SFT - Earnings call transcript Q4 2021 | Shift Technologies, Inc.

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Operator

Hello and thank you for standing by and welcome to the Shift Technologies' Fourth Quarter and Fiscal Year 2021 Earnings Conference 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. [Operator Instructions] I would now like to hand the conference over to your speaker today, Henry Bird, Vice President of Strategy. ahead. go Please

Henry Bird

welcome fiscal and Shift fourth Technologies' Good XXXX to earnings and year call. quarter afternoon the

Joining me our on CEO, the call today is our Jeff Shein. George our President, Cement; Oded and CFO, Arison; Co-Founder and

Actual performance our or risks, Please forward-looking current after for on filings as and a while statements expressed any this implied what guarantees the our any to otherwise in outcomes new we are we discussion which hold. no of judgments full result We and these future future judgment make statements. forward-looking not what any factors SEC update future some is refer obligation During differ the statements. statements may statements and events, remarks, may are assumptions, represent publicly or affect materially forward-looking believe may uncertainties. conference the involve forward-looking certain forward-looking And will with results reasonable, whether of of information, these that our call. a undertake from to

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

George Arison

you Henry. fourth joining Good you, earnings and thank afternoon and everyone on Thank our full call. us for quarter conference XXXX year

finished in objectives, you and pending available details Texas now million, a you greater of on as with we some start We finally, Thank the quick markets QX assets materials. expanded reflection with but into exciting through our the revenue. $XXX of was million our us Xx only have At acquisition presentation new revenue, our profitability the shareholder our investor year-over-year than and website. with in and these Further our results, service news guidance our the IR lot XXXX our range, marketplace XXXX across XXXX of Fair QX XXXX. state. bearing have I'll our to cover walk letter thoughts are and We including over representing for year not model. above on growth. $XXX a four We from on Technologies, entirety

cost team from year, was a while average reconditioning as drove saw team become reconditioning down of in further as ever XXX building Shift. output week. to concurrently capacity the per in-house has recondition in validation operational currently a to our facility per QX, All this see in-house which and unit. this auto platform. at thesis have decrease profitable ,growing excellence cars XX% recon approximately is large long-held of staffing that e-commerce Our then hallmark costs year-over-year We essential We a we the

great expand current meet to to as $X,XXX. growing in made unit capacity XXXX the XXXX economics more volume than progress our guidance. continue capacity will We high GPU our is improving sufficient year full progresses. to adjusted of year-over-year end We The XX%

unit will to was brand first While ultimately, had Over our and drive beginning market unit campaign marketing per to F&I has down a trusted In leverage. and X.Xx to strategy funnel launched success QX and XXXX, We end great HX, grown a in a our consumer of key HX. XXXX. which long-term was stable, at time the Shift other reconditioning major of awareness QX, hallmark cap for our unit of price in F&I brand. the per needs reliable diminish consistent, we GPU since highlight our adjusted nearly improvements of $X,XXX. of

total next improve. of regional our brand achieve markets awareness the brand to investment year has XX% in Our we internal ago, Thanks peers. a footprint, analysis aided about believe years, approach, plenty opportunity about awareness can but we lower XX% significantly the physical which have we a our shows great progress over than in operational Shift to from still few

for our a our new on our in spike some in QX, in XXXX present In initiative had Omicron with across that we grateful prepare we all impact Nevertheless, to in that undertook navigate for are performance increased the benefit we a at and members while profitability. Shift. to COVID Finally, cases, past I successfully work most XXXX team us dynamic we especially pandemic. hard and to February in including challenges, can't invested Thank my those most for and proud your hiring all has which were you, am as to operations team. December, this ability perhaps to QX year, variant January significant team's markets of guidance. of continued to the and organization last it towards leadership our our in reflected well-staffed driving how our recently in our accomplish complicated only growth Shift I people field one growing at car the execute are overemphasize result, the used to our team able continuing being the scale and as in despite our over confidence they a business ever, hubs. year,

be close The the XXXX, with unsecured Shift, where inventory, Shift's logistics $XX third-party list offering through senior alongside are announcing in Shift's assortment We're debt second independent funded X% a to marketplace, from today to a cars can access fulfilled by and expected we've Technologies. sellers to customers building marketplace both to pre-owned of agreement to now is network. greater fully proprietary acquisition facility digital dealers all transactions owned and million their excited quarter vehicles long off to our facility the SoftBank. debt At be from Fair acquire a listing and envisioned the assets of with XXXX. Turning which a a start. This transaction coupon dealer great will

marketplace becoming e-commerce, technology, unit of investments. long-term along access margin to established and see to immediate the This delivery. alpha customers. benefits deeply the launch through relationships leverage the quickly ideal platform. Fair's us expand expansion a at growth it relationships engineer the there. manage accelerated to XX drive develop last onboarding allow accelerate our will for for ownership, XXXX on inventory, vision now at platform at-home scheduled brand first the with listings dealer-facing QX end marketing solution team developing to entire our digital this and grow in sales assortment of on has long-term us is can the share for For dealer our to provide and very We third-party several via months, that It marketplace, including third-party platform to with platform to participate is a e-commerce Shift of easily and version and sources strategically dealers further inventory including transaction market marketplace scale Fair's away destination proprietary Users enabling work the car then third-party years and from from our been

and to the as these be feel fund our liquidity We size into few founding, an strong to about our efforts ultimate an next with our also and capital stewards significantly stewards optimal growth constantly front have provides year GPU our confident And in position strive view the to regard. on proud our self-fund a through prudent objectives a to market clear I the since business that less, peers. in with. scale be business to create position achieving With cash. presentation over growth these path capital end a and year, investors both smaller coupled to attract than we Turning a the do investments we this walk in the a profitability years less goal of improvements actions our years. we rapid will us capitalize strengthen believe XXXX I'm right and would breakeven belief has us on continue scaling that, this profitability, additional as bit we've I'm with and of XXXX in combination This for planned can efficiency achieving prudent that to detailed initiatives. President, Jeff that very released in to and balance of the investor in more look our trust year Today are in F&I, to we what rapid reconditioning detail few operational the to for will ahead. be profitably worked turn XXXX. shown and work expansion. that for team the our capital Ever over to the envisioned to continue our core about we our to excellence spending in have having we our Jeff? how talk minute more excited in we and at in with come, between we our a to undertaking will profitable Jeff critical Clementz opportunity. continued call economics will in a driving The unit to better grow our to and of next

Jeff Clementz

came a company I Shift to while joining When of XXXX, that rapidly achieving GPU. both in fall scaling units, the was also was I George. growth, triple-digit that year-over-year increasing the I Thanks, knew

noted improvements F&I capability. As and and to reconditioning our offering our a blend George conditions, GPO significant efficiencies expansion of market earlier, sales was product

our the next plan, profitability XXXX of constructed frontier was we As we operational our knew SG&A efficiency. drive to path to

rapid cost that strategies today. blends walk unit plan by I'll leverage focusing improved GPU significant and growth core on XXXX four Our through improvement

expansion Texas. unit our will deepening we and existing California drive strong footprint, First, to growth and market in through continue especially

marketplace, machine-learning-driven on Second, reconditioning additional achieving both efficiencies further to we pricing of value in our will improving further continuing expand F&I sides GPU our by proposition. invest optimization and

by evolve and talent and technology-enabled a are we be and the platform These and we deliver to shopping streamlining cycle, combine flows the experience. Shift end-to-end can beginning continuing Fair across by introducing customer and experience. integrate we our are post-purchase efficiencies the by improve Third, and Fourth, excited customer-empowered team. fulfillment fulfillment great as our unified into new accelerated checkout with improvements and will sales very we personalized life that the discovery customer at

our in to to a now combine smaller EBITDA results I to efficiencies. Oded customer auto as innovative adjusted the walk review through will improved and call will operational retailers, while XXXX peer achieving e-commerce experience our you profitability. touch a trajectory the our breakeven conversion scale over We strengthen Executing to turn path Oded? modern-used a on technology set. strategy and an financial set leading customer-centric to brand at to enhance much our than this Shift and will personal

Oded Shein

Jeff you, afternoon, good everyone. Thank and

with all information as be or so shared met you guidance of quite as our through of We provided year bit earnings XXXX I'll which a last walk and efficient fiscal to try possible exceeded QX our the today, and either call. on have results,

XXXX we path illustrates and to with highlights finally profitability. our XXXX guidance from and published our that I'll some today results. QX start the Our model

prior website. year's GPU please $XXX gross reached investor on the up a X,XXX results. for the was X,XXX details full contributor of reference other a or key grew Total to a Xx quarter XX% unit Adjusted million, year-over-year. With million last XX.X% our was per the F&I in Financial Adjusted year. versus to EBITDA year units period. revenue unit, representing of the the A full an increase loss nearly For year-over-year. units, representing letter XXXX. for XX.X% QX adjusted increase. X,XXX for quarter, Adjusted posted e-commerce XXX% rate shareholder loss growing increase of was GPU sold compared or fourth XX% loss year-over-year our quarter $XX.X per to profit

$XXX.X and or For a in We fiscal cash cash Quick ended year. rate cash year including loss XX.X% of adjusted million QX with last $XXX.X EBITDA was our cash. to XX% compared restricted equivalents position. of our $XX.X on million revenue highlight of million, XXXX, loss

liquidity we we untapped. additional year utilized $XX.X into by entered with At on ALLY, facility our facility a $XXX million $XX Additionally provided million front, under floorplan facility. previous million QX end, in the doubling the

guidance. to Now

quarter, million, of revenue the of For to the first million. roughly we doubling QX in million $XXX XXXX be $XXX range our to expect $XXX revenue

of be range to year, $X.X billion. billion to $X the revenue expect For we in the

expect also of to XX,XXX to range full year $X,XXX XX,XXX e-commerce units of quarter We expected the the the be be units. the $X,XXX. retail for in to is in Adjusted range to for GPU

$X,XXX. of we For tailwind ahead expect GPU in price included appreciation our be we the XXXX GPU to as reminder of of approximately that previously A discussed. million $XXX have year adjusted XXXX QX,

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

of XX% For we and the in XX.X% adjusted significant the in to investment EBITDA of margin be improvement business the XX%, loss range expect the the in inclusive to XXXX. loss marketplace the to year,

you walk that through final my like to For section, model I'd we today. financial the shared

EBITDA visibility roughly in have the Breakeven attained rapidly to and at better XXXX GPU retail growth our Following a at sales into which into and e-commerce revenue units, in we $X XXXX, can our billion XXX,XXX growing success trend equates our evident breakeven to in in profitability. path in unit achieve our continuing EBITDA be and point revenue.

Pacific is markets our current going our where growth of than significantly volume to California from competitors. legacy our the Our in is Northwest, and some come lower share

we markets, and business, of launched GPU New lines new launch marketplace. XXXX to more expect Grow and to $X,XXX. Texas in including markets major the

We et GPU given GPU over shared line that price can our rates, operational business, we of and the with have algorithms, we past improvements visibility us of strength F&I get wholesale year $X,XXX products. and previously efficiencies, can we that business believe existing with $X,XXX that attach has reconditioning our to confidence increase outperform to cetera. approximately The

an and contribute $X,XXX. a captive additional believe the per finance GPU and business, add our including unit, estimated least we business us unit $XXX brings $XXX repairs at $X,XXX Additionally, breakeven contribution opportunities can of to per service to new can of a business

achieve Finally, improves to efficiencies sufficient fulfillment to sales level rightsizing and to marketing We plan higher corporate maintain CAC by drive processes and redesigning unit, leverage overhead. per growth, continuing $X,XXX We SG&A into the to conversions there. build grow future years the stop scale the see to profitability we the come. next will three, for four and and over these to years, not benchmarks but further opportunity

George Arison

Thank and for for team a Shift strive of congratulate as another Again, and thank performance deliver fantastic the you, want and to year Jeff. all XXXX members all great work to hard in their we are Oded long-term ahead business closer bringing your through are us questions. we that strong self-funding profitability. about the growth and Shift a is XXXX. We're looking being growth excited to With that, its forward that opportunities I to of

Operator

you. Thank [Operator Instructions]

George Arison

XXXX presentation we website. these on QX available us through of finally, XXXX are objectives a in details our and letter thoughts materials. and We you our shareholder on have Thank with lot our bearing as exciting model. and IR to for investor our you news including cover profitability our walk results, Further some new

Operator

[Operator Instructions] from with Our Fadem Zach first Fargo. question Wells comes

You question. proceed your with may

Eric Cohen

Hi. This Omicron you mentioned February. if was comment wondering and was is January I -- Eric on in Zack. for can you a headwind that

over you're what and If impact you unit year, quantify can there? been of drivers just of and the growth the about cadence what of so to has thinking the that sort course get how to are the

George Arison

can point challenge. Thank areas share you. don't We We definitely number was can have where today. quantified a it of we a to kind

that concern of buying. Omicron when first terms among there customers some So started, in we felt was definitely

probably impactful So, has not and else. grew, there as cases suffering everybody we some as the was And were sales in that then Omicron when was with that which to slowdown was first announced, though bigger topic significant from was nonetheless. obviously that do but secondly, a fact somewhat

in And so, we reconditioning. had out people

across out people the level at field have We in work. executive entire operations, as well the

of reconditioning we our to for as capabilities fact bit, impacted the everybody well a fulfill ability to, over time. have that increase able they to did time. customer so, cost period kind of as also, little rely at to And And more our on our as impact because had specific times, we not work be needs needed a

and So early definite January was in that gave quarter. guidance reflected kind in a the and that's that impact of we the for February

Operator

Thank you.

Our comes Brian from with next question Nagel Oppenheimer.

may question. You your proceed with

Brian Nagel

Good Hi. afternoon.

George Arison

Hi, Brian.

Brian Nagel

So lump probably question, first two I'll my together.

today. to was with announced acquisition the respect Just that

business size, this core I your business mean, -- acquisition. the So, the the and of guess, just build-versus-buy car how today? portion we discuss that, as versus business marketplace -- And the the mean, I economics far maybe the just essentially I then secondly, decision. I the following of business of used your ramp just about size of background, the underlying parts. business should given guess, this technology the the think versus two will One, kind as

George Arison

Great.

So economics I'll start of to and portion the then the I'll answer. defer on Oded

about So marketplace wanting to start for do with kind of talked build-versus-buy, we've a to years.

an do think, we do. in Brian, work it's and that the about all how to years do first talked that I you of a we of get capabilities in ago and terms met probably core few Florida addition in always I to people the we work that time issue

builders. lot XX work our of of we in do to business. companies like fundamentally founded also but things, own but build we core core are our I my to a -- and life, for We years have

has time challenge. And to devoting this so, a been

building business. in you impressive. road see term, a and we the Fair And for how to done. long-term our we opportunistic as terms was he how be long of known spent what developed. had on across extremely I've the totality And work CEO years looked So had build is build much to to front how do to They of well. the when little just in the entire while all it because shared given came very now can to was it before of at was how just XX very stuff this kind we I business, telling any us like for they things, you the model do has do complementary the day-to-day of that what map recently, ourselves, today it having we we would of that and we great without very, kind their of technology, least Fair mean, that could months really given two sounds kind which need disruption at it This this developed. have run we

And proposition. was so, that appealing a really

without get have and in of great way. disruption on often product people having end-to-end build great to situation work can really a of a engineers a don't and bunch where bunch a great You a product everything

bate And us. years, marketplace business that to kind about launch excited and So going leverage benefit by significant. technology, opportunity more least QX when us of at would The a found towards this to been the allow two right? and of accelerate the do became of for it interesting away extremely about be to XXXX the learn really the we then alternatively as going it. it's super the it this we probably in So to in quarter, we could whereas the proposition is is the terms end business have we're

will we marketing, We because conversion improve. expect to be so right, in over should -- inventory, see have more we time leverage

more able we own, inventory selective We from that inventory we be be the be will what to we'll sell outside. because also in able to supplement that

And customer experience so, the improve. will

down improve. and costs should improve come and will GPU Our should our conversion marketing

big really work a marketplace, that's for October overall, obviously planned his actually serendipitous that verticals. Shift market valuable Walmart So, a And other on a in it's also who building had a situation And us super well marketplace places in and seen really plus. building we've spent is Jeff we at so, experience haven't while years here. joined

that kind of of turn with part your question. I'll economics Oded to to the through So walk

Oded Shein

you. Thank

it for core structure and business. business. lower in and in also -- it. XXXX than you is the to little this the on be revenue included the it's little in but not a It's point benefit term more core than much financial bit guidance, be on we earlier a it selling When no included to the going this about in When think and longer-term business ramp-up good But order get us from very So impact immaterial. marketing point. business have F&I see experience in have picture. probably the or how to impact very we need a the you the impact in breakeven model think economics, We any breakeven think is case, it with unit cost longer impacts and be had our to will assess at able

very for So again, opportunity that's a overall good us. think we

Brian Nagel

much. Thank one great. you. very That's for could just, follow-up question you if I And

the for How breakeven that today Just today's business the laying -- breakeven the get with needs we call. respect in funding thanks to the -- towards of should about breakeven out think to path -- point? to

Oded Shein

We new in inventory fund think heard we very with you floorplan, ended of our feel as signed facility growth a primarily at point. million comfortable QX, the the When floorplan nearly the just before that year So as That inventory in even to with scaled about think move our liquidity the to going higher, $XXX We business, growth to of than we and forward being think this position bank. through liquidity feel we the doubled as sufficient that our very have that can well. XXXX, good all about capacity be we to our we future said, growth needs. cover have needs. satisfy we you've

is liquidity can we want forward, further it that will to our debt, just efficiency. taking of stewards the different year. our steps equity issue acceptable we're to meantime, in this finally, cash take many strengthen It additional and the market. to enhance to means We could form be forms. then cash or And We and Going company whatever we can spend that. be identified issued the to prudent

a for big focus So obviously, cash flow us. is

George Arison

year when path very both on, are continue well factors things year I'll well. in and equity just look this attracted GPU new now the the that excellence debt plus that Shift. last on to will we it with in to be you Brian, together saw, right in add to those last and rapid end, as and growth recondition saw clear we'll others the coupled end to that, as an new believe to that investors and the coming at factors we see both back scaling the soft year, investors as just Shift quarters all a and coming come the We investor with that will attract a we as the to profitability, front

Brian Nagel

you. Appreciate. Thank

Operator

Thank you.

Your Gupta next with from question Rajat comes JPMorgan.

proceed with your may You question.

Rajat Gupta

question. taking for the Thanks Great.

persistent fairly Just I a be options for in you inflation, be could a while accommodating. gas that volatile pretty market appreciate might all down fact, that prices further macro we road. the of you high where an market given somewhat not But look the uncertain are question. follow at up still will on these environment, the a the funding

to on like have even quite today? not So And has growing that a but, you derisk your and competitive order focus not equity raise I bit why a I why advantage? in don't considering you mean follow-up. more derated stock something even to consider allow why today -- the though

George Arison

we will paying attention Hi, ensure and add our is aim opportunities Rajat, we for control behavior say, I we our on execute continue what well. own control year. Like market said, capital that would always do will that to will can't we'll thank that. to the what capital we question. and and I you -- the does, are We can to we additional consider to position to don't we really can be do something liquidity Obviously, when I is this probably But not appropriate. think,

Rajat Gupta

Got it. Fair enough.

year implies curious you Thanks. it your On uptick with pricing like, your where GPU view quarter. is seen Clearly, GPU, ASP -- any what guidance adjusted consistent for pretty guidance and and first pricing a in on in a year terms in terms used sense guidance? what in the what's versus used full the adjusted assuming last business more also can you're the just that give But informs the significant your the of of environment? vehicles of us that of has car changed mix car

Oded Shein

Okay.

parts. two So

At Let's start level. Car year, And to see some pricing we the this have in we of end of pricing. this At appreciated be high the normalized. have very beginning going our at seen point for prices of we the XXXX. forward, a stability. ASP majority year expect and

moderate XXXX there depreciation years As on we've where was throughout seen in market. previous the XXXX, the

the for year. ASP higher beginning than be is the our XXXX, XXXX probably but going peak of to So we'll at

the build areas. GPU year's XX.X. come year what above for and half Last was last seen and first we is And in well. which strong saying come about half especially the guidance, the big One seen two in are which George improvements GPU, that. of think to the performance all F&I we we the spoke was is we improvement is And can that year we key dramatic improvement reconditioning, from year to going continuing year we've F&I. GPU in it we've as last and for believe the story As expect of that second on of

guidance. the our So basis for that's

Rajat Gupta

get for queue. Thanks back color. in Great. I’ll Understood. the

Operator

Thank you.

question next from with Your Basham Seth comes Wedbush.

with may question. proceed your You

Seth Basham

capture support Thanks That's in and to volume fair GPU inclusive capital a to opportunity. I build per of assume. amount you Do longer What, $XXX expect to you model it is you going finance are afternoon. expect related When about that lot, the to first to buy to it? you expect My it? need moving you or good direction? to that captive the the thinking question unit a of take term kind out build of, from have

Oded Shein

So thanks for the about we all the to plans because to of active market ABS always the finance factors for question and Captive be our in in question. don't The I point, your have At the is following. answer but this in the detail, captive, order repeat the say in would was have question captive future. usually to you scale issuer.

possibilities thing and when at can in But one it's if see And GPU $X,XXX -- that GPU form what other tell timing that double you And our We see I when the look to end the you the by start take. So and to be specific and talk of least $X get at going have can of which of some there we includes from to seen billion it guidance, we that our coming able need year, scale about planning revenue. basically talked you've we in F&I that as you the to about competitors launch plans we're means going have know don't kind of the contribution. when scale only can of this from you it. $XXX before we captive. we'll of

So grow even to The the good captive is is money. the -- opportunity premise build we're going that the up $X,XXX GPU news additional that here going from it to with to $X,XXX there. gives to start it slow and us above

Seth Basham

the it. Fair. enough. second related Fair my question is Got acquisition And to of

marketplace the And the the confirm long to all, units can the recover to what revenue you only do expect not third-party transaction. then of of relatedly, how of cost the portions F&I you be disclose of that do you just any other paid acquisition? And First making there, to you portion for it? on on unit you that expect economics referenced

George Arison

Thanks, Seth, is George. this

of acquisition far through couple the here. is fully rate debt X.X% and $XX a interest our so are million and The in available funded SoftBank facility that is in debt So facility letter as total $XX This details and million a from price shareholder the cash forth. things as equity. about

So is perspective. funded the Shift from for transaction that fully

economics far of as how the possible is here. what and we business As think about the

generally then in we them hypothesis works all a learn go The products approach what the we with meaning approach things. various developing to we Our is point towards that and particular test try best. that

I be think approaches a as been lands best depending then this. few how to for able we've far And what charge as on, will have we experiment with. we that pursue We the then, deals

I of to we think every list something have looking is we're dealer today, on platform, X,XXX platform. that not for our If critical right? cars single you like on us listed for Northern to think car our remember the thing California example,

we platform. a that be sales our XXX to marketplace if want adding listings of So, be about we'd XX% dealer of those to

to increase inventory would only pretty a be to significant in in to you dealers Northern the XX cars. about need XXX total that but get Now California, XX

days the we'll the we cars, be able in can think de-list I I be of we us. really good where hard get room will opportunity to opportunity exclusive demand to in And is of will to to be dealers be a will that And with amount mean, so, because partner. kind it have early a this offer an get result, higher list. think an a to than work as

and what, fee Oded certain But We lands on try we'll experiment experiments will there'll mentioned. of the different probably charging have that out, you share also F&I, and with best. as lion that's potentially the see both be and a taking

Seth Basham

you. Thank

Operator

Thank you.

comes BTIG. Our Marvin next from Fong question with

with may You question. your proceed

Marvin Fong

afternoon. Good Thanks for questions. my Great. taking

brand we customer peers though triple-digit on $X,XXX, spent maybe of First slide one, talk in some mean, cost still on your their in spent they on marketing. $X,XXX. just your CAC view your confidence your one cited in the down peers model have the $X,XXX you about brand about presentation I on even I it's see high curious spend. of on acquisition But the and almost -- more the getting that to getting your how I to And millions at on think,

elaborate a about you $X,XXX maybe per in confidence So unit. getting your can to little further down on just CAC

George Arison

where perspective. we there that kind are We at where times, are is, play, Number a from places us of think to we few to regional brand are but we approaching might things a right? awareness care What peers build national focused advantage the That operations. here. for we of about on our things have buy have regions a level, I who everywhere. operations. something that allows significant to over a So is regional customers more reaching the we through not lot you think regions trying kind market drives really nationally in We're So word one you are because a CAC. we have capture on a where share which of mouth the can greater then down And that's our your of in operate. be a more purposes that doing have

So that's number one.

really as that driving SEO And we helps those we're regard but will really to your selling thirdly, to are think which efforts are the better down lower conversion. Secondly, conversion not come focused them not money then support also people CAC going. crucial your Shift, in them. is happy CAC who The on CAC might this convert and to as driving And we heavily really component spending today well. And down because of marketing with how we're then a well.

up Jeff is year on for will this critical in and a both and long-time. with be And us for site our conversion as to a frankly the so team driving that continue spoke remarks, is sales why prepared initiative

marketplace funnel. us that this is the the much in conversion increasing really regard the and as believe across help in is model, by entire that not While we

Lastly, we full on is know do peers $X,XXX that national in one that our in of about regard. they're going even though CAC, at

already lower we so this don't where at think $X,XXX that And much than that peer is.

a So number. very we think it's reasonable

than think the we in ultimately $X,XXX, be years. to I lot want it next believe frankly, but lot the folks forward put better we that internally a that for few can numbers very realistic a of be

believe kind Oded, to I'll answer. that's to I he of add this So discussion. full wants the anything ask if

Oded Shein

to in grow. lower to $X,XXX that invest we kept And $X,XXX, that to we wanted emphasize in the the a significantly we're continue than going in growth aggressively, to CAC we model, it think No. to term order can but because breakeven you We are be in marketing. at grow the need company long

the reason. that's So

Marvin Fong

a from of manage years? just you on of that of there find in I and keep the sort kind terms the effort inventory dealers will inventory And of of that. just same question, mean be planning in out some make for expect to details we that, the distinctive you'll you be still from Thanks vehicles the are follow-up bringing curating How or listing sort maybe Great. that? to working I imagine conscious a you're dealers type will the offer, of But kind guys to model on the and from you're like acquisition.

George Arison

as Fair, for team of helpful our team still nonetheless, We've that sure are strong with lot in done marketplace. – to relationships had question, how internally the way for that. on the with dealers the there of learn relationships that excited best the we Fair we're has long an about and incarnation earlier it through business. But that of that marketplace a kind one really a right? a dealer these community was have with is test and is into we a of time. about So the selling dealers I thinking first has really business, do which working the hundreds work way not those actually different we're going of to But to things this, And will what approach is said in

rely valuable to to the to can alpha signed They've So we to because bring that on don't that that's test. lot us ourselves a have of already up build us that we help really on side in be team actually forward. dealer and the customers

listings ago. look a will like business that marketplace right? or five actually XX% start to then not expand, slow helpful well. at XX%, that if Generally, XX has no the marketplace significant six to in much marketplace. today well from as So, marketplace total as something is be Walmart it's want the virtually higher so us but was but businesses today our XX super or years sales and case businesses, the Even you than you had And ago. of Amazon though years what

start then So you to slow over and want time grow it.

the we will I XX% experience. and our well. help we're stuck but years place make with But will value and listings reasonable where think that to be we of kind a things add customer reasonable over more manage for great XX%, in Shift do next conversion marketplace really can a if of a few significant way now can in

Marvin Fong

and… Thanks Great.

Oded Shein

That's being Just or capital to it a to purchasing would not inventory. inventory, a from is something – capital add demand the so a We very need be business. marketplace this light. about finance from

Marvin Fong

Understood. Thanks, and it. Oded George. Got

George Arison

you. Thank

Operator

question from next Khan comes with Our Securities. Naved Truist

your proceed question. may You with

Naved Khan

a the marketing that's sequential going of Thanks or at spend, a decline? QX this lot. that Omicron, the through just that compare does One about reflect to look to brand where factors lead thinking fourth Two for in channels then GPU. on on number play, course are year? questions. the at quarter, your other spending guidance are I we GPU performance there If versus you from how And on with impact were

Oded Shein

for Thanks the question.

Let the talking about talk GPU George can me question. then and start marketing about

very seeing We're about double over to our the year. guidance So revenue guided going for about on excited provided year. year going than the in also QX, when to – it, what's was last higher and And year. we're are very some GPU dynamics. aided strong you as degree be excited we of market think by last the We're very to we last

said going a before. with factors is to there where QX with guidance, us. specifically QX quarter and above reconditioning mention. variances, GPU for going F&I seasonal, are couple improving One accomplishment. an important has seasonal is that QX that So With, are is highest of And do that we're historically and to as we the

holiday QX, lower is and in While the everything for some hangover then going dollar with QX. competition with the all customer's on is into the usually season there

So lowest quarters. and QX historically, were QX the GPU

us Omicron to is going as you again hurt was impact the Specifically, reconditioning there mentioned, breakout QX, clearly the QX. that and an in to on of

resolved was time that in the by However, the February frame February.

it's going to to not quarter. have So then quarter. strong to capacity performance in And great future QX, quarters. is effort on future our actually to due we our a We in sales impact in finally made strong replenish look the strong forward and the any inventory

little in a still bought was them flat up, is period Now at pricing then QX time times, cars where during a lower. we going where at maybe price and some even or selling of bit these

we additional So feel But again, pressure that year. for our about guidance put strong QX. on very the

George Arison

could old the at introduce decisions. want those a that creative time mix There the think regard I you between accelerate you brand, of some of rest It's brand. times. don't we creative invest can lot other We down kind in to we then slow marketing coming speak using can that The good it make in And that a to quarters, little you're creatives to and in speak but for will with might times case, play and do might what get to we factors in that specifically you way new we it in and and more brands. how digital general to might in a two bit. heavy a take the might want are of sometimes give to doing which continue

long and practice trying the things to to success. really And the investment, we'll next in talked that XX% ability past need years, feel do. the in have in to we're do obviously, to And as to the as So, aided order as we the then use continue take we can over past best the have towards digital our in several we regard ensure marketing more brand we The brand is to good term. about we've that awareness. drive for

in which estimated we the significantly so done set that our is spend of presentation, has peer obviously type the investor than far. With lower

to powerful So of both the really kind will of additional price to front we about of in have that's conversion awareness is improve Shift our terms a percentage I've the that customers the we spoken on even in market. medium price the car one to how customers for aided improvement score what market across profit we funnel in of think tool and then which in then terms driving to a drive term end. gross and $XXX converting increase those past sell

And a others We've today lot a accomplish that better with to better. we we can we'll seen well. significantly their as to market know price so we having our so think price market increase okay, is do but and awareness that

them year, worthwhile, it but in come. is probably way, only in So we but this the manage not careful the think a we'll both to investment in years

Naved Khan

Got Oded. it. Thank you, guys. Thank you,

Oded Shein

you. Thank

Operator

you. Thank

comes Anderson question next Blair. of from William Our Tania

with proceed may You your question.

Tania Anderson

with a will follow-up Good Technologies What for draw list Fair dealers other the afternoon. have be just to versus platforms? on key Shift acquisition. the I Hi.

George Arison

new network they'll us one especially logistics regions. envisions one, and no fully closing full customers, which unique not this offer. the that model regional has just within transaction a through are network see we're then huge ourselves kind We're Number each a offer So The from differentiator purchase else I our have again, operate exposure in of because and actually to listing is benefits. maintain we local deal we So where else a transaction, different fulfillment we is our we ton a right? that anybody site. obviously going of logistics think to region

is the most which customers advantage see in the thing to with probably in that customers who new So attracting huge is hopefully exposure then Marin new grow live People XX their going and parking customer have of at think valuable expose you limits you example sell County to for for increase San the capital, have fulfillment the of want that's more. Bringing single the have model County time with to commute to of in within miles example, customers grow of of a an more that dealer Today, to location. Marin say to cost that through. a home California. ability a for and enable dealer in coming But business not footprint and XX vehicle they actually our dealer they because profit. and are kind for logistics, and gross can customer cost Jose, of their which

bucket big benefit. one So that's like of

earlier, do finance to have have of salesperson have looking to I on point Shift. bucket and on the second not of a list to go saves single inventory benefit And The they is don't transaction made the to that don't they costs. we're that that manager back which a every again well as to do transaction deal have to fact

but We kind in to will our are looking working who be have select exposure to of getting increase we'll something dealers inventory, with us, very Shift. special their

Tania Anderson

are really platform your in up. home this just all is, like internal follow if Okay. that planning to any no? in-house were acquisition don't But movement I has what ready to And at to capability wondering then accelerates doing finance. you talk the we way appreciate about maybe captive direct lending versus your or that some it

George Arison

Yes.

reasons looking Like, spoke of started captive captive to got it since revenue. related Shift that in We right? more a since about way you doing roughly business. described have lot that build a purpose have for business scaled can market the billion been this little before. learn So bit all captive I you captive speak building before look, Oded $X business to ABS to I Oded more a the along I'll I've the scale a to into at forward to the for finance

And about of and so I'm it. to super excited kind level we're that getting

the help on we the does with help than of captive cars the are captive shift model core because selling able had with the enable then really and we past able business work restart captive We out internal to have process to in in confident be build a feel be only require the anticipated will frequency that if and the that a to captive done inventory, ability of issuance of market. a to really in-house. marketplace more our Obviously, ABS the sell lot we in to able business business

benefit. or up captive an So, if years only that and more, that XX,XXX in now just we're thinking marketplace for opportunity envisioning end with a the XX,XXX will create and we few about or XXX,XXX doing units

with launch is be that. quarters to able have provided But to have We time clear. few for that marketplace build to go any have mid-term very or from because guidance an selective volume captive what to hypothesis more We marketplace, marketplace out capital a do will sell the good need not easier to be of to a more be we in the with that model long-term to will able it and to the there. first more be down be -- cars we

Tania Anderson

you. Okay. Thank

Operator

you. Thank

Our next Securities. comes Mike question Grondahl Northland from with

with You your proceed question. may

Owen Rickert

Mike. on guys. Hi is This for Owen

sourced that customer the the quarter? of I shareholder quick two are for quarter? from directly on the during what letter. vehicles have cost was Just missed And And percentage the customers then have ones. acquisition What

Oded Shein

all was with few is purchase question? from the which second came what So, I'm past XX% our of vehicles quarters. consistent the customers And sorry

Owen Rickert

customer the overall quarter? costs for Just acquisition

Oded Shein

$X,XXX it. There precise. to have just It under was don't actually I $X,XXX, be was you go. it

Owen Rickert

Thank Great. you.

Operator

Thank you.

Sherlund question Fitzgerald. next Benjamin from with Our comes Cantor

proceed with may your question. You

Benjamin Sherlund

thanks guys, for appreciate a color Hey bit my taking more I and around your questions to profitability. path

would model California any SG&A Can us color -- e-commerce the which for at year is looking largely So, market market expansion. unit give total expense quantitative attributable the new to assume color has XXXX, increased around then the every since you I you this And have to cohorts markets your opportunity own you perspective? three top follow-up Northwest. the mentioned Pacific in scale in as five US in in an the from SG&A and you're market a of significant a

I'm or to is expand this slipping cut like scale to the operating to really per get your would to pricing trying recession. of higher market it's were to a profile, is odds if what unit in timeline entirely, expansion reach at So, time So, guess, your do in I captive finance, you here your looks profitability? what market expense in

breakeven it? Thanks. investment quickly, needed do if this take? achieve flow you So, And what to cash you how would would

Oded Shein

we about continue Thanks you breakeven for at to then end the growth to talked a we always us some grow path whatever to that we question. the and breakeven, to is years want present model to fully When where up we for enable to come. note and

you and necessarily into be for it be to on because the new and more that on always you and but can not by top rate can mentioned, level. improvement. marketing SG&A is an alternative maybe have there breakeven XXXX, I closer markets you focus growth even cash investment, the do of get focus between However, to moderate capital also -- SG&A us. preservation that -- expensive and is to as markets And new staffing efficiencies say mind for can

and important year, significant a So, through we if you not product But GPU focusing grew scale way. improve people. how relying before think and about SG&A are on our I just to XXXX is quite we technology, in this mean, on really

So model we on think this that's going for the to have implications and our future. also for year,

profitability. this our growth even to continuing So our a go growth sacrifice our to slides, that. If that's plan. Again, purpose improvement we do there marketing. moderating in side forward. you earlier, we at the And marketing an The when a expense. the on see can is of the by question SG&A of about breaking some wanted for that No we is part you with same as important look that path

Benjamin Sherlund

Okay.

kind has Carvana similar. which know of cohorts, kind of your -- marketing I out take market broken their is expense so to let's just And similar

original were their In XXXX $XXX Analyst years decorate per they in XXXX think I cohorts on Day CAC. were $XXX. unit e-commerce

thinking there? mid or of older in about should that your of from kind be So cohorts range, kind your we $XXX around CAC $XXX

George Arison

its I doing data time cohort doing them two been have newer can't of by speak our it important Carvana to much the on think years started share marketing specific I And to in marketing note is meaning they earlier. is that brand brand much numbers time, a And it. marketing.

yet. that done haven't we So

an point there. I of kind think it's important

I because And than do economics time unit versus we like so the better business. catching you think now There's -- we're most I mature business many had definitely kind But about we started probably want in as well. just that not markets. still and long grand question see markets entire up once, do a total say, in noted to also spending launching ago. no we've across more at our of right the that's of in been we're which

because in regions we to a launched. bit we've these share cohort of little that few is kind do, only harder have the us so for And

in announces you're better markets in have to we'll the to that Texas future think asking be the able mature, as a for. I share clinical position to be

Benjamin Sherlund

Okay. Thank you. Super helpful.

the I Thanks guys. So appreciate color.

Operator

Thank you.

Our with next Mike D.A. question Baker Davidson. from comes

proceed may your with You question.

Mike Baker

Thanks. questions. Okay. Two

more there on growing. up lot because instance, are that is sense the competitors, your for list would cars a hearing, dealers marketplace, why to actually from there actually of dealers we're following Just in to been there and some And other buying to lot dealers. want CarMax your out selling pretty it's a on think are cars competitive of directly we of directly out marketplaces

might been get dilutive four this to going it how how -- So because to follow-up about been thinking short take is think competitive to have years. may term? acquisition compared get moved acquisition, that years there, to three because question, to now second three that talked to competitive question, you've ago? forward you? you Just to how to of does going list that get a Has months longer the to four in to profitability what And or just you Has it's dealers of that this six do pushed? on to be been then path

George Arison

every earlier. since the us, single We're be let that with now have anywhere to XX%, to to take going need listed be XX%, not So about in and about people every or California. dealer region. reasonable talking I listed again we that marketplace don't many cars to first cars XX% say total marketplace. single given full marketplace, cost X,XXX close in question, to Northern in we of have listing Right be said want a what We a a we're our me transaction dealer our

with work a be we which is to that So When in XX% could region we will That at with. XX XX wanted about to to there would significant, we that. our us. probably are very list in growth XXX to add but of need XXX most cars dealers this dealers inventory, dealer

very a our not the stores significant that across able One understand entire German to Bay same way two or because XX stores increase things, the of of be those only kind of on one We of want brands to the area. the platform, probably the everybody, of Area. want in store one has in I footprint we

So them would to be get of not beneficial. all that

much of do. fuller in we range that, on Secondly, unique a that sites our are of in terms cars the e-commerce age than kind sell of of we point, peers

So whole our that there are cars of out there don't independent years mostly really segment kind eight-plus-year-old touch have is that of platforms a old. dealers six-plus cars. online And

places the being ship reason XX much where the is one a XX given of make cost. dealerships, for to that's cars more that versus sense they XX,XXX or the regional internationally can of so few Shift shipping list even local a It of or And with, that doesn't approach cohort a nationally.

And regard. so, dealership Shift. independent very I to listing that our advantage, that model is be cohort And that's think with will unique be but in more an

thing But competition. of Walmart, with So than they'll automotive will will with think is same of more in turn the seen well. lot I we've with -- right successful one like with I'm then second same all Oded Walmart, sure, there's folks the room for as Amazon true for things these And listing there question. everyone listening be plenty the I are but marketplace. also a is to example and Amazon for as and

Oded Shein

the about of it ramp contribute line no the we before to forward, bit to mentioned. as So and depends with we economics going our the fast talked core bottom impact impact, XXXX. bigger up. Small it little marketplace, starting a financial then we on And how initially business then

had it your think are six not I why sharing to and question we with ago. months do other now

company. wanted far. our see saw liked And we just for we visibility as We to a we So some into year and XXXX have the results ended XXXX. first so full what public

path time future both good the a feel the thought about this beyond. So then how was and with share we we to to breakeven you

George Arison

to of point forward not we include in kind the marketplace put again, model last emphasize then, years. that And does all the outer at the

And of scaling, cetera. the model be business out And you earlier with synergies, well. marketplace we as marketing there how kind marketplace we Shift we think the need would et I in core But of it's launch have to and so, as kind lot update the as model. a a see discussed there'll then of as that stand-alone

Mike Baker

Okay.

Oded Shein

Just a correction. quick

can't used a sure to be going I I It's impact XXXX. on it's the think you in that period. the word no impact be zero. exactly

Mike Baker

Okay. Thank you.

Operator

would showing Thank remarks. at questions back you. any And not to to turn like the I for time. George call Arison further now over closing I'm this any

George Arison

everybody you, forward the thank we Well, to talking for joining the coming to days look in and further. call you

Operator

This concludes call. Thank today's you participating. you. for Thank conference

You may disconnect. now

Shift (SFTGQ) 16 Mar 222021 Q4 Earnings call transcript