Operator: Good day and thank you for standing by. Welcome to the Shift Technologies’ First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

[Operator Instructions] I would now like to hand the conference to your speaker today, Henry Bird, Vice President of Strategy and Finance. Please go ahead.

Henry Bird: Good afternoon, and welcome to the Shift Technologies first quarter 2021 earnings call. Joining me on the call today are Co-CEOs, Toby Russell and George Arison; 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.

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 this 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 Russell: Thank you all for joining us today. I am excited to report today on a fantastic quarter, which has set Shift up for an incredibly strong 2021. In Q1 with focused execution on our business plan, we drove record financial results, including revenue of $106 million, up 254% year-over-year and adjusted GPU of $1,690, up over 3x sequentially from the fourth quarter. Both measures are above the targets, we set out on our last call.

We achieved this with an adjusted EBITDA margin that was also better than we had previously implied in our guidance. Given Q1 success, our continued confidence in the strategy we previously laid out and our success in executing our key initiatives, we are raising our full year 2021 guidance across all key metrics, which Oded will outline in detail later on this call. Our previously communicated growth strategy laid out three core drivers for our growth, deepening penetration within our existing markets, enhancing our ancillary product offering and expanding our geographic footprint. This year, we are successfully delivering on all of these. We expanded our reconditioning capabilities, which has enabled us to drive both growth and higher adjusted GPU results.

Additionally, our national brand awareness campaign is helping us drive strong growth. I'll take a moment to walk through each driver in more detail. In the first quarter, we delivered extraordinary revenue growth, more than triple last year's level, including strong sequential growth quarter-over-quarter. We also tripled our e-commerce unit sales and nearly all of this growth came from the same six West Coast core markets we had last year. Given our full spectrum inventory capabilities and our unique model of test drives delivered to the consumer's home.

We see a significant opportunity to further deepen our penetration and grow sales volume in existing service territories by continuing to capture more share. And as we scale, we continue to invest in our technology platform to support our accelerated growth model and industry-leading customer experience. Our core market growth is complemented by the new marketing strategy we implemented in mid-February. This strategy supports immediate and mid-term sales efforts while also building durable, non-perishable brand impression, both within these markets and beyond to benefit Shift now and for the long-term. The immediate positive results are extremely strong, as evident by outperformance on volume and revenue in the latter part of Q1 and our strong guidance for Q2, which Oded will detail in a moment.

Given the success, we will continue our investment in consumer brand building. And as we've discussed before, the full benefits of this strategy will come in the months and years ahead. As Q1 marks the changeover from our old marketing strategy to our new marketing strategy, it also marked the high point of our 2021 advertising expense due to overlapping spend between our previous strategy and the new one. We expect our total Q2 advertising spend to be substantially lower than Q1, reducing our CAC roughly in half. And we expect continued improvement in CAC through the second half of the year.

Q1 saw an historic supply shortage in the new and used car market. One of the core differentiators of our business model that allowed us to grow despite significant lack of supply across the industry is that we sourced the vast majority of our cars directly and indirectly from consumers, 87% in Q1. This model mitigates our risk related to auction and wholesale market volatility that impacts other industry players. Our tremendous revenue and volume growth was coupled with strong improvement in adjusted GPU, which grew to $1,690 in Q1, of more than 3x improvement over Q4. In November 2020, we outlined actions to improve and expand our in-house reconditioning operations by mid-year 2021.

We succeeded in accelerating that timeline significantly and achieved our goal in early Q1. As anticipated, bringing our in-house reconditioning volume back to target levels was the primary driver in our improved front-end GPU in Q1. And that improvement will sustain going forward. Additionally, reconditioning improvements not only supported strong GPU growth, but also enabled us to increase our sellable inventory position. 93% from beginning Q1 to beginning Q2, which has allowed us to efficiently meet heightened consumer demand, even in a supply constrained market.

Concurrently with strong improvements on the front-end, our back-end GPU also performed strongly, in light of our continued strategic focus on expanding our F&I offering and delivery. F&I GPU reached a record $938 per unit, representing growth of 58% year-over-year on our path to our midterm goal of $1,200 to $1,300 per unit in F&I gross profit. This growth was primarily driven by the continued investments we've made in our consumer experience and product delivery, resulting in improved attach rates across products. There is still significant upside here and we are excited by the opportunity to have F&I expand our GPU margins over time. Turning to geographic expansion.

Earlier this week, we announced that Austin and San Antonio, Texas had been converted to our full omni-channel offering, including test drives brought to consumers' home within 145 miles of each city. Additionally, last week we launched our car acquisitions in the Las Vegas metropolitan region. This is our first expansion into Nevada and we are now able to purchase vehicles directly from consumers in 11 super regions across the western half of the United States. In addition to selling cars direct-to-consumers across the whole of the U.S., our very strong first quarter results and Q2 guidance are evidence that our strategy is working. Digital adoption in the used car market is still in its infancy with tremendous opportunity to capture share from offline sales.

By executing against our plan, we are positioning Shift to be a leader in the automotive e-commerce transformation. Importantly, I would like to thank our Shift team members for their continued hard work and dedication, especially in overcoming the challenges brought about by the pandemic environment to deliver record results. I will now turn the call over to our CFO, Oded Shein to review our financial results. As you recall, Oded joined Shift in March and brings extensive public company financial experience, including roles as CFO of both Stage Stores and The Fresh Market. Oded is also a Board Member and Chair of the Audit Committee at Conn's HomePlus.

Oded?

Oded Shein: Thank you, Toby; and good afternoon, everyone. It is a pleasure to speak to you for the first time today since joining the company in March. I joined Shift team because I see the long-term opportunity to bring the used car market online and significantly improve the consumer experience. I believe Toby, George and the entire Shift team have the right strategy in place to capitalize on this opportunity. And I look forward to achieving our long-term strategic priorities.

I will first review our Q1 results and then address our guidance for the second quarter and the fiscal year. Total revenue for the first quarter grew to $106 million up 254% year-over-year. Total units sold were 5,979, an increase of 181% with the e-commerce channel growing to 4,452 units up 213%. E-commerce average selling price was nearly $20,000, 30% higher than a year ago. The increase in ASP was due to change in our inventory mix, as we increased purchasing and selling highline and luxury cards, which have historically been strong performance for Shift, and were prioritized in 2020.

We also decreased the value of segments slightly as a percentage of total sales, while growing it in aggregate to support our reconditioning team's efforts to increase throughput. Adjusted gross profit increased to $7.5 million from $3.5 million in the prior year period. Adjusted gross profit per unit was 1,690, significantly higher than our expectations and sequentially up from $514 in the fourth quarter of 2020. This sequential increase was in large part due to the return to in-house reconditioning operations as Toby has discussed. SG&A was $50.2 million in the first quarter versus $13.4 million a year ago, reflecting the investments we made to support our strategic priorities, including a meaningful growth in headcount to meet consumer demand and enhancing key leadership positions.

Marketing investment also increased primarily due to our new brand marketing initiatives, expenses were also up year-over-year due to public company costs, including stock-based compensation of $8.2 million versus $0.3 million last year. Adjusted EBITDA for the first quarter was a loss of $34.4 million versus $9.7 million a year ago. Please note that the Q1 EBITDA loss was within our stated guidance range. Now turning to the balance sheet and cash flow. We ended Q1 with cash and cash equivalents of $177 million.

We also had approximately $43 million in net inventory after giving effect to our flooring line of credit. Cash flows for the quarter declined by $56.8 million from year end, as we invested $25.2 million purchasing cars into inventory to support growth and meet customer demand. The accounts receivables, also increased by $12.8 million due to a timing shift in our collecting process that is expected to reverse during the fiscal year. As the result of this impact to working capital in Q1, the cash used for the quarter was higher than we expect to use in future quarters. Given the current cash balance, we have a strong liquidity position.

As we have said in the past, we are always evaluating our liquidity and capital management options to ensure that we are able to continue our high growth rate into the future and achieve operating scale and strong profitability Next, our guidance for the second quarter. We expect total revenue for the second quarter to be in the range of $120 million to $130 million, 270% to 300% higher than Q2 last year. Our adjusted GPU is expected to be between $2,000 and $2,200, reflecting our internal improvement in reconditioning capabilities and benefits from favorable appreciation in car prices that we have experienced since March. We expect adjusted EBITDA loss for the quarter to be in the range of $28 million to $31 million. The midpoint of this range implies an adjusted EBITDA margin loss of 23.6%, a significant sequential improvement to Q1 due to our improved gross profit and reduction in marketing costs.

Based on our strong year-to-date results and improved operational execution, we are again raising our annual guidance for 2021 across all metrics. We expect total revenue to be in the range of $480 million to $520 million, an increase of 145% to 166% year-over-year. And we expect to sell 21,000 to 23,000 e-commerce cars, a growth exceeding 120%. We are raising our full year expectation on adjusted GPU to exceed $1,800 an increase of $200 per unit compared to our previous guidance. This increase is driven by our higher than expected Q1 results and the Q2 expectation I just discussed.

This guidance is also based on the possibility that the favorable car prices we enjoyed since March may not continue for the rest of the year. Finally, as a result of the above expectations, we now project our EBITDA loss margin for the year to be better than 24%. I will now turn the call back over to George for closing remarks.

George Arison: Thank you, Oded and Toby. We're extremely pleased with our results for the first quarter, as we outperformed expectations for revenue, adjusted GPU and EBITDA margin due to immediate benefits from our new branding strategy and a dramatically improved reconditioning throughput.

We have great inventory and awesome momentum heading into Q2 and the remainder of 2021, which positioned us to far exceed the revenue growth targets discussed when we became a public company last fall, while delivering growth with improved operational leverage and strong gross profit. We believe that Shift is uniquely positioned to be a leading and transformative e-commerce platform for auto sales and our performance this year is setting us up well to achieve this goal. Operator, we are now ready for questions.

Operator: [Operator Instructions] Our first question will come from the line of Marvin Fong from BTIG. You may begin

Marvin Fong: Hi, good afternoon and thanks for taking my questions; and welcome Oded.

I guess I'll start just on the marketing spend. It's good to hear that it will be stepping down in future quarters. Just some additional color and just how you're thinking about that. Do you – I mean, you guys are obviously enjoying fantastic growth, do you feel like if you could be spending more to drive additional growth or do you feel like you're just trying to balance profitability and growth from here on out? And then a second question, just on the days of sales, 47 in the quarter. I think last quarter George you had said like a range of 48 to 58 would be optimal.

So just curious, if you were able to optimize margin in the quarter and how are you thinking about that for the second quarter and the balance of the year? Do you think days of sale will get into that range that you feel is the sweet spot? Thanks.

Toby Russell: Excellent question. On the marketing portion, were actually extremely excited about the brand building and marketing strategy that we have put in place. As I mentioned in the – at the outset, the Q1 overlap of our previous strategy and our current strategy is what really drove, what we would describe as a peak or a high point in our marketing spend. We expect to have significantly lower spend and significantly better like by half CAC going forward.

But at the same time we’re growing unit volume and we do think that this is the right level of investment in marketing, because we're building not just a near-term impact as you're seeing from our rapid growth, but we are also seeing the brand awareness and long-term nonperishable growth in brand equity that we're creating within our existing footprint and beyond. That's the needle that we've been threading with our new strategy. Q1 has been a cut-over and we're very excited about what we're seeing in the early days and expect us to continue investing in that consumer grounding.

George Arison: And on the inventory time to sell question. So, obviously we're seeing great growth in Q1 and we're guiding to really strong growth in Q2.

And 47 is okay, although slightly slower time to sell would be better from our perspective in terms of what we hope to do, that's hence the guidance of 48 to 55 of kind of what we want to do for the full year. We are seeing really strong growth in our sellable inventory. We discussed in our shareholder letter that we've had over 90% growth in our sellable inventory from the beginning of Q1 to the beginning of Q2. So that's really good and really positive. And we continue to invest in ensuring that we have the right amount of inventory, and then we finish net inventory.

So obviously demand is very strong. We sold more units in Q1 towards the end of the quarter than I think we had initially anticipated by some amount. And so, that obviously helped with the revenue results for the quarter. And we believe that demand will continue to be very strong in Q2, hence the guidance that Oded providing.

Marvin Fong: Great.

And if I could just sneak one more in. Just curious, you did highlight the strength in used car pricing, the wholesale channel, obviously seeing a lot of volatility. You guys mentioned that you're getting most of your cars through the consumer channel. Just would like some additional color just kind of on the interplay of that, for instance, does that with your competitors and other dealers getting a lot more of their inventory from wholesale? Does that cause them to raise prices and you guys can kind of take advantage of that without having realize the same thing cost in your sourcing. Just kind of help us think about how things stand right now and how you're positioned to take advantage? Thanks.

George Arison: Totally. So we acquire by – over 80% of our cars come directly from consumers or from partners. And we think that's super advantageous to us in this environment, because as you mentioned wholesale prices have been very high, which results in people having to pay a lot for the car when they buy it wholesale, which reduces their margin in terms of what they can sell it for to the consumer. Just the overall car prices in the market is also high, so you're sewing it up higher priced to market than you historically would, at this time, that's I think true for everybody. But there isn't margin compression between what you can sell for and what you buy for, when you go wholesale, there is less of a margin compression when you buy from consumer.

That's why we think consumer acquisition is such a valuable thing and have always kind of thought that that gives you the best inventory at the best possible price. The other kind of reality on the wholesale versus consumer side is that, wholesale cars are much more of a commodity. They tend to all be kind of bunched up in the two to six year range and even more so in a two or three, four year range, but a lot of them are off lease. And so they're very commoditized in the market, whereas consumer cars are not, so that the number of benefit to buying consumer cars. And then we think that what we built in terms of consumer acquisition for car purchases, as well as the price – continuously and then be able to stand by that price when we go out to the consumer's home or office to pick up the car, that worked really, really well and we'll continue to push that forward as we scale our business.

Marvin Fong: Terrific. Thanks, George and Toby.

Operator: Our next question will come from the line of Mike Baker from D.A. Davidson. You may begin.

Mike Baker: Okay, thanks. Couple of questions, first on the F&I drivers, you talked about greater attachment rates, but I also think you're making some changes to some of the vendors that used in some of those – for some of those products. Is that helping to drive the better F&I? Or is it really simply just better training, better attachment, et cetera?

George Arison: So in Q1 we have not yet made – had not yet made any changes. We are working on changes that we might make later in the year, but they're not coming in Q1 or in Q2 just yet. So right now the results that we're seeing in F&I is around tax rates and the kind of planning and so forth.

And there is still, as we mentioned in the script a ton of opportunity to grow that and improve there. But then there is additional kind of benefit from being able to change the agreements that we'll have with our partners which we're working on, but that has not yet come into effect.

Mike Baker: Okay. Makes sense. Another thing I want to ask about is, just the bigger picture free cash flow outlook, cash burn.

I mean, if you sort of use your midpoint of your guidance and you said better than 24% EBITDA margin, but let’s use 24% versus 25% before. It speaks to a cash burn of about $130 million, I'm sorry, about $120 million, which is actually higher than it was in the previous guidance where I think it was about $130 million. So I just wanted to ask about that. And then, as you burn through that cash, what's the outlook for next year and sort of when do we become cast flow positive or when do we sort of run out of cash?

Oded Shein: Thanks for the question. Just a couple of thoughts about that.

As we sit here today, we're in a really good liquidity position, we have cash in the bank, we plan to grow our inventory, we can do that through the traditional method in the industry, which is a floor plan facility, so that's always there. And thinking about a future, we want to continue to grow at an accelerated pace. And if we – that position, we can always reach out to the capital market and thinking about our capital management to make sure that we continue to grow at that level. As for break even, well the company said in the past that 2023 was a target date, it has to do with getting scale and operational efficiency. We talked about some midterm goals, especially for GPU with $2,500 again, again which is a function of efficiency in reconditioning in F&I.

And we are making great progress towards all of those. So that's directionality where are we heading?

Mike Baker: Okay. Makes sense. Thank you. One more quick one, if I could.

You took down the value percent maybe by design because it was easier. You didn't have to do as much reconditioning, so I get that. But now that you've caught up on the reconditioning, should we expect the value penetration to go back up, to me at least that was one of the differentiating factors for Shift versus some of the competitors. I'm wondering if that's sort of being downplayed a little bit, or was that just a temporary issue because of the reconditioning situation?

Toby Russell: So value cars as a total number of cars sold has actually gone up from before, right? So it has increased as a percentage of total inventory, but in aggregate total, it's going up and will continue to go up. In addition to having slightly lower value as a percentage, we also actually been doing more on the highline and higher price points, that was driven by the fact that in 2020 with the COVID situation and where the economy was, we felt that it’d made sense to kind of step back from it a little bit.

Previously, we had done really well with higher – more expensive cars in 2018, 2019. And so going back to that, once we were no longer capital constraints post being public, that made a lot of sense. So kind of two things happen, whether it be more – on the more expensive side and doing slightly less on the value side, because of reconditioning. We would expect value to be an important part of the business. It might not be quite the same percentage that it had been in 2020, but it will be a significant percentage.

Peers definitely don’t tell those at all and we actually have a huge number of value cars that what’s we're selling and we seeing very good demand for those. I think there is more things we're kind of thinking about as far as how to do more value in the future beyond what we do right now, and that's something that is important. We think that as, like you said a big differentiator for Shift and also a huge winning strategy, because demand for those cars are very, very strong, those cars are generally very scarce. There are very few places you can buy them, other than independent dealers. And so we are the only ones that are aggregated digital e-commerce first companies that can actually capture share from an independent dealer.

And we think that's super valuable and we'll continue to pursue that.

Mike Baker: Right. Agreed. Okay, thank you. I'll pass it on.

Operator: Our next question will come from the line of Seth Basham from Wedbush. You may begin.

Jesse Sobelson: This is Jesse Sobelson on for Seth. Just piggybacking on the prior cash question here. You guys mentioned a floor plant facility.

Do you currently have a floor plan facility commitment? And if so, what's the capacity on that? And then looking forward, when it comes time to raise capital, would you prefer that debt or equities looking forward?

Oded Shein: Thanks for the question. The total facility is for $50 million at this point. We actually underutilized in the first quarter, we have only $31 million on the books. So we have an opportunity to grow with. And as for the future, we'll look at all of our opportunities in the market whether it's equity, debt or anywhere in between.

So, this thinking is we want to accelerate growth and raise more money and accelerate growth and raise more money to get to both scale and profitability.

Jesse Sobelson: All right, cool. Thanks.

Operator: And our next question comes from the line of Sharon Zackfia from William Blair. You may begin.

Matt Curtis: Hi, this is Matt Curtis on for Sharon. So first off, congratulations on the first quarter. Can you talk about what offset the revenue upside since adjusted EBITDA was basically within your expectations? I mean, did you pull forward any investments or was there some unanticipated expense that limited the flow through? It sounds like the marketing overlap may have played a part in it, but I was just wondering if you could clarify.

Oded Shein: Thank you for the question. Yes, top line exceeded our expectation and so did gross profit, at the same time we pushed down on the accelerator for growth and variable growth and also investment in marketing.

But at the end of the day, our EBITDA was within our guidance, so we were pleased with that.

Matt Curtis: Okay. Thank you.

Operator: [Operator Instructions] Our next question will come from the line of Mike Grondahl from Northland Securities. You may begin.

Mike Grondahl: Hey, thanks guys. Just a question on kind of the reconditioning, clearly a lot more efficient than last fall, on a scale of one to 10, how would you say it, your reconditioning efficiency was in the first quarter and in kind of what else can you do to kind of keep improving it? And then maybe lastly to that, like your reconditioning capacity, what percent did you operate at in 1Q?

George Arison: Thanks. Great question. So we think the reconditioning is in certainly a much better place than it was in Q3 and Q4. And obviously, I really happy with the improvements that we've made, I don't think I can put a number like you're asking because it's not something we published.

But we are definitely much happier than where we are that does not mean to suggest that we are much happy with where we are now versus where we want to go, where we are in the past. That said, there's still opportunities to do better. Both in terms of dollars spent per unit, we think there's improvements that could be made and in terms of speed of reconditioning, there's also opportunities to do faster which we think will be better from gross profit perspective, because if you can get a car reconditioned quicker, you can get it on the lot to sell faster which then allows you to turn that car with better gross profits so we've had pretty significant improvement. And we spoke about that during the earnings call in March and really happy with the results. I think our sellable inventory increased from beginning of Q1 to beginning of Q2 kind of speaks to how well reconditioning has done, but there's still a lot to do in the future.

And that's not a one quarter kind of change. That's the most headquarter strategy to make sure that we finishing the costs are where we want them to be long-term, as well as speed is where we want to be long-term. Last point is, we've spoken in the past about how our midpoint goal is to get $2,500 in gross profit of which about $1,200 to $1,300 will come from front-end. Obviously, driving reconditioning costs down to the kind of ideal level over the next couple of years is a big part of getting to that $1,200 to $1,300 of sustainable front-end gross profit.

Mike Grondahl: Got it.

And then you guys sound really happy with the marketing and branding campaign. Is there one or two things you can kind of call out there that's really resonating you think with buyers or sellers of vehicles?

Toby Russell: That's a great question. I would say two things are quite important on that front. One, our channel mix, the way we reach consumers always changed substantially versus how we did that previously. That's part of the new strategy.

And I think that I guess that one of the most important thing that we've talked about in the past. The problem of Shift as then people just don't know about us, and us reaching out to folks and creating awareness, using a full spectrum multi-channel approach has proven successful we talked about. We saw early signs of that in Q4, and now the full rollout in the latter part of Q1. Part two, we believe in our unique brand positioning and the creative assets that we've created to stand behind that positioning. Our value proposition is used cars never felt so new.

We believe that consumers face a difficult challenge and choice that is, they say, I want quality and trust. So I think I should go buy a new car, but I'm going to get overcharged buying that new car, why, the second you drive that thing off a lot. You're going to lose thousands in depreciation. And so what we're doing, our fundamental thesis as a company and our brand proposition is breaking that trade-off for consumers. This is what great products do, you get your new car, peace of mind with used car value.

That is a core of what we're presenting. We're not saying, hey, like we're just the better channel, et cetera, et cetera. We're talking about why the customer's at the center of what we do. We're talking about why, what we offer is meaningfully better than what's available in the market, and we're doing it we believe in a clever way that resonates from a creative asset point of view that we have seen to really land well.

Mike Grondahl: Got it.

That's helpful. Thanks guys.

Operator: Our next question will come from the line of Zach Fadem from Wells Fargo. You may begin.

Eric Cohen: Hi, this is Eric on for Zach.

Thanks. Now you guys had five markets in Texas that were only one-sided for all Q1. Was there any GPU headwind from that? And is it easy to use now that you flipped San Antonio and Austin to two-sided market?

George Arison: Any business within Texas was a minuscule scale in the first quarter as usually we didn't sell any cars so 9 to 10 GPU.

Eric Cohen: And it looks like San Antonio and Austin, you started one side, six months ago. It took six months to flip to buying.

What sort of been, is that the typical runway you've had in other markets? And should we expect the other remaining markets in Texas and Las Vegas to switch to two-sided model in about six months from when they opened?

Toby Russell: We haven't published timelines from when it is market launches to the point at which we would flip it over, that's part of our competitive advantage and secret sauce as it were as to when we're going to be launching markets. And we also haven't shared which additional markets we have planned for subsequent launches. We've been actually really excited about the velocity with which cars came online in Texas. We're very, very excited about the Nevada launch with Las Vegas coming online as well. Part of what is helpful there is that we can both turn cars to wholesale where necessary, where they're not retailable.

And because we have a national selling capability of those cars that are sourced can flow into the main flow. As Oded mentioned, we didn't sell necessarily cars locally in market with our omni-channel offering that we've now launched in Texas, and the total volume was relatively small as we were ramping up, but we're really excited about how those markets have come online. And we actually are bullish on being able to add additional markets. Overall, though, I'll note that we're ahead of schedule, relative to what we had said we would do in terms of market launches. And we're thinking about these market launches in terms of adding real growth for next year, because our current strategy is to grow primarily in footprint in 2021.

And we're putting in place the foundations and footprint to add additional growth for next year, as we get further and further down the path of expanding Shift.

Operator: And our next question will come from the line of Mike Baker from D.A. Davidson. You may begin. Mike, your line is open.

Mike Baker: Hi, sorry. Just one more real quick, just to be clear on the marketing costs going down, first of all, if you could quantify what we should think about in the second quarter, that'd be helpful. Do we just cut it in half? Is that what you're saying? But more importantly, just to be clear, and I think it's obvious from your previous comments, but you're not pulling back at all on the new marketing campaign. It's just that the old marketing campaign goes away. And so can you confirm that and are we going forward or even accelerating the new marketing campaign, which seems to be so successful right now.

Toby Russell: Thank you for that question, Mike. Yes, confirmed. The reason for the spike in total spend in Q1 was we had overlapping strategies occurring bringing on a new one as sunsetting the old one, and that created that overlap and a spike. As I mentioned in the outset, expect a substantial decrease in total spend and a resulting decrease by half in CAC with continuing decrease in CAC over the course of the year, as we see that efficiency, but we are doubling down and in fact, really leaning in on the new strategy. And it was really that changeover, that caused essentially the high point of what we expect to be quarterly spend by a good amount in advertising in Q1.

Mike Baker: Right. Okay. That makes perfect sense. I just want to make sure. Thanks.

Appreciate that.

Operator: Thank you. No further questions in the queue. I’d like to turn the call back over to George Arison for any closing remarks.

George Arison: Great.

Thank you very much and we really appreciate everyone joining our call. And we’ll speak to you guys in a few months when we report Q2.

Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect.