Shift Technologies, Inc.

Good day and welcome to the SHIFT Technologies Incorporated fourth quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 touchtone phone. And 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 Ms. Susan Lewis, Vice President of Investor Relations. Please go ahead, ma'am.

Good afternoon and welcome to the Shift Technologies fourth quarter and full year 2022 earnings call. Joining me on the call today is CEO Jeff Clements and CFO Oded Schein. 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 statements. 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, Susan, and good afternoon, everyone. 2022 is a year of significant change for SHIFT. Given auto industry and capital market dynamics, we adjusted our strategy to prioritize balance sheet health, reduce cash burn, and accelerate our path to profitability. To that end, over the past several months, we have rapidly executed a number of strategic initiatives in a short period of time. This included our merger with Carlos, which closed in December, bolstering our balance sheet and bringing omni-channel capabilities We reduced our geographic footprint, both at Shift and Carlos, and enacted other cost-cutting measures, such as reducing operating and corporate expenses, in turn, lowering headcount. These were not easy decisions, but our teams have done an incredible job to continue innovating and executing throughout the change, and I can't thank them enough for all their hard work over the past few months. Oded will cover our financial results shortly. But let me just comment that in the fourth quarter, excluding the impact of the December acquisition, both revenue and adjusted EBITDA loss came in range of the guidance provided in our third quarter call for SHIFT standalone. Before I turn to our strategic priorities, I want to emphasize that cash usage and maintaining balance sheet health is our top priority. We expect sequential improvement throughout 2023 in unit sold, unit economics, and EBITDA. We also expect our cash use to moderate significantly in the coming quarters. We acknowledge the need for additional capital to get to profitability, but we believe that based on our current outlook, we have sufficient cash to execute our strategy. We are actively exploring a variety of avenues to maximize shareholder value and to fund future business needs. Turning to our first strategic priority, achieving positive unit economics by expanding GPU and leverage in sales and marketing. while tightly controlling G&A expenses. We believe that our work in the second half of 2022 and first quarter of 2023 has adequately adjusted SG&A to the size of the company today. Starting with the CarLots merger. On December 9, 2022, we closed the transaction and immediately got started on an integration by eliminating duplicative costs and roles. With a difficult decision, in early February, we decided to exit CarLots presence on the East Coast. We have also shut down the Downer Grove, Illinois location in order to focus on our core West Coast markets. The remaining car lots location in Pomona, California is where we have the most operating expertise, logistical and brand awareness leverage, and ability to scale. We now have three markets that serve Los Angeles, the Bay Area, and Portland. Turning to the full company, while difficult, we reduced headcount by approximately 30% in the first quarter, In addition to corporate roles, the majority of reductions were due to our move to decentralized sales organization, which occurred in February, which I will discuss in just a moment. We believe that the car lots integration and strategic moves to right-size our SG&A are largely behind us. While we remain disciplined on G&A and tiling control costs, our focus is on driving leverage through revenue and unit sales growth. This leads to our second strategic priority, increasing penetration in our West Coast markets to grow retail units sold. At Shift, we believe that we have a leading technology-forward omni-channel experience. Consumers want the convenience of being able to browse and purchase online, but also want the flexibility of being able to view vehicles and research their purchase in person. We have created a model that enables Shift customers to shop for the vehicle the way they want. As part of our shift to an omnichannel model, as mentioned earlier, we moved to a decentralized sales organization. Going forward, local teams will take on more ownership of individual deals and will be assisted by a smaller central organization. This model will decrease handoffs and improve the overall customer experience, while simultaneously increasing efficiency and cutting costs. Results so far have been positive, with the new sales model lowering our cost per unit sold. Additionally, we've seen positive results from our new buyer checkout and dashboard experience that we talked about last quarter, including increased conversion rates and lower CAC. Turning to our third strategic priority, which is to create a differentiated auto marketplace. Partner dealers on SHIFT's marketplace will strategically participate in e-commerce to grow their market share margins and develop long-term relationships with digital customers. Shift customers will benefit from the Marketplace's expanded assortment with the same seamless trusted experience. We will continue to optimize and improve our Marketplace platform and expect that we will fully launch later in 2023. In closing, I believe two things to still be true today as when I first joined the company. First, we believe the auto industry as a whole is shifting from offline to online as consumers increasingly prefer digital-first transactions. Second, we believe Shift has a differentiated technology asset to power an exceptional omnichannel experience. Shift has repositioned the business to remain on a path to profitability by 2024. I'd now like to turn the call over to Oded to review financial results and guidance. Oded?