- Earnings call transcript Q3 2022

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Operator

Good afternoon. And welcome to the Shift Technologies Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Cheryl Liu, Manager of Corporate Strategy. ahead. go Please

Cheryl Liu

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

on is Joining and call the me today Oded our CEO, Shein. CFO, Clementz; Jeff

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

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

Jeff Clementz

set together Thank you, to Shift our up immediately meeting fair and to I'm giving inspired, incredibly simple, to and way, to pivot like plan, for at everyone. challenge. Cheryl, team great the used operating afternoon, the way team did pulled job cars. the a was work a third thanking execution but task and their by hard the the customers our buy hand, the quarter. out to rapidly task I'd employees during by It start easy good no our new

profitability the new call, on our the plan at period a quarter prioritizes and new operating pursued strategy. our lower As cash accelerated though we volumes. lower transition as burn, third we unit talked company was The last about for

Coast eliminating a favorable test actions assortment profitability; value through reminder, mix inventory online drive; the GPUs and and we which across place end by hub West reducing After the third and sales market, and roles optimizing streamlining and to rationalizing locations; took our more include have XX have XX% plan checkout front the footprint corporate positions a overall following: the in physical about channel execute. in operating frontline tireless our hubs during the favor to As to our quarter we corporate remote overhead quarter, refocusing vehicles, our and three; during thereby, is work our new foundation to from now costs. reducing

the be today, results The the discuss but the benefit quarter Oded reporting will shortly. guidance third results fourth expect and transition financial third we impact beyond. are the does and we to quarter evident results in quarter

to Turning our priorities. strategic

positive while G&A achieving in economics controlling unit from prioritized we and tightly from expansion First, and leverage marketing, selling GPU expenses.

mix our earlier, stated inventory we As shifted value towards to skew vehicles. have

Now which older as old define over years our half vehicles or vehicles we XX,XXX than are over considered miles. valued, eight

affordability front the headwinds, coming car on be margins. As value to those environment a with purchase are that consumer rates naturally interest In will vehicles we've higher greater rising this and we making when drawn about, sell have and total through in talked months. consistently and oriented end believe consumers vehicles more

units Second, markets sold. West increase grow Coast to our penetration e-commerce in

Coast as only We e-commerce more rationalized focus for seen strong as response offering. As our profitability, to an you know, drives checkout but our and online we improved third three true more people markets. expected, focus this eliminated move hubs a on have down successfully to moved we our in Not are to the West test quarter and channel. opting consumer

rolled complete updates including and car needs to the in customer team next purchase new throughout innovation and as to out mission experience undergo product the to allows We checkout buyer those cars documents. product uploading that we our happen see and what the several purchase selling continues Although, to third themselves, as exciting their such required we quarter, a making dashboard to simple. advance actions still on fulfilling anywhere focus of The US. and ownership are

improvements shipping We page, online also made personalized shopping the a and of substantial experiences interactive shopping experience, number price more including of checkout vehicle to payment other the modernization detail and new a and calculator.

a version relaunch priority marketplace The the from dealer F&I inventory listings was our team launched and the additional as beta partners by the of to we Fair the improve learned options. scale area. a marketplace shopping plan to Los Greater continues of Our optimize test in our business. a partners customer with QX, from In number powered and in data Shift Angeles We’ve third XXXX buildout and first we'll add we and half amount the experience to platform. tremendous the of shopping

Shift many the are consumers. that instant with conveniently flow, from directly enables there over quotes to Additionally, bringing Shift their year, or by heard their past to enabling inventory home to customer this Shift’s the our it do of than providing greater very car and sort dealers we've XX% which at have by sell our your to We been car by sell hub. impressed

into allows flow your we've Given this dealer the Web dealers launching and car to auto interest, sell acquired are embed their that site. created platform Shift’s

a pleased a Florida. also in Lease Off significant group with Only, dealership based announce to terrific We partnership are

sell on the profitable partners partnerships. believe significant provide CarLotz looking enables businesses the platform Shift powerful to relationship Shift, and buyers and the and the dealer in we're focus auto And that a initially access dealer optimizing QX for in the Shift dealer create CarLotz excited car used the upon sales. coming with ecosystem. increase omnichannel will Directors At so, will additional value of will we to both our remain The which team and ever US. believe platform platform close evolving to and a ecosystem of a sellers leading merger combined value for our open Shift the In platform the build retailer. then create Board it high dealer will shareholders. proposition pending and integrating the merger, leads expand forward marketplace to launch Car building We Off across and doing love finally, e-commerce capabilities. we'll We And are your e-commerce flow, for up auto of by Lease acquired Only engaging value the to the our months, that will quality becoming continue customers. their to more buyer inventory and leading partners our deeper, to by executive we

customer leading adding Oded our it will further I We out the to omnichannel and now stores to hand experience. review will our build retail by financials. platform to capabilities over CarLotz create then a

Oded Shein

Thank quarter I'll start you, with Jeff, our and third good afternoon. results.

the new while Our very required team and executing by in pivoting well to inventory restructuring continued [change]. the strategy liquidation to the perform

adjust rates demand year, headwinds increased mostly mix third between Our facing of as wholesale August unusual economy, several value year. year XX% was period. new retail able quarter due into $XXX.X decrease of revenue interest the last Total X,XXX of wholesale third of was to due met smaller sold quarter a including hubs versus unit expectations our adjusted rising liquidate transition channel XX% macro to decrease in of quarter we was elevated prices. year. QX as a per unit of use results million, the slowing versus closure X,XXX Total the Adjusted XX%, manage also XX% The geographic sold in was XXXX inventory We a compared despite versus and last part a X,XXX or profits higher the were to to footprint. X,XXX gas retail last and in gross exceeded operating to the for Wholesale successfully vehicles. was in to units the the mix to the plan. prior

income other gross F&I higher Our last retail X,XXX, profit per unit than year. or was XX.X%

vehicles penetration with to transition F&I we expect ASP, lower our to moderate. a performance As we higher value of

and loss. and and $XX million, of to equivalent $XX the margin $XX.X Adjusted costs F&I, SG&A contributed due $XX.X cash quarter as in million total were marketing restricted year the $XX front was declined Lower to improving prior to $XX.X million on However, value our lower million. in primarily of total the cash liquidating quarter expenses operating adjusted to of SG&A decrease compared includes compares loss. quarter, with EBITDA higher favorably balance The adjusted retail resulting result is the was Cash operating million expenses restructuring, million the which of cash cash restructuring. Adjusted last second this to approximately SG&A million, expenses year. also against primarily inventory QX the cars and of cost GPU. which expected $XX loss reduced for increased period. EBITDA offset of to end We a due ended the

floor from million outstanding of of million a QX in the inventory $XX debt liquidation the our at by result function $XX as Our in a $XX decreased under facility inventory The hubs. of QX. the million lower end to closing of decrease was plan

to guidance. turning Now

adjust This For million. million to due to the segment. the lower than lower new fourth provided and XXXX, be totals to range QX million value revenue year The ASP million. $XX now as with lower we strategy the we implies of on the and e-commerce $XXX the previously expect for to are of to units revenue quarter in in $XXX range lower the $XX also priced focus

our in We the the the loss prior X,XXX X,XXX million. benefit I of to of Q&A. to range implies turn over $XXX million X,XXX. fourth pivoting X,XXX it The margin. adjusted adjusted million EBITDA now $XX fourth GPU to The higher the loss for XXXX higher EBITDA be with segment This and We operator to still adjusted implied of Operator? guidance XXXX GPU in the result to front expect to to million. that, $XXX of quarter With towards total would quarter X,XXX, $XX than value expect end to GPU be like X,XXX. range of guidance is adjusted to is

Operator

come [Operator from And will first Fargo. Sam Instructions] question Reid of our Wells

Sam Reid

level Maybe start out high here. something to

markets, been at a your business dig do just those three your kind to what core What XX a you You've compares you doing on versus and maybe are in markets where then have like-for-like a down prior? as how market And this might you local scale year hyper differently little those a here, doing ago three of cut to your essentially level prioritized share bit to you geographies. across you were sense basis? deeper to to say markets have build

Jeff Clementz

strategy first to quarter our and hubs the and this LA, Difficulty] And we talk we're from Coast three San last it question, to across to or we the On serve customers remains to Diego. that, by West that able finding operating can Seattle addressed enable the demand [Technical our are to car the car up inventory all there do pick assortment them, for customer the across that customer is those to because to and Shift’s or markets. we're ship and to at able of hub we along

of In of not the market up top of time, market this terms on the at do share, mind hand top or but have that. we I can follow share

Sam Reid

a one drives before? basis us give guess to you Can e-commerce curious Just now more kind hybrid of on shift, any I fully you've sort what now guideposts And about that versus quarter seeing you're model well. the like-for-like that a that in shifted here. the the [modded] conversion as question there test strategy model of we're around included

Jeff Clementz

conversion. to We're on hard continuing work

a a that shifting hubs to our still also state our mentioned our have of -- continued as had the are the we inventory we terms process, through were will I process, to normalized excess aiming of remarks, selling of quarter to innovate. we steady I and experience inventory both we and throughout was significant closing. that as in say selling in from the get amount So were we the transition our kind as opening product

our we think conversion's a feeling state, as the where year are remainder is pipeline very we're towards of I getting And for good working the well. strong product steady So but quite about to still at.

Operator

Rajat question of next Gupta The from J.P. comes Morgan.

Rajat Gupta

the unit than in much On still maintain unit? or or if the volumes per or focus to at SG&A want given you mean, to of was the But cost previously margins? order for gross level been look fourth when more low continue on in quarter, volumes, back volumes to your I that is economics, lower expected, I volume outlook especially gross is unit opportunity per on volume like restructuring order enough what you like maintain the very should we of is a mean, bloated. lower to I it going looks actions to level has that margins. up. there ramp there expect follow this And have done in to cost refocus SG&A

George Arison

restructure, the heavy I liquidation would the old of to third from so quarter the hub of new transition was quarter of we a the course, and inventory, lifting. strategy included, the where say a of that transition the executed lot the

model going As have forward, will thinking we're we volume. lower that, have a yes,

-- markets only are than are used and we We to in we less be.

We also channel. the to online our channels narrowed

to have we September, going in, already inventory was and be it's seen a the this October So operation. is period well, being highly volume especially say, in it's with as would reduced what that point. different And rebounding at reduced, I

So we to calls, volumes to we go definitely side. information economics we and on and that provide and better think guidance future unit as you're going next next on year, year see into SG&A going are the improving

don't we further restructuring question, point forward. from going this see your answer to just So

Rajat Gupta

competent? your on variable base, any And the versus latest what's SG&A color -- fixed what's the on

Jeff Clementz

the and shared and it's exactly straightforward. is fixed variable, between pretty haven't what We split

we and But components some our the of lease some fixed. about there variable As our staffing, facilities think is is as of some well. and of course, cost

Rajat Gupta

their of And actually still But better balance despite believe to split between that Shift. the little the the press $XXX equation and the on cash expecting coming entity, what higher just we higher yours announcement a come correct? that that at just like and of if maybe in the little million a had you than It Is I $XX or release. expected have can be on combined expect that the was lastly and the the the CarLotz million, yours I mentioned should and curious would quarter. little cash drag a like us the from you the in had cash CarLotz CarLotz? roughly cash third million looking $XXX in in merger, you restructuring, have like looks cash we if might came update still and thought what's be

Jeff Clementz

date an So the inventory, the going think for we in the human to this a also anticipate we But resource forward didn't expensive because that it's tough process when that had to will of the wholesale expense assuming merger is be all it, into liquidation us, occur going go restructuring, especially going think I believe we're to market. that the much, $XXX between of a vote are million in lot We have bring with $XXX two million close. not at how to going a to go we December. the which least combined I'm that least at the early going is to have total, going at but entities. in

Operator

Brett [Operator Cantor Instructions] And our Fitzgerald. next question comes of Knoblauch from

Brett Knoblauch

expect about. to Maybe going the on even that just range we GAAP to SG&A kind variable. down this into I has should quarter? the down you're this basis, quarter another versus back come of are SG&A SG&A, million in if you're we is quite come adjusted considerably much to EBITDA talking one gross guess, that on to where tell I quarter. assume, But X% I say of know kind how margins fixed like $XX not guess us

Oded Shein

an So think that quarter was restructuring include was the And we basis the on then shared SG&A about when $XX was before was adjusted that just remember we restructuring of and what that, million. two about we the third months. in July,

the be, it other margin would anticipate guidance quarter to of the We be lower gross what I and imply components going to you is from than So EBITDA. sure SG&A can didn't I'm specific give but of even fourth that.

Brett Knoblauch

the like skewed about to up of your at mix value? kind you talked inventory that guess, of -- in being And you October more then attribute the towards it of do shift I seems XQ. are picking start volumes maybe

Jeff Clementz

assortment, the our levels, of assortment as in rates. conversion well mix right improvement combination we're that selling that of say would the right so and having it's having process to as assortment, the continuing I e-commerce the a drive the

into those put So all us off have us guidance helped of confidence and that started we've in as we've the QX forward. give

Oded Shein

there's factor seasonality in think I also here. a

months are picks season. the then in towards among holiday of As you most and the October lowest year, and know, the up September it

think part it. I that that's So of

Operator

closing question-and-answer to turn back for like our Jeff remarks. any concludes over the session. Clementz This I to would conference

Jeff Clementz

want to to Thank and in you. their call thank continue hard thank the QX. in executing well time. an take team just to for I the you. the everyone Thank to today as innovating transform And entire the opportunity work business all to and again, Shift on for QX,

Operator

has conference The now now Thank for today's concluded. attending you disconnect. you presentation, may and

Shift (SFTGQ) 9 Nov 222022 Q3 Earnings call transcript