CARLOTZ : Management’s Discussion and Analysis of Financial Condition and Results of


The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of our consolidated
results of operations and financial condition. The discussion should be read in
conjunction with the unaudited condensed consolidated financial statements and
notes thereto contained herein and the consolidated financial statements and
notes thereto for the year ended December 31, 2020 contained in our Current
Report on Form 8-K/A filed with the SEC on March 15, 2021. Unless the context
otherwise requires, references to "we", "us", "our" and the "Company" are
intended to mean the business and operations of CarLotz, Inc. and its
consolidated subsidiaries.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 regarding,
among other things, the plans, strategies and prospects, both business and
financial, of the Company. These statements are based on the beliefs and
assumptions of our management team. Although we believe our plans, intentions
and expectations reflected in or suggested by these forward-looking statements
are reasonable, we cannot assure you that we will achieve or realize these
plans, intentions or expectations. Forward-looking statements are inherently
subject to risks, uncertainties and assumptions. Generally, statements that are
not historical facts, including statements concerning possible or assumed future
actions, business strategies, events or results of operations, are
forward-looking statements. These statements may be preceded by, followed by or
include the words "believes," "estimates," "expects," "projects," "forecasts,"
"may," "will," "should," "seeks," "plans," "scheduled," "anticipates" or
"intends" or similar expressions. Such statements, including statements
regarding our ability to: execute our geographic expansion policy; manage our
business through the COVID-19 pandemic; achieve our expected revenue growth and
effectively manage growth; achieve and maintain profitability in the future;
innovate and expand our technological leadership; invest in additional
reconditioning capacity; further penetrate existing accounts and key vehicle
channels; add new corporate vehicle sourcing partners; increase our service
offerings and price optimization; effectively promote our brand and increase
brand awareness; expand our product offerings and introduce additional products
and services; enhance future operating and financial results; acquire and
protect intellectual property; attract, train and retain key personnel,
including sales and customer service personnel; acquire and integrate other
companies and technologies; remediate material weakness in internal control over
financial reporting; comply with laws and regulations applicable to our
business; and successfully defend litigation are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
results or other outcomes to differ materially from those expressed or implied
by these forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in the section
entitled "Risk Factors" in this Quarterly Report on Form 10-Q and Item 1A "Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020,
filed on March 15, 2021, and those described from time to time in our future
reports filed with the SEC. Many of these risk factors are outside of our
control, and as such, they involve risks which are not currently known that
could cause actual results to differ materially from those discussed or implied
herein. The forward-looking statements in this document are made as of the date
on which they are made and we do not undertake to update our forward-looking


CarLotz is a leading consignment-to-retail used vehicle marketplace that
provides our corporate vehicle sourcing partners and retail sellers of used
vehicles with the ability to easily access the retail sales channel. Our mission
is to create the world's greatest vehicle buying and selling experience. We
operate a technology-enabled buying, sourcing and selling model that offers a
seamless omni-channel experience and comprehensive selection of vehicles. Our
proprietary technology provides our corporate vehicle sourcing partners with
real-time performance metrics and data analytics along with custom business
intelligence reporting that enables price and vehicle triage optimization
between the wholesale and retail channels.
We offer our products and services to (i) corporate vehicle sourcing partners,
(ii) retail sellers of used vehicles and (iii) retail customers seeking to buy
used vehicles. Our corporate vehicle sourcing partners include fleet leasing
companies, rental car companies, banks, captive finance companies, third-party
remarketers, wholesalers, corporations managing their own fleets and OEMs. We
offer our corporate vehicle sourcing partners a pioneering, Retail Remarketing™
service that fully integrates with their existing technology platforms. For
individuals who are our retail sellers, we offer a hassle-free selling
experience that allows them to stay fully informed by tracking the sale process
through our easy to navigate online portal. We offer our retail customers a
hassle-free vehicle buying experience. Buyers can browse our inventory online
through our website or at our locations as well as select from our fully
integrated financing and insurance products with ease.
Founded in 2011, CarLotz currently operates sixteen retail hub locations in the
U.S., initially launched in the Mid-Atlantic region and since expanded to the
Southeast, Southcentral, Midwest, West and Pacific Northwest regions of the
United States.

Our current facilities are located in Virginia, North Carolina, Florida,
Illinois, Texas, Tennessee, California, Colorado and Washington State.
Our hubs act as both physical showrooms with retail sales volumes and as
consignment centers where we can source, process and recondition newly acquired
vehicles. Our ability to source vehicles through these locations is important to
our asset-light business model. At these hubs, our vehicles undergo an extensive
133-point inspection and reconditioning process in preparation for resale. Our
hubs are more than just locations to buy, sell and repair vehicles and are
crucial to the information and data-analytics that we make available to our
corporate vehicle sourcing partners and retail customers.
For our corporate vehicle sourcing partners, we have developed proprietary
technology that integrates with their internal systems and supports every step
in the consignment, reconditioning and sales process. For our retail buyers, we
have developed a fully digital, end-to-end e-commerce platform that includes
every step in the vehicle selection, financing and check-out process. To
supplement these systems, we have developed custom-built data analytics tools
that provide real time information to our corporate vehicle sourcing partners,
retail sellers, retail buyers and ourselves. For our retail buyers, we offer a
fully digital and hassle-free process that offers our full range of services, as
we continue to expand our technological solutions. Our strategy is to roll out a
fully integrated mobile application while continuing to expand our digital car
buying platform.

Business Update

We experienced strong retail GPU and gross profit performance for the three
months ended June 30, 2021, due primarily to higher average selling prices for
vehicles sourced in the first half of the quarter via purchase and consignment
at lower relative cost as average used vehicle selling prices were appreciating,
resulting from high consumer demand. As previously disclosed, in mid-May 2021,
the corporate vehicle sourcing partner that accounted for more than 60% of the
cars we sold during the fourth quarter of 2020 and the three months ended March
31, 2021 informed us that it would be pausing its consignment of vehicles to us,
with immediate effect, due to the current strength of the wholesale market for
vehicles. In order to secure sufficient inventory for sale following such pause
in consignments, we significantly increased our...


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