Shift Technologies, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to SHIFT Technology's second quarter of 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during this session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker for today, Henry Bird, Vice President of Strategy and Finance. Sir, you may begin.

Henry Bird Good afternoon and welcome to the SHIFT Technologies second quarter 2021 earnings call. Joining me on the call today are co-CEOs Toby Russell and George Harrison and CFO Oded Shai. During our remarks, we will make some forward-looking statements which represent our current judgment on what the future may hold. And while we believe these judgments are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks, and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statement. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statement. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, after this conference call. During the course of the call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. With that said, I will now turn the call over to Toby.

Toby Lowe Thanks, Andrew. Good afternoon, everyone. In the second quarter, our business exceeded all expectations. Through hard work of our team, we delivered incredible performance across key metrics, $155 million in revenue representing year-over-year growth of 377%, 5,871 e-commerce units sold, adjusted GPU of $2,809, and significant improvements and our operating leverage. With these results, which greatly exceeded the guidance that we gave on our first quarter call and strong momentum into Q3, we are now raising our full-year revenue guidance to between 575 and 595 million. At the midpoint, this represents a 3X increase over last year, or nearly 50% more revenue than we had originally anticipated for 2021. We achieved these strong results while continuing to provide exceptional service to our customers in a very unusual environment brought about by COVID, and continuing to drive toward achieving our mid- and long-term strategic goals. These goals will be the core focus of the rest of my prepared remarks today, and afterwards, Oded will discuss the financial results and guidance in greater detail. As we've discussed before, we have several key strategic focus areas, investment into which we'll set shift up for long-term success. These include deepening market penetration within our existing markets, expanding our geographic footprint, building lasting brand awareness, and driving efficiencies in our full-stack operations while improving unit economics. Once again, our growth this quarter was primarily driven by the strength of our most mature regions along the West Coast from San Diego up through Portland. These five legacy markets in which we had operated prior to 2020 accounted for nearly all of the 377% year-over-year growth in the quarter. At the same time, we are encouraged by what we're seeing in newer markets, such as Seattle and our Texas markets, and Las Vegas, where at this time we are buying but not yet selling cars. the newest markets will be valuable contributors to our sustained growth in 2022 and beyond. One of the key drivers of growth across all of our geographies has been our new marketing strategy that we've talked about at length in prior calls. This campaign has proven to be highly effective, supporting immediate and midterm sales efforts, while also building durable, non-perishable brand impressions for the long term. In our May call, we set the expectation to reduce CAC by roughly half in Q2. We achieved this with a 46% CAC decrease quarter over quarter, with total marketing spend also decreasing sequentially, despite accelerating unit sales growth. Given the momentum we are seeing in our business and the effectiveness of our branding effort campaign, we will continue to prioritize and in some cases accelerate investment in building our brand. As of late Q2, we are now in a position to utilize powerful third-party data tools to measure the impact of our branding efforts on shifts aided awareness among customers. We believe that with the right investments over the next six to eight quarters, we can drive faster awareness growth than our peer set has when they embarked on branding growth and do so at a lower total spend level despite a more expensive COVID-driven marketing environment. That, in turn... will drive deeper market penetration, support growth in front-end GPU, and help new markets grow with faster ramp in their earliest quarters. Turning to operations, we continue to see strength across business functions. While many in the industry struggle to find supply, Shift was able to grow our sellable inventory nearly 40% throughout the quarter, with 93% of cars sourced in Q2 coming direct from consumers and partners. Our in-house reconditioning facilities did an excellent job keeping pace with the growing supply and currently can process over 600 cars per week without additional staffing, which is more than sufficient to meet our 2021 inventory needs. Q2 saw some of the most unusual used car market behavior that the industry has seen in decades, and certainly in the seven and a half years since shift has been in operation. A confluence of factors caused multi-week steep pricing appreciation, rather than the depreciation the industry normally sees across all used car cohorts. Market tailwinds benefited the industry and helped us achieve the $2,809 GPU overperformance. ODID will provide additional color on the drivers of that and overall unit economics. That said, our nearly 5x revenue growth year-over-year significantly outpaced that of the broader market. Given this momentum, based on the branding and operational investments we are making, we are positioning to continue significant market share growth in existing and new markets for the rest of the year and beyond, regardless of market pricing dynamics. Regardless of how the market moves in the short term, our strategy, technology, and operational excellence is well positioned to respond appropriately to drive growth while delivering on our mission of making car purchase and ownership simple and trustworthy for long-term. I would like to thank all of our employees at Shift for their hard work and dedication to make these great results possible. Our people stepped up and delivered exceptional results. We had a great quarter, and we are excited for the growth ahead in 2021. I will now turn the call over to Oded to go over our second quarter financial results as well as provide guidance.