industry, a for we at we that. and the we're the approach a through with then going And problem chance, was late August growth QX also bought and strong we've September, a we a about and of doing position we inventory do about had need would strategy going order had than spoke pricing. point. in need in we we our inventory having into amount and very we more year, And are that you was with the we're summer inventory happy at grow decrease to that strong very with happy side, high strong really August that QX, we a which people we've in when what a because year, this had are to I strategy entered into going acquisitions a sell in here had in to a really aiming for inventory, not with in never QX next to QX, position. were in -- fact enter see a for QX really how and we think what actually but really

position been happy in natural able has it's our really sold that. exciting Our keep up reconditioning to inventory the way. and it very be with able quick been very with strong as and needed, we've get ready be to to to And see a

a so position of think I cars less that because a much to I broader which all way well, of really from years a as the you XX-XX with that we X lot to years other in thing will regarding it resulted [Indiscernible], age, cars our of we Like that retail. So cars on but ties one lot inventory helps sell that say, point way, to set think we sell the kind I wholesale, us that cars retail. made is sell come

that's than and speaking over think many that room over I a don't excited also each questions. So am I day we when different we answered rooms, going can other. to one -- have this do the hopefully hopefully

Marvin Fong

George much Yeah. forward Thanks Oded. that. and to I'm looking so

Operator

of Potter Alex from Sandler. comes Piper question Next

is open. line Your

Alexander Potter

Thanks, guys. Perfect.

be process, the up there. First, there a you're the using this higher so questions had of industry following encouraging can trends get F&I, the those least congratulations. couple attach retailing Good high in obviously automotive to guess seeing traditional I'm context strategies wondering sales Toby, a at friction luck. I rates. F&I relatively of the I on

George Arison

Alex, involved sale F&I an definitely thing just to There's versus to so easy people sell. choosing it. yes, is not an actual do

else virtually industry. of like or every I of the automotive outside components vehicle contract true service think across that's a anything type service

position for we really how team team. our rates, right I of trying little you're that making of This to but be and and something are on continue think we providing there's we needs team, to a obviously where a working through training. training environment so grow are, an then in our up to do. in need for increasing to think, in the that that type bit including that, we'll that, do learn And both progress the keeping We is good XXXX. we're a growth that in to tax with And the drag good

that fact with the Additionally about to a a we and on you through. there we think results where -- is an working in want thing have to $XX we're in that's $X,XXX to not small of It's that midpoint, want contracts which good we're them $XXX more up to to dollars. we've spoken the that another And $XX get numbers before or about to a $X,XXX. partners, that time be do additional things overall, where our thing opportunities it's area $XXX add we It's by our at where up to increasing lot to. the and path the are one number adds you ultimately

Alexander Potter

great. the prices And don't some have that higher-priced one attach to favorable maybe know is also obviously are is that on that now, speaking, it driven? rate maybe of you also extent which vehicles. follow-up I here higher Is mix. market transaction possible some we seeing of F&I. high then F&I on Generally Okay,

down so, you do them a go come to that vehicle Thanks. idea attach to not or are prices is this with And F&I if normalize, rates or going that subscribe down risk? back

George Arison

for people is spend. being also of XX-year-old XX loan car vehicle year that a rate or There's to to but it's F&I for are I cars, that in lower. contracts, old is now true comes inflation, well that that possibility service of of have vehicle vehicle money $XXXX rates car you because like when a think have as attached the likelihood because a attach to it's XX slightly it's it especially or selling light service $XXXX lower, or attach it's certainly maybe really on lower inexpensive kind the that

to value about everything true that's past. monthly think inventory. the some call value on we pay see this have as look much the don't -- people rates. in driver their -- Attach at So a add? add-ons as a your not on actually quite what I need in depreciation actually What generally concerned are prices I in they lower attention of result and they that while at afford automotive price, salaries in could So attach and market don't normalized picture. The spoken for as buy it's might certainly being the vehicles considerably paying I people's do about are payment. the more as that else, And rates we've than it's on is you do would because But Actually have are are then monthly monthly monthly that proof in way payment. is able for argue whole for attachments it could quickly a can do. like might this, ending. basis? payment you they there's folks much larger scenario, about increase that and What that they And thinking vehicle? certain prices more obviously, What they any a to of to for paying

it we up, data that's see both a about then higher that will that [Indiscernible] back payments well. able people's monthly to is as I to as numbers internally, vehicle be and kind how tax of could do And goal service, our think of to You but attachments that, up go we hypothesis would F&I rates. absorb overall, I increase this us works. think for the But think

Alexander Potter

Great.

Good Okay, that's Thanks super a lot, quarter. George. helpful.

Operator

Thank you.

comes next Gupta Our question from of Rajat Morgan. JP

Your line is open.

Rajat Gupta

Would taking as congratulations, the those in Toby. my call Great. well. and questions Thanks comments for echo

couple a one and Just question maybe questions. -- of

medium follow-up X,XXX Firstly, what based on is level terms the cost that GPU, on in a that? just volume from

George Arison

it So is not the efficient with of the side. to be the to ability on X,XXX progression operational has our volume do specific,

order able we we end. reduce operations improve job of increase we've And to to be over costs. that. facets Now, helps and F&I -- be really obviously learn, to continue done train, quarters, and in good scale should to on need do our But and a able many staff, and really a to that there reconditioning all and to

Rajat Gupta

helpful. -- And staffing. the and That that's just it. Got then Understood. you're when hiring

investments letter, through mentioned reconditioning You're out functions adding to hiring fourth ramping the up sale salespeople, the but like and growth, and How adding and all in staff in quarter, you you also your manage investing then here do the -- significantly side. of how you shareholder support. like a situation puzzle? the you're other tripled caught equipped, you other of in one logistics, do on other manage trucks, funnel issues but drivers not on like Just fully piece the all have on you're the the so and where

quarter how about that context of up. we fourth in pickup? So should had follow I the think just one a SG&A

George Arison

all areas we to as includes concierge, the service, as house. across that think focused is where we hiring in do is Our possible needs sale people, need the And everything really the that people have important customer includes we a that etc. almost business. execute here mechanics I Company that on drivers, includes thing that

logistics our Our finishing [Indiscernible] house, has been is in etc. house; in

[Indiscernible] how takes for -- because operate. differentiator car and we have a into and – we customers. what to We into get mention a on dependencies also don't good we the the to have car sense think driver want or this So the drives the that really our the out people. I our of I gets as important unfortunately car we need our pretty it's

logistically type labor the back well. force So we're different, it field the is as a way, drive the the just and we hiring different of on on -- then then so operate and -- truck don't is car a in there put how we

we're I is focus regard. that the higher-end. think manage that carefully right going that we QX. big the market it's have ensuring doing, pieces can across think you we are a very So obviously, I delinquently, really we easy we as very investing into I of XXXX And said, in to need well all Like and those and imagine, it for an and not people amount market

and going of locations wanted etc. into the just than Telco was in the a a be one dependency not things hiring to obviously to able do our expensive One that a Texas, lot in have diversifying more of for example, lot location, we that places. including to by fact

we're definitely as just so, launched. that the but we're allocations And we going in from also to California, hiring benefit now newer well, that not hiring we're because

my I I question. that's So overall. answered the hope

Rajat Gupta

Sorry. for helpful, That's [Indiscernible]

George Arison

Sorry to interrupt.

really team. a out she the we of new each ago, hiring. helping to or in addressing Just is ops they've and a organization our economy professionals shout job of of Hiring team the and CPO, people who us. in hired X a attack now, across seasoned part brought months whole the difficult our really right X done fantastic and About issue

feel very in confident with place we leading forward. So them us

Rajat Gupta

then large like reopening. an center? going to delivery. case, it's they're replicate Great. recon just recon regions the be as concierge, is on the approach just across just that and In -- to other Thanks. And And of too, that plan the in of well center, X the that terms the you size scale

George Arison

Yeah.

other. be reconditioning facility. less moved quite We So from then and among operate facility, into that we unique less The and in we facilities our can peers. I our space facility approach to to rent the that think, is, one put then

on so Our as move based side, that facility, the can it's location as And get we leases fairly to you well. location capital our can make we shorter to limited one are another a from the need into investment, generally on grow.

ton are for about to to of the XX% can a in said reused the all approach think equipment in had of shareholder necessary. scale the is not growth Bay from continue continue Area to kind seen reconditioning we and for of we kind that's came And that long This to much that for obviously there be there's San that markets. time. market is opportunity this facility. facility today, busy our make there's or needed think had to to much we of and this next. at have the massive cost we Almost we markets we've very California, think that, an that our a We we've us. larger [Indiscernible] at that growth Francisco. savings that had In criticize as are a investment these to a see reaction to the facility facility well, you South go building large facility from to don't And in -- from you of be one I upfront And able letter, is -- approach that's long-term, to but value So a a grow. a in larger. definitely is factories We

have of been But that's need And facility the And bit And bigger primarily Northern achieve so we're plus that approach Bay has a what moving our we serve Sacramento bigger that capital to a to limited. do to locations, [Indiscernible]. investment up and it'll pretty potentially facility a why little than is is now. California X.Xx Area "we as more that.”

ship from Shift car to and them. to buy consumers anywhere, majority buying do buy is can There's choose But That of obviously, Now, a from people that then a us. to we'll car that. it. way kind

it geographic ship we will a a the put we done. drive for our we'll is common footprint consumer to the who within and car of overall But customer customers case, that the them to regions, and have the across in with always like country. the majority truck buy concierge so And wherever

Rajat Gupta

it. Got

color for good Thanks Okay. the all Great. luck. and

Operator

Thank you.

Our comes next of Wedbush Securities. Seth from Basham question

line is open. Your

Seth Basham

and deeper prior Thanks Toby lot, to of and into a I to a the couple want well. dig questions. good afternoon as congrats just

that couple environment retail I should to effect The the understand bought is there's going which pricing first there something the a step-down. last and the is patient e-commerce trying why or continues I'm that vehicles fourth guidance on level for else from or the something cost you the of think strengthen Understanding seasonality to or this at on your Is stronger from GPU than such quarter. transfer perspective, margin just additional you're that reconditioning months that's be forecasting. conservatism, over so else? the

Oded Shein

for thanks the Seth. question, So,

the pleased As our starter. a from to impact. before, in so just fourth that's what then able is number we guide $X,XXX more seasonality to I mentioned happens is there last to because the that be And $X,XXX quarter to are year, than very Xx

years an best here? experienced had quarter. the previous fourth guide in there our do And ways best it impact the conservatism finally, cars then just to money is on you we becomes they ability decide it more people more Yes, to and spending Just final priority. we in that of challenging has is And element our now. some their spend of in price And because their and car. to get make the an first wanted we sometimes competitive, so, sure different you give and as if it you take on for not of

Seth Basham

improvements attachment And of this how improvement third the then much higher perspective. Okay. was in F&I quarter, ASP to relates That's to as relative and quarter, rates? from simply that helpful

Oded Shein

it's hard ways. the many we the increase the other the sell. was different many Well, to bit we on see but and that side both improvement in able as little financing products exactly, it And tell a obviously attachment were to you in products can different

So think but there. I the ASP I necessarily culprit not and it on one would is across-the-board, main was don't say focused thing,

Seth Basham

Got it. Thank you.

Operator

Thank you.

Khan next Our question Naved Securities. of from Truist comes

is open. line Your

Naved Khan

ending a are thanks Hi, buyers Do efficiency about more the out advertising marketing lot. and buying just seeing car and priced are And not can and more more hard, Which you cars ones a We're the channels. talk just getting up you then be maybe about there more buying. think effective? environment? normalized hearing

George Arison

were for the creating Great, highs frankly, of certainly question. thanks back reasons Look, and go And eventually one have we the that's cars things where normalize. it's why they have have for people. on we environment before to And that of lot up. a complicated that we gone hope -- prices a

from a fortunate are can brand Shift. that new cars very you meaning We our is broad, buy inventory

old, miles. to X XX old XX thousand plus all or way that XXX a car You year know -- the with months a

And people the price shifted, find is broad. it that very so it can diversity

opportunity be four-five-year-old hopefully X able price a or people not buy the to so And vehicles. year year good an given might a Shift increase really who that's for certified car old to afford X

regards brand Last today watching through demand. through mean which to detail. the transition, over spoken know, Historically, and primary hope way will one both in cable, I you video on area, way. television advertising. pay and we've sustainable much television is is we marketing. on consume Shift television in also off long-term people and ourselves on that it channels. don't sell over-the-top where long that refocused term. Whereas marketing sense approach where CNN to focused how a just very With you're you been this normal has Obviously and with marketing, we digital have that we but The brand more do in a as to so building And to them QX, we changed fundamentally

can doing As where channel use our lot well we as other We spend. utilize than a as it We obviously haven't always to to digital channels total really stopped people to of do less work That's that both continues will a a that lot as of digital. brand. focus And used the to we needed. deployed us. those well our was continue of percentage for And is.

Naved Khan

you, Thank George.

Operator

you, comes of next question our Nagel Oppenheimer. Thank from Brian

Your line is open.

Brian Nagel

Hi, good afternoon.

George Arison

Brian. Hi,

Brian Nagel

the moves on nice on Congrats quarter. the congratulations and

George Arison

Thank you.

Brian Nagel

used just the elevation car about -- just X begin. pricing It's significant question to would here basic. talking We're issues. So relatively

elevated Is negative or business, you? down? I eventually prices, in did -- the mean, you for positive that increase more used you assuming car of business look will As your car prices that is look used at a the globalize, your at

George Arison

I'll to I'll speak let chime well. start want [Indiscernible] as Toby in, and them then I at

for then quarter. bought and cars elevation every So car before the we virtually price week we still throughout and started, QX have Because and that. certainly in we released prices from appreciation had tailwind

That prices and call our it's so little in we said, that pressure us, us you came bit positive. that so talked QX a in from guys kind point, we tailwind in for -- back lot are it's a really In those And with of August. some saw then September about little kind core of during that a QX on helped But while. that and helped then as well.

happen An applicable. threw based the what's patterns we've that history and going how flip we've year to though, lot Oded longer environment. unusual book this in and you that pricing been that are been the on the side On about more makes never operating telling of you out months, extremely a to in the and have history, an throughout what before. that just works has environment don't know and noticed for been no things us complicated. that assume much history And

to environment, so executed been even from what perspective extremely proud because able this more that's that complicated do actually in of the well. And team's I'm very

higher things that years then could learned things our to we because frankly, back we've we because And happen the be so to predict everyone's to bit little And in course, of for from that turn pricing, make and better view, In of many as cars. wouldn't would be this that going to is point -- that they a consumers normal? would for prefer over patterns would historical better well and what paying a to easier. place would price ways, use lives

Toby Russell

you're a what industry the occurred at to that into trajectory would you going in it some in that tailwind is I'm then saw of we or me it future. that QX to I prices, the could have just when fairly the new in add turn specifically, car change to look, but headwind get point

period in As long their long continue trajectory time. as prices of for a

Maybe to normalize cars. more and sell have get you when it's cars appreciation can but that between gain buy you to pricing. in if small So you on, pay to you more you a get

are pricing we in now saw we right normalized more versus example. what QX for So in

Brian Nagel

your I new the could really that discuss markets comes of in become but your in know that I I overall let's maybe all with case in Then still said appreciate these me growth? you've the think to of when That's script it. there performance I question Houston. past kind And -- second the you question, -- and guess from to your Is mostly markets, change the still But is of new markets. contributors timing your just new two-part I legacy let growth markets. in talked bigger respect helpful. a the have, about any

George Arison

launched. in and a well that on year. last makes majority this some was such doing would small we or contributors California business seen market QX, of other and [Indiscernible] dying suggest that to XXXX to, November Oregon, Not the that ones There grow. to markets. has many the Market we the some That A we've is growth the say then the year. Texas from of we really markets them hands. next in to I the of which two we any prior a expect bigger prior sided think that really momentum vast in, year, they that in sense our were of to we're because won't markets existing November said, way, so in had come strong of be had

which We the in of to be just given markets to fact would business very ton of they're from share But markets. bigger, that well. will continue expect these end in big that XXXX half contributors to they and first that be and be we the the markets to captured a XXXX market growing late in then growing will still we grow expect There's those XXXX. launched be

Brian Nagel

I appreciate it. you. again. Congrats Thank

George Arison

Thank you.

Operator

from comes Sherlund Cantor of Ben question our And next Fitzgerald.

Your open. line is

Ben Sherlund

PPU relative increase higher I question. the increasing Hey entirely mix guys, you also if appreciation thanks for the price point wondering the have related of guys are or is was price in to vehicles?

George Arison

Is that approximately you're lower GPU? kind that about? Shift of how have on thinking that implying you are think, I So

Ben Sherlund

just forward. It's about not related I'm trying to to PPU going think GPU. No.

you're PPU So the if $XX,XXX would say, that going forward? were current range we used will we assume vehicle remain to pricing remain should at at levels,

George Arison

Yes.

X that that was there ISD higher happened resulted things we've being So than previously. are -- it in year this

made. strategically One of we that the tweak

idea lower-cost So felt for because in they in want COVID really XXXX, which to as they had because also a to started makes demand significant be saw vehicle don't be. would a People transportation, they want sense. lot a of economy where a they for don't no car in but money public we cars, need spike spend the like

so lean And into we that.

cheaper have so, sell a we a big of sold. percentage ability our really to cars, We cars unique made

our we've up. that with at ASPs prices, because of which throughout chosen as cheaper to thought them we massive that percentage And, the as was drove we sold. cars cheaper car business a and that to mix seen percentage did reduce then in significantly. of to everybody which probably this ASP a obviously pretty so our we appreciation vehicle that, to jumped wanted year total, a cars it have Concurring reduce we better XXXX, year, which into is have because this Going saw reconditioning, led what and a probably we

an X of are that very have. the environment for those the as price broad as So said, price, up $XX,XXX spectrum inventory, things we still below where That year. of the appreciation over example, in ton a of we even in that have in they drove prices course much ASP our sell cars have are gone

predict expect and that that going based we the the changes what's we'll that think to Obviously, the can -- We to so respond make. in consumers and good that they generally don't any answer is set have on that. inventory We internally mix from future. up we of And can make we in get that changes. from Does we'll future the on demand middle if that a question? and mix the same have did XXXX, in choices the to different continue demand like foreseeable today

Ben Sherlund

Yeah, that's Okay, I Thank great. Maybe follow-up a could. helpful. if you.

a from you need source wholesale point more from acquire is there to As number can unconstrained consumers? channels of you where are you markets, on to scale continue new the inventory expand into and or you cars entirely

George Arison

were of auction, year. from we doing XX% reasonable. our going year, So we having the come this that were We last roughly which follow of look back costs into as if at on QX planning of you kind modeling in

mind auction up dramatically have not that more saw had cars Now, to prices cars we for a auction And made to because not of bought we cars cause, this pay auction possible do. XX% if lot ultimately, which end the of We actually has retail we than we we think thought is and year. didn't actually this prices just what up was selling did you consumer. made at know our we'll people we from go it up for we what sense happened and year on look at

long very that cars able And time, we come. don't continue competitive meet are that unique and quarters demand that to that to So for scale reason a can't we That's had we for we in strong any cars. a to a able were to the well. do the advantage had we way, in Shift very from see consumer

margin chosen Now, wholesale. increases an high to have car buy wholesale as have bought better had obviously, of at prices we buy Historically, a to as are they which eventually prices, more wholesale happen retail cars want when we cars able to and would that get sell not normalized front-end versus be today cars the have would much wholesale, -- less GPU again, are to cars new Shift because F&I expect that to then probably not lot auction. to at you and we a price you you once production those

we didn't have not when F&I, as good we were much. So that into able to very lean

that F&I and that the there's are we turning prices improve, we sale, normalize option our Now retail will to to to continue but auction before to that. lot numbers do an then a think better our and them into a we're need opportunity purchases, actually grow able

Ben Sherlund

guys. Thanks, Great.

Operator

comes question next Your of Mike Securities. from Northland Grondahl

Your line open. is

Owen Holm

closer. I Holm is do But have an guys. on for just getting Mike. quick share is I This lockups X -- exact know have X, for guys Owen date the you Hi, yet?

George Arison

Sure.

transaction. public on November ever the time that's Monday. a long So XXth, on for is lockup which And expires been since

Owen Holm

quarter. Great. Thank you. Congrats on the

George Arison

Thank you.

Operator

ahead. from comes of Anderson go next our Please Tania Thank question Blair. you. And William

Tania Anderson

your capacity. Hi. a more talk little specifically Good you afternoon. reconditioning Could bit about

a facility and could what's last this, where if mentioned me, it California expected you so put then bigger maybe missed that you mean, And XXX timing now. in then when over the I stands And switching facility? bigger it where capacity, I've the then in on move wondering to remind think you you're quarter, I to -- you've to be. I increasing was week at was you

George Arison

Okay.

this produce by Let and ability we we're going a It's numbers to capacity me as of into grow. recondition scale-up constraint efficiently do -- it in next to well It's year. really on as start strength capacity as This expand. to our business. I'm to the one not our my a grow and opinion not saying doing is and update continues saying, cars, we did our so

to As for the new the takes facility, place, equipment a going put the we're move bit the be we in some overlap will there current retrofit X. facility, need some staff, that and even hire between little the from to and it the just it all though

So, at year, next some point in fully operational. half of the be we'll first

Tania Anderson

next Okay. to F&I. that is make quarter follow-up Can and things And hiring year. you you talked XXXX you're Is improvements being one, public includes Do to partners. maybe these I the this improvement to better the little goal other incremental some to XXXX. initiative -- bit being then, it doing? quarter can think a better is second Is I little that reasonable you cross it I and you a I each mentioned those about billion bit all about remind timing with revenue improvement. fair your know for you're all midterm you're maybe new thing training, And going in think of, -- it on me there, guess $X F&I, since incremental the

So can on thoughts your you update us on of timing [Indiscernible] the

George Arison

build at to get lot, point that. [Indiscernible] correct view. how factor in need on and update revenue have on was We've provide to a That and this you're We we lot at able will for -- billion year that, in said is think be to next a from we concrete for update we'll point to of Sure. really quarters always a to when don't able we hopefully, them certainly guys capital us. just I a a And but you least actually that, grab be several an out. few to

happen. as well QX significant But XXXX linear few that generally, and to last our think if quarter-after-quarter. to that do we is results, As to on so it's The [Indiscernible] make our this might F&I, from exactly to not that be number, overall, way is quarters, well. decrease improvement we're quarter think look our get far that from that a in we've goal slight improved we or as you last some F&I Obviously, at to pretty QX.

Tania Anderson

Okay, thanks.

Operator

you. to the this time, Please. Arison At back like remarks. turn George to over for closing Thank I'd call

George Arison

everybody, us. we're your Well, questions [Indiscernible]. joining look for you, can I to for forward thank to you, speaking And Great. ready and

Operator

concludes today's for call, conference you this And thank participating.

now disconnect. may You

Shift (SFTGQ) 12 Nov 212021 Q3 Earnings call transcript