Shift puts 2022 focus on improving its liquidity

Leaders at Shift Technologies Inc. say 2022 was going to be "a year of balanced growth and profitability" even before market conditions tightened amid rising inflation and continued supply constraints.

And while the online used-vehicle retailer based in San Francisco said it more than doubled revenue and sold more vehicles in the first three months of this year, those macro constraints are adding pressure to the business.

Last week, the company said it cut about 10 percent of its corporate staff in April. It paused its expansion into Las Vegas. And, perhaps most alarming, Shift said in a quarterly regulatory filing that "substantial doubt" exists about its ability to continue as a going concern.

Still, leaders say they are confident in the cash position for this year and are taking steps to improve liquidity. Executives last week said they were working toward a plan to achieve profitability in 2025.

"We're putting in the fundamentals to get there," Shift President Jeff Clementz said. "We plan to be a growth business for the foreseeable future."

Analysts told Automotive News that the company may have executed better than larger rivals Carvana and Vroom but that it also remains vulnerable as it's becoming more difficult to access capital.

"If the credit environment worsens, then it could be difficult for them to fund their business," Rajat Gupta, a senior equity analyst at J.P. Morgan who covers auto retail, said of Shift, Carvana and Vroom.

Shift's executives disclosed in the regulatory filing last week that the company had an accumulated deficit of $497.8 million as of March 31 as well as negative operating cash flows of $98.4 million in the first quarter. It counted unrestricted cash and equivalents of $94.9 million and working capital of $127.9 million as of March 31.

"Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing or generate profitable operations," Shift wrote in its filing.

Clementz declined to comment specifically on the filing but said: "We feel good about our cash position for 2022, and it's also our expectation that we will be strengthening our cash position" for next year.

The company last week said it has up to $150 million in an at-the-market facility that it can use over three years, which provides flexibility while Shift explores other financing routes.