Shift Technologies, Inc.

Good afternoon and welcome to the SHIFT Technologies third quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Cheryl Liu, Manager of Corporate Strategy. Please go ahead.

Good afternoon and welcome to the Shift Technologies third quarter 2022 earnings call. Joining me on the call today is CEO Jeff Clements and CFO Odette Shimes. 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 statements. We undertake no obligation to publicly update any forward-looking statements, 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 Jeff.

Thank you, Cheryl, and good afternoon, everyone. I'd like to start out by thanking the SHIFT employees for their hard work and execution during the third quarter. It was no easy task to rapidly pivot to our new operating plan, but the team did a great job meeting the challenge. I'm incredibly inspired by the way our team pulled together and immediately set out to the task at hand, giving our customers a simple, fair way to buy used cars. As we talked about on our last call, the third quarter was a transition period for the company as we pursued our new strategy. The new operating plan prioritizes accelerated profitability and lower cash burn, though at lower unit volumes. As a reminder, the actions we took during the third quarter include the following. Streamlining sales through our online checkout channel and eliminating test drives. Optimizing our inventory mix and assortment to favor value vehicles, which have a more favorable front-end GPUs and overall profitability. Refocusing our physical footprint to our West Coast markets, thereby rationalizing from 10 hubs to three. Reducing frontline roles in corporate positions by about 60% across remote and hub locations. and reducing corporate overhead costs. After tireless work during the quarter, our new operating plan is now in place and we have the foundation to execute. The third quarter transition does impact the financial results we're reporting today, but we expect the benefits to be evident in the fourth quarter results and beyond. Oded will discuss the third quarter results and guidance shortly. Turning to our strategic priorities. First, we prioritize achieving positive unit economics from GPU expansion and from leverage in selling and marketing while tightly controlling G&A expenses. As stated earlier, we have shifted our inventory mix to skew towards value vehicles. Now over half our vehicles are considered value, which we define as vehicles older than 8 years old or over 80,000 miles. As we've talked about, sell-through on those vehicles are consistently higher and have greater front-end and total margins. In this environment with rising interest rates and consumer affordability headwinds, we believe that consumers will naturally be drawn to more value-oriented vehicles when making a car purchase in the coming months. Second, increase our penetration in West Coast markets to grow e-commerce units sold. As you know, we eliminated test drives in the third quarter and moved our focus to an online checkout channel. Not only does the move improve profitability, but as expected, we've seen strong consumer response, as more and more people are opting for a true e-commerce offering. We successfully rationalized our hubs down to three to focus on our West Coast markets, although we're still selling and fulfilling cars to anywhere in the U.S. The team continues to focus on product innovation as we advance our mission of making car purchase and ownership simple. We rolled out several exciting product updates throughout the third quarter, including a new buyer checkout and dashboard experience that allows the customer to see what needs to happen next to complete their purchase, and undergo those actions themselves, such as uploading required documents. We also made a number of other improvements to the online shopping and checkout experience, including substantial modernization of the vehicle detail page, new personalized shopping experiences, and a more interactive price, payment, and shipping calculator. Our third priority was to scale our marketplace business. In Q2, we launched a beta version of the shift marketplace powered by FAIR, with a number of inventory listings from our dealer partners in the greater Los Angeles area. We've learned a tremendous amount from the beta test and plan to relaunch in the first half of 2023 as we optimize and improve the platform. The team continues to build out the shopping experience, and we will add additional F&I partners and customer shopping options. Additionally, over the past year, we've heard from many dealers that have been very impressed with SHIFT's Sell Your Car flow, which enables SHIFT to source greater than 95% of our inventory directly from consumers. We do this by providing instant quotes and by enabling the customer to conveniently sell their car to SHIFT at their home or by bringing it to our hub. Given this dealer interest, we've created and are launching the Auto Acquire platform that allows dealers to embed SHIFT Sell Your Car flow into their website. We are also pleased to announce a significant partnership with Off-Lease Only, a terrific dealership group based in Florida. We will initially focus on optimizing our platform for off-lease only sell your car flow, which will launch in Q4, and then open up the platform for additional dealer partnerships. We believe the combined value proposition of the auto acquire platform and the shift dealer marketplace will provide significant value to dealer partners across the U.S. And finally, we're looking forward to integrating the shift in car lots businesses upon the close of the merger. to create a profitable, leading, omnichannel-used auto retailer. The executive team and board of directors remain excited by the pending merger and believe that it will create value for both Shift and CarLot's shareholders. At Shift, we are building a powerful ecosystem. Car sellers and buyers love our ever-evolving e-commerce capabilities. In the coming months, we will continue to expand our ecosystem by becoming a leading e-commerce platform that enables our dealer partners to build deeper, more engaging relationships with their customers, and in doing so, will increase the access to high-quality inventory to buyer leads and sales. We will then further build out our platform by adding the CarLot stores and capabilities to create a leading omni-channel retail customer experience. I will now hand it over to Oded to review our financials.