Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the Shift Technologies, Inc. Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Ms. Susan Lewis, Vice President of Investor Relations. ma'am. ahead, go Please

Susan Lewis

welcome XXXX Shift Earnings and and Fourth Full Year Call. to afternoon, Technologies the Quarter Good

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

differ our some During and hold. any may involve from future expressed and statements we materially are risks statements, will are remarks, judgments while on uncertainties. make certain or these and these our which the assumptions, we And results represent is Actual performance reasonable, in current believe future not judgment what of may forward-looking what outcomes implied forward-looking statements. guarantees forward-looking

to SEC no a or new information, of any discussion filings forward-looking to refer otherwise Please may statements. result of after forward-looking our any with as obligation for a affect whether events that call. factors the future publicly full conference undertake this We update the statements

we the earnings in referring course call, non-GAAP the reconciled materials. will During and as our measures be defined of to

I now to that With call over Jeff. will said, turn the

Jeffrey Clementz

Susan, and Thank Shift. was of for good year XXXX you, change significant afternoon, everyone. a

and health, capital sheet our to adjusted strategy market our we to dynamics, balance industry and profitability. cash prioritize path burn reduce auto accelerate Given

reducing at our balance as sheet corporate turn, and and CarLotz that Shift months, our rapidly a a in December both we of enacted and We and past the executed cost-cutting our footprint in end, time. capabilities. short strategic lowering CarLotz, have initiatives This of bringing which such closed operating over omnichannel expenses geographic number other measures, period reduced included To with headcount. several in merger bolstering

in can't quarter, for them quarter Ed provided of past and over both continue Ship innovating hard but came fourth their done have results the our just enough change, to our for EBITDA the of not will the and and job These third all the acquisition, but were call easy adjusted in me range the the excluding our months. guidance revenue incredible teams impact December comment that decisions, executing loss cover few financial shortly, thank throughout let I in work standalone. an

turn to sheet top health to I want that and I our Before priorities, priority. cash our maintaining usage strategic balance is emphasize

and We in expect unit economics sequential throughout units EBITDA. sold, XXXX improvement

cash We We the need get use to in execute outlook, we coming cash additional our but that our to moderate quarters. capital our expect for acknowledge based current to significantly profitability, the we sufficient believe have also strategy. on to

maximize fund are We to shareholder a business to future of actively exploring and needs. variety avenues value

leverage while the positive second believe our of work to quarter priority, and tightly first today. and adequately size adjusted sales by first the GPU of SG&A G&A strategic to Turning expenses. controlling marketing, and of expanding XXXX company in in achieving has We half unit the economics XXXX our that

we the started X, was difficult merger. Starting Coast. December with closed on and costs presence the decision got integration CarLotz February, immediately early XXXX, by decided the East CarLotz's an on to roles. eliminating a we in exit It duplicative On transaction and

remaining The on serve and shut Bay markets. operating the and also order We now Portland. Angeles, we to have location and location CarLotz X West in We ability the have scale. markets have Illinois Pomona, leverage core down awareness Area where to the Grove, logistical focus our is brand in that California, Downer expertise, Coast most Los

full the company. to Turning

the difficult, quarter. first While by reduced headcount in we approximately XX%

us. We were the integration believe February, sales decentralized move majority in to due largely In occurred that strategic SG&A moves discuss organization, in just to corporate a our roles, of to moment. CarLotz addition I which will reductions are and to rightsize which the our behind

also to penetration in on grow controlled At we flexibility browse and second convenience to retail of online, a on Shift, omnichannel growth. priority, revenue driving being Consumers person. of but the full. technology-forward leading being Coast purchase strategic This their costs, focus our in our disciplined tightly and want purchase able through to remain leads we markets we the believe sales leverage to While vehicles units increasing and want is G&A view research and our that have unit experience. West able

a enables for We Shift shop customers way have the to the created they model want. that vehicle

As part decentralized we to as an mentioned to shift of earlier, our a moved organization. model, omnichannel sales

the will sold. improve with on have local simultaneously increasing decrease overall lowering assisted and take customer be model the Results cutting of sales experience so will positive This and organization. handoffs far a central cost our teams efficiency ownership been by forward, smaller will deals and new individual Going while more unit model costs. per

have we quarter, last experience new from and rates about that we seen checkout positive our including talked dashboard buyer CAC. results Additionally, conversion lower increased and

our marketplace. to grow their e-commerce to dealers which third differentiated is Turning relationships will margins to create strategic customers. strategically develop and with Partner a digital priority, long-term Marketplace Shift's on participate in auto share market

with from assortment same seamless experience. benefit from the -- the marketplace's will customers Shift a expanded trusted

I as We and will improve joined company. the XXXX. we things platform first later when expect will marketplace I In continue and X in to that believe closing, launch be still our fully optimize to true today

first believe we the as transactions. increasingly online is First, shifting consumers industry off-line prefer auto from whole a as to digital

believe omnichannel to Shift a exceptional asset power an experience. we has Second, technology differentiated

remain XXXX. has profitability on repositioned business a to path by Shift the to

results turn the review to guidance. to and call over like financial to Oded Oded? now I'd

Oded Shein

I results first Thank you, our and go review our will guidance. Jeff, and fourth financial then over good quarter afternoon, everyone.

primarily below million. quarter sell-through depreciation reconditioning the and revenue our of steeper-than-expected $XX of wholesale activity. GPU inventory, due of includes XXX X,XXX total fourth below For to capacity and came market units. Adjusted units was retail aged expectations, XXXX, This $X,XXX in

point fourth XXXX. and the the improvement to sequential expect throughout for expect quarter GPU We low be

restructuring. Adjusted the previous of were pleased marketing due from a and $X,XXX in was was we The at Additionally, decrease sequentially flat F&I remained primarily to $XX.X that lower million, as $XX.X million down the relatively quarter. per SG&A expenses selling result unit.

million. was CarLotz's in results weeks $XX.X loss EBITDA these of Please approximately that operations. mind X keep Adjusted include

EBITDA revenue adjusted in our standalone. both quarter merger, guidance and call on of range Shift third loss for provided came the Excluding the

G&A of actions implemented months. the the Our the shortfall EBITDA have GPU few cost adjusted past performance speaks we despite over

We by primarily benefits, ended The was due of million CarLotz of working closing our capital offset the with partially $XXX quarter net loss. and to the total cash. the increase fourth merger quarter-over-quarter

As compliance of listing year-end bid XXXX. on December Shift XX, X, X-for-XX XXXX, we outstanding price been enacted for adjusted at million have requirement the the split had XX.X for outstanding. bring March on minimum share To into with The NASDAQ. retroactively its reverse stock shares

in bid As minimum compliance the of were XX, March requirement. with back we

quarter first our to Turning guidance.

business and fully establish integrated some experience. quarter, CarLotz the the as we disruption first omnichannel the During we to continue experience to

We are from not normalized but quarter, does expecting updated the represent sequential a our improvement fourth quarter the of omnichannel strategies. quarter first

expecting and in in the to million. of of million adjusted last are $XX Adjusted we loss quarter, first a versus $XX $XX the million $X,XXX range year. in EBITDA $XX the GPU last $X,XXX million $XX.X to revenue of the $X,XXX year, loss range For to of versus range million

we million adjusted end year to adjusted SG&A, expect and SG&A between reductions further to sequential $XX million. see For the $XX annualized with

equivalents. of with first approximately to end cash and cash million the We quarter $XX expect

including included During grant the not similar costs transaction future quarters. costs, impact closure, uses other cash first hub expect do with cash these We of accounts a items to and from payable. quarter, timing of in associated

us as realized. have we cash other in future initiatives perspective, the operating behind cost expect quarters to are we decrease usage and integration an CarLotz From reduction fully

We'd for now the to open like call questions.

Operator

the will And from Instructions]. Nagel Brian first [Operator Oppenheimer. question come with

Unidentified Analyst

is far. Thank so you for Brian This on Nagel. for details the

the transition the you successfully and closed in to the merger So omnichannel completed QX, model.

what So congrats on wanted And if business, means financial further operational allow your leverage I on could you? ask to could that. what this elaborate just this and ultimately for you

Jeffrey Clementz

for thank and William, that comments. you nice for also question your

purchase put the our want seamless to QX of or optimize checkout in remarks to schedule us, and experience, to one model, we technology which the customers they the online, opening we ahead a which optimize drive can online team a in have our and go into seamlessly to fully pickup as for process car and a a that place so I can to stores. in We test that in QX way have create that paperwork our delivery the have of omnichannel continued leading ahead of serve the customers kudos Moving the really shop. really believe mentioned come allows they to lot continued and complete experience or time,

excellent the we leaders And our them with is working that. giving customers that what omnichannel that teams, and CarLotz decentralize implementing the a with in an store the lower-cost operational choice of really applied And us. that believe did many And we've and there an is business. our associated advantage is further, empowered we job selling them put model team, done for

and reducing goal to conversion rates, our do us So increase staying all path that sales while profitability, our will is to unit told, cost our XXXX. on that our where and to improve in our economics help improve sell-through, positive our

Unidentified Analyst

That's question recent more here how hard you're the what now, to Obviously, in And term. used do, has these Perfect. things car progressed demand near business a helpful. you and are on characterize one backdrop. especially right the seeing weeks? difficult Can quarter in during just through the particularly

Jeffrey Clementz

in in Certainly, depreciation December, very was and soft strong. bet. especially demand QX You was and

place. omnichannel external and we the in that's We're market, that's model a demand think been And reported. month-over-month well that, think demand we've also the put QX. of that solid I new in seeing improving combination but

optimistic the of start that we're it year, feeling about hoping the we're continues. So and

Operator

Fargo. The next Sam Reid question with will come from Wells

Richard Reid

understand the to you there. from, you QX drivers to any But those I target. X,XXX-ish Quick lot numbers? noise GPU us other What there maybe your Lotz walk that in levers are one of X QX was a GPU. through in get say, on bridge let's could

Jeffrey Clementz

Sure. question. Thanks, for Sam, the

some prices QX were the pressure could charge. which what I depreciation, felt we think put on that we in

write-offs overhang. that with associated had also were some inventory We

both so stabilized improvement margins. seeing the then F&I what And front into and QX, our prices on on going we're and are end

contributing those quarter-over-quarter the that to expect. improvement GPU the factors So main are we

Oded Shein

even than of expect the going forward. and on that and acquisition improve consolidating behind that we're marketplace And quarter-over-quarter in continue us all Just is that see to costs already going in QX we in GPU lot going that had results we of between should our the better to in a we in we the was add see to the QX, indicated see burden and better what guidance, going that inventory a in forward. journey QX

Richard Reid

a That's follow-up Maybe super here. helpful.

Just -- on updated breakeven combined now get to what you'll a closed, is more to order count in entity need and to unit you're merger and hit broadly, the ultimately any thoughts that EBITDA?

Oded Shein

haven't do in selling on both shared strategy and update the I tell We it future and the new to the and cost you that marketing model an quarter. structure, can omni we with But reduced may yet. So our G&A.

at EBITDA shared a we of level think all past. So breakeven than the unit can economics we lower an cost. aspects to We get even in

Additionally, us the marketplace our other at of assets, should and the lower things retail technology development help again, there, get number.

Operator

Michael will Baker Davidson. The next question from D.A. come with

Michael Baker

you square you to get to guess your to versus have comments that you're your profitability, the sufficient that, profitability. I additional quarter. that fourth going strategy, And strategy $XX you guess presuming be can will need the is the -- capital down to square your but X? related cash acknowledge you to quarter is I million so get in down to those execute Can cash then to first

any You expect said over be the that for color the But to forward. burn going quarters? should burn we on be coming what the cash won't rate

Oded Shein

good obviously it's question. And a Yes. very

the outlays, top it are for million me our with we total and hub that liquidity let the top and transaction by around Just closures, cash. quarter We year the first of and started somewhere such mind absolutely million. the quarter priority. see in extra the But first focus start and $XXX We some about saying as to had management, cash so integration Board, on. cost rent and cash unusual $XX guided rent

put pressure cash expect see we on going do not forward So but that that on balance. our that cash, was -- to

Michael Baker

costs can prepared quantify remarks, that You were? less on what those color said any onetime or in you -- the how what much

Oded Shein

to that on many million So not guided that, have improved it, the think we improvement those expense reduction talking pretty EBITDA based And expect initiatives costs you but line if to place. we're volume, only loss expect go going that's all done on big million, better so is the a but of away, about and EBITDA harvesting and we $XX million, $XX GPU just $XX haven't we gap. about forward, in also we

stores. to say, we our let's mean point, the And grow here, standing have, that continue starting So to improve omnichannel and execute million that we as with think as sufficient said, by the to $XX cash what we is initiatives. we

continue raise. get we we develop to going profitability the and the talked we're additionally, road believe now tech to in to Jeff to about. And that future. and again, have fund the beyond, what need today. Down in and assets to, hasn't order timing that that But look additional and yet, update The we that's forward been determined we extent for the near

Jeffrey Clementz

top I to that, the for question. on build of wanted Oded, and just you, thank Michael,

As then marketplace, the both where where double future technology really for looking capabilities, which I with development line comment future digital we omnichannel going to the Shift's right operational fundraising, the customers look combination at are and our ahead that is that want are of we forward. market the of headed an the underway is in of and now -- and experience and processes do selling to the on our down kind assets think

right now. we're with on the So happy we're that path very

Operator

will BTIG. from next Fong with Your come question Marvin

Marvin Fong

that kind macro the of up car or you mean, kind what is of prices prices basing this assumptions may your question. in just I the sequential general most kind your guys retail the about you're -- weeks, think of derive But we've a appreciate making comments well. guidance? wholesale And from you I be industry improvement ticking sort trade-ins. about when about I -- just guess seen on of recent up, quarter-to-quarter, of are I in you're providing that environment as inventory

Jeffrey Clementz

terms we're that its conversion the stores, are customers now, our of seeing to period really that same a we're in rates, coming the in built trends, and Yes. our fundamentals that strong from the underlying or making Certainly, our seasonally into we optimizing right a actually foundation. business purchase we've funnel sell-through, but believe and in the we're those coming to way

vast and the or ours, you that. acquire from is car cellular into where As units our direct know continuing customers majority our you strength trading the of as mentioned, capability lean and flow we're from we to of the

to most of improvement on we capabilities. we the positioned of are So within kind And that. navigate the moves, basing actually as certainly, our well sequential market are

Marvin Fong

And Great. is, mentioned quarter follow-up think I looking I guess that you better. my question first

too way? but business? think being occurring strategy? to Or shift.com say? to it that standpoint possible is break by a that in the some mentioned the entirely new down conversion Or I from Is influenced you is is omnichannel core also, of that it early things

Jeffrey Clementz

at of business our kind our an omnichannel at look is We as -- business as -- we business. look

pull that X to drive strength to fully in So the and apart, seeing the online it's a advance. consumers stage for in and and to hard want in we're that buy want online test to those person and purchase come

really us We're board. now. working the well for seeing across the it's So right model

Marvin Fong

last Okay. Great. question. maybe one And

little I assuming you on I'm the didn't think change, a same. cars. I it's about so strategy, new say the But think, is more any emphasis value

sort Is had response over what to of I still think XX%. market? in -- said might that seeing want in that the past, your Or you mix you true? is that the change in you're

Jeffrey Clementz

car and for well. consumers place the that are as really the reconditioning it's in a range the from rates that be. great mix a to a of core think XX% to us in vehicles, We're place market. that for our the is interest prop of looking Yes, value and throughput seeing optimal car terms we still been XX% mix And that appreciation an value it's a given

is switch the we're well that were get place think So at. too economy where I or year, especially don't we target. much consumers we XX-XX an below that, it. We to and positioned really too the I and made is that really last as our We changing, that started that our much thankful above for are think think that even want optimal

Operator

would our This sir. over like concludes conference ahead, for closing remarks. the to CEO, session. question-and-answer back any turn Jeff Clementz I to Mr. go Please

Jeffrey Clementz

Thank X with you. like I'd thoughts. close to

Shift shine we First, performance and our dedication. none and business. to without financial the overall thank every work right as team. our restructured economics even improve I'd continues with of that believe is we've hard to the unit business. this their The the of possible decisions second, all the like faced for we've made And person to each and team challenges the we

business It economic was industry the our evolving align better structure and XXXX in not sales easy to to and shrink to the cost environment.

our place we difficult these after throughout benefits experience improve the the while now decisions, experience. However, are in performance to customer continuing provide year, a to showing our omnichannel of amazing

to for Thank and even to speaking place, our groundwork lay leveraging We in assets all focus our with the you look we And is soon. today. and short-term for the joining on growth, continue growing you future forward again though including develop marketplace. us current

Operator

has you presentation. today's attending conference for The concluded. now Thank

disconnect. now may You

Shift (SFTGQ) 28 Mar 232022 Q4 Earnings call transcript