Good day, and welcome to the Shift Technologies, Inc. Fourth Quarter 2022 Earnings Conference Call. All participants will be in a 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 touch-tone 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, welcome to the Shift Technologies fourth quarter and full- year 2022 earnings call. Joining me on the call today is CEO Jeff Clementz and CFO Oded Shein. During our remarks, we will make some forward-looking statements which represent our current judgment on what the future may hold. 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. Good afternoon, everyone. 2022 was 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 CarLotz, which closed in December, bolstering our balance sheet and bringing omni-channel capabilities. We reduced our geographic footprint both at Shift and CarLotz and enacted other cost-cutting measures such as reducing operating and corporate expenses, in turn, lowering headcount. These were not easy decisions. 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 units 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 CarLotz merger, on 9 December 2022, we closed the transaction and immediately got started on integration by eliminating duplicative costs and roles. It was a difficult decision. In early February, we decided to exit CarLotz presence on the East Coast. We have also shut down the Downers Grove, Illinois, location in order to focus on our core West Coast markets. The remaining CarLotz 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 CarLotz integration and strategic moves to right-size our SG&A are largely behind us. While we remain disciplined on G&A and tightly 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's customers to shop for the vehicle the way they want. As part of our shift to an omni-channel 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 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? Thank you, Jeff. Good afternoon, everyone. I will first go over our fourth quarter financial results and then review our guidance. For the fourth quarter of 2022, total revenue was $66 million. This includes 2,520 retail units and 354 wholesale units. Adjusted GPU of $1,041 came in below our expectations, primarily due to sell-through of age inventory, steeper than expected market depreciation and below capacity reconditioning activity. We expect the fourth quarter to be the low point for GPU and expect sequential improvement throughout 2023. Additionally, we were pleased that F&I remained relatively flat sequentially at $1,334 per unit. Adjusted SG&A was $28.1 million, down from $39.4 million in the previous quarter. The decrease was primarily due to lower selling and marketing expenses as a result of the restructuring. Adjusted EBITDA loss was $25.5 million. Please keep in mind that these results include approximately three weeks of CarLotz operations. Excluding the merger, both revenue and adjusted EBITDA loss came in range of the guidance provided on our third quarter call for Shift standalone. Our adjusted EBITDA performance, despite the GPU shortfall, speaks of the G&A cost actions we have implemented over the past few months. We ended the fourth quarter with $110 million of total cash. The increase quarter-over-quarter was primarily due to the closing of the CarLotz merger and working capital benefits, partially offset by our net loss. As of December 31, 2022, we had 17.2 million shares outstanding. The share outstanding at year-end have been retroactively adjusted for the one for 10 reverse stock split enacted on 8 March 2023, to bring Shift into compliance with the minimum bid price requirement for its listing on Nasdaq. As of 22 March 2023, we were back in compliance with the minimum bid requirement. Turning to our first quarter guidance. During the first quarter, we continued to experience some disruption to the business as we integrated CarLotz and fully established the omnichannel experience. We are expecting sequential improvement from the fourth quarter, but the first quarter does not represent a normalized quarter of our updated omnichannel strategies. For the first quarter, we are expecting revenue in the range of $56 million-$58 million, adjusted GPU in the range of 1,600-1,800 versus 1,681 last year, and adjusted EBITDA loss in the range of $24 million-$26 million versus a loss of $46.6 million last year. For adjusted SG&A, we expect to see further sequential reductions to end the year with annualized adjusted SG&A between $85 million and $95 million. We expect to end the first quarter with approximately $70 million of cash and cash equivalents. During the first quarter, other uses of cash included transaction costs associated with hub closure, including rent and timing of accounts payable. We do not expect a similar impact to cash from these items in future quarters. From an operating perspective, we expect cash usage to decrease in future quarters as we have the CarLotz integration behind us and other cost reductions initiatives are fully realized. I'd now like to open the call for questions. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Brian Nagel with Oppenheimer. Please go ahead. Hi, good afternoon. This is William Dawson on for Brian Nagel. Thanks for taking my question. Thank you for the details so far. In Q4, you successfully closed the merger and completed the transition to the omni-channel model. So congrats on that. I just wanted to ask if you could elaborate further on what this means for your business. What operational and financial levers could this ultimately allow you? William, thank you for that question and also for your nice comments. Moving to the omni-channel model, which we put in place in Q4 and have continued to optimize in Q1, really allows us, as I mentioned in the opening remarks, to serve our customers the way that they wanna shop. We believe we have a leading online experience, which kudos to our technology team, have continued to optimize the checkout process and create a really seamless experience so that customers can go ahead and fully purchase the car for pickup or delivery online, or they can complete a lot of the paperwork ahead of time, schedule a test drive seamlessly, and come into one of our stores. We really believe that giving customers that choice is an advantage for us. Further, working with the CarLotz team, we applied a lower cost selling model that is associated with the omni-channel business. What we've done there is decentralized many of our teams, put them in the store and empower them, and our operational leaders did an excellent job implementing that. All told, that will help us to improve our conversion rates, improve our sell-through, increase our sales, and do that while reducing our cost and staying on our path to profitability, where our goal is to positive unit economics in 2023. Perfect. That's helpful. Thank you. One question, just more on the near term. Obviously these things are hard to do, especially during a difficult backdrop. Can you characterize what you're seeing in the used car business right now? Particularly, how has demand progressed through the quarter, and here in recent weeks? You bet. Certainly, in Q4, and especially in December, demand was very soft and depreciation was strong. I think that's been well reported. We're seeing solid demand and improving demand month-over-month in Q1. We think that that's a combination of the external market, but also the new omni-channel model that we've put in place. We're feeling optimistic about the start of the year, and we're hoping that it continues. Great. Thank you very much. Thank you. The next question will come from Sam Reid with Wells Fargo. Please go ahead. Thanks so much, guys, for taking the question. Quick one on GPU. What are the levers that get you from, you know, let's say, $1,000-ish GPU in Q4 to your Q1 target? Understand there was a lot of CarLotz noise in there. Could you maybe walk us through any other drivers to bridge those two numbers? Thanks. Sure. Thanks, Sam, for the question. I think what we felt in Q4 were depreciation, which put some pressure on the prices that we could charge. We also had write-offs that were associated with some inventory overhang. Going into Q1, what we're seeing are stabilized prices, and then improvement both on the front end and on our F&I margins. Those are the main contributing factors to the GPU improvement quarter-over-quarter that we expect. Gotcha. Yeah. Just. Just a quick. Just to add that, you know, even in our guidance, we already indicated we're gonna see better results in Q1 than in Q4. A lot of the cost and, you know, and the GPU burden that we had in consolidating all of the inventory between the acquisition and what was going on in the marketplace in Q4 is behind us. We should see a better journey going forward. We expect to see that continue and improve quarter-over-quarter going forward. No, that's super helpful. Maybe to follow up here, you know, more broadly, you know, now that you're a combined entity, you know, and the merger's closed, you know, any updated thoughts on what unit count you'll need to get to in order to ultimately hit break even EBITDA? Thanks. We haven't shared an update to the model yet. We may do it in a future quarter. I can tell you that with the new omni strategy and our reduced cost structure, both on selling and marketing and G&A, all aspects of cost, we think we can get to break even unit economics even in EBITDA at a lower level than we shared in the past. Additionally, the development of our technology assets, marketplace and other things, should help us get there again at a lower retail number. No, that's super helpful. Thanks so much. The next question will come from Michael Baker with D.A. Davidson. Please go ahead. Hey, thanks. Can you square the comments that you acknowledge that you're gonna need additional capital to get to profitability, but you have sufficient cash to execute your strategy? Presuming your strategy is to get to profitability, I guess, can you square those two? I guess related to that, your cash will be down $40 million in the first quarter versus the fourth quarter. You said, you know, that won't be the burn rate going forward, any color on what we should expect for the cash burn to be over the coming quarters? Thanks. Yeah. Thank you. It's obviously a very good question. Just let me start by saying that cash and liquidity are a top-of-mind focus for the management, the board. We see it as absolutely our top priority. We started the year with about $110 million in total cash. We guided the first quarter to somewhere around $70 million. The first quarter had some unusual cash outlays such, you know, transaction costs and hub closures, integration and rent, extra rent and so on. That put pressure on cash. We do not expect to see that going forward on our cash balance. What we have Right. You said that in the prepared remark. Any color on how much less or what. Can you quantify what those one-time costs were? We haven't done that, but if you think about it, EBITDA, guided loss is $24 million-$26 million, and we're talking about $40 million, so that's a pretty big gap. Okay. Just going forward, not only do we expect many of those costs to go away, but also we expect improvement on the EBITDA line based on better volume, improved GPU, and harvesting all the expense reduction initiatives that we have in place. Standing here, let's say, with $70 million at the starting point, we think that we have, as we said, sufficient cash to execute the initiatives. What we mean by that is to continue to grow and improve our omni-channel stores, and additionally, continue to develop the tech assets that Jeff talked about. Down the road, in order to get to profitability and beyond, we now believe that we're gonna need additional fundraise. The extent and the timing hasn't been determined yet, and we look forward to, again, update that in the, in the near future. That's what we have for today. You know, Oded, I just wanted to build on top of that. Thank you, Michael, for the question. You know, as we look ahead to future fundraising, I do wanna kind of double down on the comment that we think that Shift's omni-channel selling capabilities, the combination of our technology and our operational assets and processes, and then the future development of the Marketplace which is underway right now are both really in line with where the market is headed and where digital customers are looking for an experience going forward. We're very happy with the path that we're on right now. Got it. Appreciate it. Thanks. The next question will come from Marvin Fong with BTIG. Please go ahead. Great. Good evening. Thanks for taking the questions. I guess, just kind of a macro question. I mean, I think in recent weeks, we've seen wholesale prices up, retail prices maybe ticking up as well. I appreciate you guys, you know, derive most of your inventory from trade-ins. Just, you know, is this the environment that you're sort of basing your comments on about, you know, improvement quarter to quarter? Or what kind of assumptions are you making about the car industry in general, when you're kind of providing that sequential guidance? Yeah, certainly we're in a seasonally strong period right now, and we're seeing those same trends. We actually believe that the fundamentals that we've built into the business in terms of our conversion rates, our sell-through, the funnel that we're optimizing from customers coming in and making its way to a purchase or coming to our stores, are really the underlying foundation. As you know, and as you mentioned, the sell-your-car flow, or our trading capability where we acquire the vast majority of our units from direct from customers, is a strength of ours, and we're continuing to lean into that. We actually are basing most of our sequential improvement on the capabilities. Certainly as the market kind of moves, we are well positioned to navigate within that. Great. Thanks for that, Jeff. I guess my follow-up question is I think you mentioned that, you know, first quarter looking better, I think you mentioned from a conversion standpoint also. You know, is that entirely occurring in the core shift.com business or is some of that, you know, being influenced by the, by the new omni-channel strategy? Is that possible to break things down that way, or is it too early to say? Yeah, we look at our business as an omni-channel business, so it's hard to pull the two apart, and we're seeing strength in consumers that want to buy fully online and those that want to come in person, and for a test drive and to stage the purchase online in advance. It's really across the board we're seeing the model working well for us right now. Okay, great. Maybe one last question. I think, you didn't say any change. I'm assuming it's about the same, but, you know, the new strategy I think is a little more emphasis on value cars. I think your mix, you had said in the past you want over 50%. Is that still true, or might that change in response to sort of what you're seeing in the market? Thanks. Yeah. We still think that the 50% value car mix and 50% core car mix is a great place for us to be. We're seeing that in terms of a value prop to our consumers that are looking for a range of vehicles given the interest rates and the appreciation that has been in the market. And it's really an optimal place from a reconditioning throughput as well. I think that that is our target. We don't wanna get too much above that or even too much below it. We think that the 50/50 is an optimal place, and I think we're really thankful that we made that switch last year, especially as the economy started changing, and we were really well-positioned for where our consumers were at. That's great. Thanks very much, Jeff. Thank you, Mark. This concludes our question and answer session. I would like to turn the conference back over to CEO, Mr. Jeff Clementz, for any closing remarks. Please go ahead, sir. Thank you. I'd like to close with two thoughts. First, none of this is possible without our team. I'd like to thank each and every person for their hard work and dedication. The Shift team continues to shine even with all the challenges we face as we've restructured our business. Second, we believe that we've made the right decisions to improve the unit economics and the overall financial performance of the business. It was not easy to shrink the business in 2022 to better align our sales and cost structure to the evolving industry and economic environment. However, after these difficult decisions, we are now in a place to improve our performance throughout the year, showing the benefits of our omni-channel experience while continuing to provide amazing customer experience. Even though our short-term focus is on growing and leveraging our current assets in place, we continue to develop and lay the groundwork for future growth, including the marketplace. We look forward to speaking with you again soon. Thank you all for joining us today. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.