Q1 2021 Shift Technologies, Inc. Earnings Call
Yeah, Dan Thank you for sending by welcome to the shift technologies first quarter 2021 earnings call.
This time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
A question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded for you acquire any further assistance. Please press star zero on it.
On the conference over to your Speaker today, Henry Burke, Vice President of strategy and Finance. Please go ahead.
Yeah.
Yeah.
Good afternoon, and welcome to the shift technologies first quarter 2021 earnings call. Joining me on the call today are co Ceos, Toby Russell from Georgia, Harrison and CFO or net.
Hi.
During our remarks, we'll 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.
<unk> 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 on the factors that may affect any forward looking statements and 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 at the for.
Find and reconciled in our earnings materials.
That said I will now turn the call over to Don.
Thank you all for joining us today.
I am excited to report today on a fantastic quarter Which's 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 $1690 up over three X sequentially from the fourth quarter.
Both measures are above the targets, we set out on our last call.
We achieved this with an adjusted EBIT margin that was also better than we had previously implied in our guidance.
Given Q1 success, our continued confidence in the strategy, we've 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 deeper.
Deepening penetration within our existing market.
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 G. P results. Additionally.
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 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 gross sales volume and 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 the immediate and midterm sales efforts, while also building durable non perishable brand depression, both within these markets and beyond the benefits shift now and for the long term.
The immediate positive results are extremely strong as evidenced 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 on the changeover from our old marketing strategy to our new marketing strategy. It also marks the high point of our 2021 advertising expense due to overlapping spat between our previous strategy and the new one we.
We expect our total Q2 advertising spend to be substantially lower than Q1.
Reducing our cash roughly in half and we expect continued improvement in cash 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 source. The vast majority of our cars directly and indirectly from consumers 87% in Q1.
This model mitigates, our risk related to auction in 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 $1690 in Q1.
Our more than three <unk> 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.
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 begin in 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 or back end GPU also performed strongly in light of our continued strategic focus on expanding our F&I offerings and delivery.
F&I GPU reached a record $938 per unit representing growth of 58 per cent year over year on our path to our midterm goal of 1200 to $1300 per unit and 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 an improved attach rates across products.
There is still significant upside here and we're excited by the opportunity to have F&I expand our GPU margins overtime.
Turning to geographic expansion earlier this week, we announced that Austin and San Antonio, Texas had been converted to our full omni channel offerings, including test drives brought to a consumer's home within a 145 miles of each city.
Additionally, last week, we launched our car acquisition in the Las Vegas Metropolitan region.
This is our first expansion into Nevada, and we are now able to purchase vehicles directly from consumers and 11 super regions across the western half of the United States. In addition to selling car 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 day.
Is it all 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 ecommerce 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.
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 doors and the fresh market and it is also a board member and chair of the audit Committee at Collins home plus Oded.
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 the shift even because I see the long term opportunity to bring the used car market on line and significantly improve the consumer experience.
I believe Tobey George and the entire shift team has the right strategy in place to capitalize on this opportunity.
I look forward to achieving our long term strategic priorities.
I will first review our Q1 results and then on dress our guidance for the second quarter.
In the fiscal year.
Total revenue for the first quarter grew to 106 million up 254% year over year.
Total units sold were 5979, an increase of 181%.
With the E Commerce channel growing to 4452 units up 213%.
E Commerce average selling price was nearly 20030% higher than a year ago.
The increase in AFP was due to change in our inventory mix as we increased purchasing and selling high line and luxury cars, which have historically been strong performance for shift and where deep prioritize in 2020.
We also decreased the value segment slightly as a percentage of total sales, while growing and get the aggregate it 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 1690, <unk> significantly higher than our expectations and sequentially up from 514 in the fourth quarter of 2020.
The sequential increase was in large part due to the return to in house Reconditioning operations as Toby has this guidance.
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 meaningful growth in head count 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 for 34.4 million versus $9 7 million a year ago.
Please note that the Q1 EBITDA loss.
It was within our stated guidance range.
Now turning to the balance sheet and cash flow.
We ended Q1 with cash and cash equivalents for $177 million.
We also had approximately $43 million 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 in inventory to support growth and meet customer demand.
The country receivable 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 a result of the 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 strong liquidity position.
As we have said in the past.
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 to.
270% to 300% higher than Q2 last year.
Our adjusted GPU is expected to be between 2000, and 2002 hundred reflecting our internal improvement in reconditioning capabilities.
<unk> 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 for 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 to 520 million, an increase of 145% to 166% year over year.
We expect to sell 21000 to 23000 on ecommerce card growth exceeding 120 per cent.
We are raising our full year expectation on adjusted GPU to exceed 1800, an increase of $200 per unit compared to our previous guidance.
This increase was driven by our higher than expected Q1 results.
On 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 day above expectations, we now project, our EBITDA loss margin for the year to be better than 24 per cent.
I will now turn the call back over to George for closing.
Any remarks.
Thank you on it and tell me.
It's mostly east went on results for the first quarter as we outperformed expectations for revenue adjusted GPU and EBITDA margin.
Benefits from our new branding strategy.
Dramatically improve reconditioning cookbook.
We have great inventory and on some momentum heading into Q2, and the remainder of 'twenty, 'twenty, one which position us to far exceed the revenue growth targets discussed when we became a public company last fall, while delivering growth with improved operating leverage and strong gross profit.
We believe that shift is uniquely positioned to be a leading e-commerce platform for auto sales.
This year is setting us up well to achieve this goal.
Operator, we're now ready for questions.
Yeah.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Standby, while we compile the Q&A roster.
Okay.
First question on comes from the line of Marvin Fong from <unk> you may begin.
Hi, good afternoon, thanks for taking my questions on locomotives.
I guess I'll start just on the marketing spend it's good to hear that it will be spent on stepping down in.
In future quarters, just for some additional color on just how you're thinking about that do you. I mean, you guys are obviously enjoying fantastic growth do you feel like.
You know if you could be spending more to drive additional growth or do you feel like.
You're just trying to balance profitability on growth from here on out and then a second question just on the day for 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 you know if you were able to optimize margin in the quarter and how are you thinking about that for for the.
Second quarter on the balance of the year or do you think are they used to say oh, well get into that range that you feel is on the sweet spot.
<unk>.
Thanks for that question on the marketing portion.
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 on our current strategy is what really drove what we would describe as a peak or a high point in our marketing expense.
We expect to have significantly lower.
Spend and significantly better bye bye have cash.
Going forward.
But at the same time be growing unit volume.
And we do think that this is the right level of investment and.
And marketing because we're building not just on near term impact as you are seeing from our rapid growth, but we are also seeing our brand awareness.
And for the long term non perishable.
Growth and brand equity that we're creating.
Within our existing footprint and beyond.
That's the needle that we'd been threading with our new strategy.
Q1 spend of cutover and we're very excited about what we're seeing and the early days and expect us to continue investing in that consumer granting.
And on the inventory time to sell question. So obviously, we've seen great growth from Q1, and we are guiding to what at least from growth in Q2 and 47 in okay on those slightly slower time to sell would be better from our perspective.
In terms of what we hope to do that hence the guidance of 48 to 55.
Kind of what we wanted to do for the full year.
We are seeing really strong growth in our sellable inventory.
Discussed in our channel Joanna that we've had over 90% growth in on.
Settled on that next month on the beginning of Q1 to the beginning of Q2.
So that's really good and really positive and we continue to invest in.
On ensuring that we have the right amount of inventory and then refinish net inventories. So obviously demand is very strong.
We sold.
More units in Q1 towards the end of the quarter, then I think we had initially anticipated.
By some amount.
So that obviously helped with the revenue results for the quarter.
And we believe that demand will continue to be very strong in Q2.
The guidance on that.
Great and if I could just.
Sneak one more in just curious you know you did highlight the strength in used car pricing on the wholesale channel obviously seeing a lot of volatility you guys mentioned that you're getting most of your cars through through.
For the consumer channel I'm, just would like some additional color just kind of on the interplay of that for instance, you know does that.
With your competitor is another dealers getting a lot more for their inventory from wholesale does that.
No calls.
Them to raise prices and you guys can kind of take advantage of that without having will realize the same same cost and your sourcing just kind of help us think about.
You know how things stand right now.
How are you positioned to take advantage.
Totally so we acquired by over 80% of our costs come directly from consumers from partners.
And we see net super advantageous to us in this environment because as you mentioned wholesale price that had been very high on which results in you know people having to pay a lot for the car when they buy wholesale which reduces net margin in terms on what they can sell it for the consumer obviously overall car prices in the market and also high so you're starting at a higher price market.
And you know historically would.
At this time on that.
So for everybody, but there is margin compression between what you can sell for them. When you buy for when you go on wholesale is less of a margin compression when you buy from consumer and 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 at the best possible price on the upper kind of reality on the.
Wholesale versus consumer side of that.
Wholesale car that might come on the commodity they tend to all be kind of bunched up in that two six year range.
And even more so in the two or three for your range for a lot of them on off lease.
And so that they can monetize in the market, whereas consumer loans are not so that's another benefit.
Moving to buy and consume a pause and we think that you know what we've built in terms of consumer acquisition for.
<unk> for car purchases as well as the price.
And then be able to stand by that price when we go out to the consumers home or office too on.
Take off the current on works really really well and we'll continue to push that for one as we scale the business.
Terrific, Thanks for Georgia and Toby.
Okay.
Our next question on comes from the line of Mike Baker from D. A Davidson you may begin.
Okay. Thanks.
Couple of questions first on.
On the F&I drivers you talked about.
Attachment rates, but but I also think you're making some changes to some of the vendors that you use in some of those.
For some of those products is that helping to drive that the better F&I or is it really simply just just a better training better attachment et cetera.
So in Q1, we have not yet 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.
Two one or in Q2, I'm just yet so right now the results that we're seeing in F&I zone.
And the.
The kind of training and so forth and that is still as we mentioned in this but I kind of opportunity to grow that.
Simple there, but then there are additional kind of benefit from being able to change the agreement that we'll have with our.
Partners, which we're working on but that has not yet come until that.
Okay. It makes sense on another thing I want to ask for us.
Just a bigger picture free cash flow outlook cash burn.
If you if you sort of use your mid plenty for guidance and you said better than 24% EBITDA margin, but let's use 24% versus 25 per cent before it speaks to a cash burn of about $113 million I'm, sorry, about 120 million, which is actually higher than it was on your previous guidance, where I think it was about 113 million. So I just wanted to ask about.
That in and then you know as you burn through that cash or what's the outlook for for next year and sort of when do we become cash flow positive or when do we sort of run out of cash.
Thanks for the question I'm, just a couple of thoughts about that you know as we.
Sit here today, we're in really good liquidity position with cash on the bank.
We plan to grow our inventory, we can do that through the traditional method in the industry, which is there.
On a floor plan facility. So that's that's always there and thinking about the future we want to continue to grow.
At an accelerated pace and if we are at that position.
We can always reach out to the capital markets and.
Thinking about our capital management.
To make sure this week.
You need to grow at that level.
As for breakeven.
Well you know the company has said in the past that.
2023 was.
Target date, it has to do with getting scale and operational efficiency, we talked about for midterm goals, especially for GPU with 2500 mm again, which is a function of efficiency in reconditioning and F&I and we are making great progress towards all of those.
So that's that.
Directionally, where we're heading.
Yes.
Okay makes sense. Thank you one more quick one if I could.
You had talked on the value percent may be by design because it was easier.
Have to do as much reconditioning, so I get that but now that you've caught up on the reconditioning should we expect a value.
On penetration to go back up to me at least that was one of the differentiating factors for shifts versus some of the competitors on.
I'm wondering if that sort of being downplayed a little bit or was that just a temporary issue because of the reconditioning situation.
So on value cars as a total number of cars sold has actually gone up from before so.
It increased as a percentage of total inventories, but in aggregate total its going up and we will continue to go up in addition to having slightly lower value as a percentage. We also actually been doing more on the high line and higher price points on that was driven by the fact that you know on 2020 on with the COVID-19 situation.
And where the economy was we felt that it made sense for kind of step back from that a little bit previously we had done really well with higher.
For more expensive cars in 2018, 2019, and so going back to that once we were not on the capital from Spain on.
Post being public I made a lot of sense.
Two things happened a little more on the more expensive side on doing slightly less on the value side, because probably finish line, we would expect values to be an important part of the business on it.
It might not be quite the same percentage as it had been in 2020, but it will be a significant percentage.
He is down you don't sell those at all and we actually have a huge number of value cars on that was we are selling on and we're seeing very good demand for those.
I think when there's more things with kind of thing came on as far as college news, it's even more value in the future beyond what we do right now and that's something that is important we think that that that like you said, a big differentiator for shift and also a huge winning Saturday because demand for those causes their day strong. Most guys are generally very scarce. There are very few play for you can buy them.
<unk> kind of independent dealers.
So we are the only ones a day aggregated digital E. Commerce first companies that can actually capture share from an independent dealer and we think that's super valuable on will continue to pursue that.
Right agreed okay. Thank you I'll pass it on.
Our next question comes from the line of.
Seth Basham from Wedbush, maybe begin.
This is Jesse so Wilson on for Seth.
Just piggybacking on the prior cash question here you guys mentioned a floor plan facility do you currently have with Courtland 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.
Equities moving forward here.
Thanks for the question.
On the total facility for $15 billion at this point.
We actually under utilized within the first quarter, we have only $31 million on the books. So we have an opportunity to grow it.
And as for the future, we will look at all of our opportunities in the market.
Equity index or anywhere in between them. So.
Thinking is we want to accelerate growth and raise more money and accelerated growth rates for more money.
To get to both scale and profitability.
Alright, thanks, guys.
And on our next question on comes from the line of.
Sharon Zackfia from William Blair May begin.
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.
Thank you for that.
Question.
Yes, the top line.
It is our expectation and so did.
Gross profit for the same time, we pushed on the accelerator.
For growth and variable for growth and also investment in marketing, but at the end of day day, our EBITDA was within our guidance range.
We're pleased with that.
Okay. Thank you.
And once again Thats star one for questions. Our next question on comes from the line of Mike Grondahl from Northern Securities You May begin.
Hey, Thanks, guys.
Just a question on kind of the reconditioning.
Clearly a lot more efficient than last fall.
You know on a scale of one to 10 how.
Would you say is your reconditioning efficiency was in the first quarter and 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 one queue.
Okay.
Thanks, Great question so.
We thank them for condition, and then telling me a much better place than it was in Q3 and in Q4 and obviously.
We.
Really happy with the improvements that we've made I don't think I can put a number like you're asking because on the Samsung.
Kind of published but we are definitely much copier than where we are that does not mean to suggest that we have we're much happier with where we are now versus where we want to go where we were in the past that said, there's still opportunities to do better on both in terms of a dollar spent per unit on we think that improvement.
Net to be made and in terms of speed on reconditioning and there's also opportunities to get faster, which we think will be better from gross profit per factor because if you can get a car from conditions quicker you can get in on a lot to sell faster, which then allows you to turn that car with better gross profit. So that you know.
We've had pretty significant improvement on we spoke about that during the earnings call in March.
And I'm really happy with the results I think our Sellable inventory you. Please from beginning of Q1 for a big enough for you to kind of speaks to how well depending on who has done but there's still a lot to do in the future and end up on a one quarter kind of change that the most headquarter strategy to make sure that we're finishing the costs are where we want them to be long term as well.
Well as you know speed.
Speed is one for me a long time.
Last point as you know we've spoken in the past him on how our midpoint goal is to be at $29 on a gross profit of <unk>.
About it's about $700 will come from front end on.
Driving refinish net cost down to that kind of ideal level over the next.
Couple of years.
Big part of getting to that 12 to $700 of sustainable on an on gross profit.
Got it.
And then you guys sound really happy with the marketing and branding campaign.
Is there 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.
Okay.
It's a great question Mike.
I would say two things are quite important on that price.
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 that gets at one of the most important thing that we've talked about on the past.
The problem with shift has been people just don't know about us.
And us reaching out to folks and creating awareness using 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 in choice.
It is.
They say I want quality and trust. So I think I should go buy a new car.
But I'm gonna get overcharge buying that new car why the second you drive that thing off a lot.
Youre going to lose thousands and depreciation.
And so what we're doing our fundamental thesis as a company and our brand proposition is breaking.
That trade off for consumers is what great products do you get the new car peace of mind.
With used car value.
That is the core of what we're presenting we're not saying, hey, like where that where just the better the better channel et cetera et cetera, we're talking about why the customers at the center of what we do we're talking about why what we offer is meaningfully better than what's available on the market.
And we're doing it we believe in a clever way that resonate.
From a creative asset point of view that we have seen to really land well.
Got it that's helpful. Thanks, guys.
Yeah.
Our next question comes from the line of Zack <unk> from Wells Fargo you may begin.
Hi, This is Eric on for Zach Thanks.
No you guys.
On markets in Texas that were only one sided for all Q1 was there any GPU headwind from that and does it eases used now these flips San Antonio and us into two sided market.
Any business did in Texas was minuscule scale in the first quarter a good fleets, we didnt sell any cars from them.
Yeah.
And it looks like San Antonio and Austin.
Hassan you started one side six months ago. It took six months to flip to buying what's would've been is that the typical run rate you've had in other markets and should we expect the other remaining markets in Texas and Las Vegas to switch to Tucson mono in about six months from when they opened.
So we haven't published timelines from.
When it is mark.
Losses to the point at which we would flip it over that part of our competitive advantage and secret sauce as it were as to when we're going to be launching markets and we also have a share which additional markets behalf.
Plan for subsequent launches.
We're actually really excited about the velocity with which cars that came on line in Texas, our very very excited about the Nevada launch, where Las Vegas coming on line as well.
Part of what is helpful. There is that we can both turn cars to wholesale where necessary or where they're not retail level.
And because we have a national.
Selling capability on those cars that are sourced can flow into the main the main flow. So as oded mentioned, we didnt sell necessarily cars locally in market with our with our omni channel offering that we've now launched and.
Texas, but the total volume was relatively small as we are ramping up but we're really excited about how those markets have come on line 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 losses, 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.
Yeah.
And our next question on comes from the line of Mike Baker from D. A Davidson.
We begin.
Mike Your line is open.
Hi, sorry.
For you to come up with 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 do we just cut it in half is that what you're saying, but but more importantly, just to be clear on I think it's obvious from your previous comments, but you are not pulling back at all on the new marketing campaign.
To set the old marketing campaign goes away and if so can you confirm that and you know are we going forward or even accelerating the new marketing campaign, which seems to be so successful right now.
Thank you for that question Mark Yes confirmed.
The reason for the Spike in total spend in Q1.
Whereas we had overlapping strategies occurring.
On a new one as sunsetting the old one and that created that overlap on a spike we as I mentioned on the outset, how expect a substantial decrease in total spend and a resulting day, Chris like by half in cash with continuing decrease in cash over the course of the year.
As we see that efficiency, but we are doubling down in fact really leaning in on the new strategy and it was really that seem that changeover that caused essentially the high point.
Of what we expect to be quarterly span.
By a good amount in.
In advertising in Q1.
Right. Okay. So that makes for expense. So I just wanted to make sure. Thanks I appreciate that.
Okay.
Thank you no further questions in the queue I'd like to turn on the call back over to George Eriksson for any closing remarks.
Great. Thank you very much on whether you've heard everyone for joining our call and we'll knock on a few months when roof on on Q2.
And this concludes today's conference call. Thank you for participating you may now disconnect.
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