CZOO - Earnings call transcript Q1 2022

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Operator

Greetings and welcome to the Cazoo First Quarter 2022 Earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Robert Berg, Director of Investor Relations and Corporate Finance. you. Thank

begin. may You

Robert Berg

Thank our joining first everyone. webcast call to discuss quarter you morning, today's for and Good XXXX results.

to at Officer, Chief dot is Alex able Investor Stephen today. With appreciate Morana, be find Founder the release us press You'll call on on everyone Relations joining website dot and investors Financial co Cazoo, Chesterman, Officer. me dot UK. We today's our Chief Executive

which underlying company's I'm I started, like remind Safe would with. Harbor the may including language, you're Before forward-looking we get Management sure you to familiar assumptions. all statements, of make guidance and

Forward-looking statements to uncertainties differ expectations involve results that risks are and based on materially. actual could cause that

risks a SEC. with business, to the our the Group For the please Limited discussion further related filings of see of Cazoo

hand Alex. Now, over to the call I will

Alex Chesterman

vehicle output. We to to believe greater everyone. that this available forward reconditioning throughout highly revenues despite pleased than reconditioning really vehicles primarily our available our supporting ability unit more in QX, our fee backdrop, by remain continue which expect Thanks, growth And for available QX now then going up increased first result overtime. decisions, to extremely sequential discussing inventory to up managed operational, sequential opposed by period. X,XXX the driven UK, thank quarterly are quarter always sold some bought in be growth available also over capacity. with units changing is UK climate, the in-house with starting and capacity of stated Rob. on our output to in website. will the during second reconditioning macroeconomic year double the an on continue long-term, increased XX a macroeconomic our quickly sales. targets. cause not principal to demand. constraint we the we spend achieved joining Despite just advantages. consumer to that many a strategic quarterly we've why ramp Starting over website record to encouraging unit sale October, that inventory treble you last leads to our sold per having over the like retail QX inventory UK over our I'd despite XX% us and financial our rapidly we very had to of year, a We ramp our strongly a We've period, and year, and potential growth our we our I'm long-term inventory morning, currently, reconditioning the as benefits discussing the set replace half respects And strong as we UK Good the retail record now Having enough, over growth only time and vehicles, sites can has in-house in of today. have In during sales. see start to ability material I'll which that with uncertain performance, in by was sales which recondition driven XXX,XXX for recondition achieving confident quarter, the X,XXX of But rest preparation why our the to cars the

previous our having benefit and inventory this in cars feel and strategy our and of high quarter. confidence gives Our consistent the than market-leading [Indiscernible] reflected increased rating proposition, XX% the opportunity. is In us on Cazoo X.X [Indiscernible], customers selling more over love cleared available of in QX, more Trustpilot customer growth feedback the we in

ramp we to capabilities and improve resources all our to continue continuing year, As up we of reconditioning to advance processes. incremental our by aim this through adding

continue our our to lead to initiatives long-term allow share ambitions. market to growth progress these expect towards We further us and

in UK. growth however, not Our the will from come just XXXX,

Germany France in there make in those good we year, in begin our our markets marketing late once since to positive the sales to continue brand Europe launches mainland progress We and in coming last campaigns to unit a weeks. expect impact and our see

our We and our in of by and of us will become £XXX have remainder annually. QX teams, year growth sales this to to a those from a with combined expect this expect the target. to start contributor and the country of to of market place And year, presence five billion year, QX growth and countries to addressable at strong coming the end also key months launch revenues local our markets. over unit Spain over the in This to in markets contribute infrastructure, in in long-term partnerships at one see Italy we last already these grow and

ambitions, Before I macroeconomic the are our on markets touch backdrop industry remind important you to think facing. of long-term I it's and our

What in for market transitory little our in growth we bearing long-term growth a remind of now. could nature most macroeconomic us. of chain against macro the way as make expect any of number navigate we the structural however, impact, our targets, the progress to remain confidence and Whilst we climate expectations you a in on Our confidence. the front our mindful such wider very that and have despite opportunity consumer the be which continue solid is changing have rapidly and of we potential keep of as important, continue and as to eye headwinds, margin comes we closer achieving our through weaker All momentum exciting uncertainties we're any and detailed laser-focused on micro QX strategy environment supply on previously execution is year. issues I'll huge a a

at our results, As the in two start still full-year of markets worth We're top. amount we're a worth more EU market Four with over just accomplished we've than little opportunity on massive weeks this £XXX UK launch, £XXX the exciting journey. ago, and billion very said annually, huge since addressing few Big years the billion I a a whilst over a at market

is market medium-term just which time. over digit £X,XXX we shares addressable market transactions large would million targets we now prudent of XX flows generate Our market used single so expect to an business, that The free cash to have meaningful enormous low and is annually. over car opportunity £X,XXX, with GPU

is Our or capture of detail. QX to X,XXX now in over who'll share growth are long-term greater the Stephen, excited future performance through opportunity. our to market is target details we our run more X% which pass why with GPU, I will a by panels

Stephen Morana

Alex. everyone. you, Thank Good morning,

our revenues increased quarter, to million. £XXX the During XXX% a year-on-year

XX%. our strong retail from a XXX% Sequentially, a sales was and growth year, by which year-on-year, performances increased revenue streams. saw wholesale revenue other growth last QX driven from revenues, of units QX primarily retail we Our retail also but by with up XX%

XX,XXX QX, During including XX,XXX year-on-year. XXX% vehicles, retail up sold year-on-year, XX% units, we up

As our Alex and to said, available impact in-house positive growth a sales. with this [Indiscernible] inventory respect process, units which in on had retail following our reconditioning came initiatives our

As last over low well of sales pain previously experienced X,XXX and numbers our QX, the we from October cars, transition. we've during year. a this inventory short-term benefit, believe numbers. our see In mentioned, bringing reconditioning huge in-house investment we X,XXX to the a worth is in benefits the growing available of around on With up to strategic started

in full retail in we a results, QX QX. our down our flat £XXX the As that UK to GPU was year reported from £XXX

place the and were QX source that sell impacted this as made directly of from the retail in the we XXXX, our cars a big pillars consumers. deliver depth discussed the in-house steps our be our GPU by put full-year to of heavily second the into last to targets. to details again QX two in all the large at in I our two proportion all recent are key As strategic These XXXX a on half to to needed cars won't long-term year I GPUs UK results. go able we reminder, we recondition and

progress in business, While the both these areas, via with of of flows two key which much the costs we're we're the making of these has in GPU. strategic delivery OpEx short-term cost the goals to some pleased

will and the QX. highest higher impact reconditioning buying costs the expect in from We in investments channel be car

Looking to we the QX QX, and of the to per believe specifically, buying car Should in launch was more GPU increase have consumer QX inventory. the notable and in expect visibility a I'm in beyond, our clear beyond. in of the forward. More and channel for reconditioned we £XXX impact recently looking purchased on see region

expect see to a missing We only minimal QX. impact in

effective we further of of the [Indiscernible] reconditioning, to the the have about of As regards of and between majority make hundreds we reconditioning while end year, as now With continue, sold. GPU we expect are output, been can pounds investments savings. to the ramp cars set now

unlikely to Some flow of through weighted. to be to hedged start but bill which QX, will in

growth pricing to increasing already ancillary we've put Such will In in improvements, the during finance we addition, we'll continue directly place streams. increasing calls, and decisions, proportion GPU which revenue also sourced expect detailed further as previous and as optimizing costs to our consumers, in of further year. the drive

And We taken have of reaching GPU XXXX. steps path remain the to in medium-term. given we we beyond stated £X,XXX level the see in confident retail this a and we've

backdrop is Turning clear through coming rapidly macro-economic of to obviously as uncertainties. the through And though, day-to-day in changing basis make our all which to we this continue It's there a markets, we're on our near-term some a managing creates solid outlook, progress. we head periods.

XX strategy targets. if the remain our car higher reaching impact should our subsequent well we're long-term to impact the market remain we arise our to be whilst well-funded inflationary remain consumer in do laser they growth growth current continue confidence UK and GPU Internally, said next business focused and pressure EU in and execution see expect opportunity to short-term believe facing to We not our nature. transitory confident macro profitability. value months. do and that which our the and the are By we retail aware strategy Alex. we this and margin on inflation any they the huge to over in unit As to I capitalize there to cost UK XX share, new on if marketplace pressures execute the results, on the expect we of achieving of obvious moment. be And headwinds sales. at our on ambitious sales, stage on risks previous we

Alex Chesterman

Stephen. Thanks

significant our business. In in far And to and to have We both established a the macroeconomic infrastructure, beyond. to growth blocks huge that a open expect EU. plans, we So us our markets, that ambitious in brand, and in the summary, continue progress throughout capture and we there to we've all whilst and in seen and up team, the execute believe we who platform, in QX. and to around markets operator very strong XXXX pass are momentum to across biggest we've the the four uncertainties so market-leading UK, building continue now call we're the whilst enable our place the presence mainland opportunity creating Thank are made put the well-funded moats line UK for we by in now in Q&A. back the year Europe. well-placed very now I'll the will encouraged you. the We've

Operator

you. Thank

question-and-answer We [Indiscernible] be conducting will [Operator we a for session. while moment, now your One please, questions. Instructions].

with Our Gupta Morgan, first Rajat questions questions. come your proceed of please with from line the J.P.

Rajat Gupta

Thanks Great. ago on you I the near-term. the questions. a your the If more bit month from reiterated question you full-year, I had the taking comments, on import cautious full-year for correctly little a seem guidance. a had

units GPU? will retail has business, Thanks last that's in seeing curious, XXX,XXX are four retail you're still follow -- the it's the £XXX like three the I So full-year already? and you just that weeks anything and of And changed up. the or reiterating not in guide

Alex Chesterman

Good Thanks. morning Rajeev.

of things terms we've internally control could we QX. think I great in the certainly business, seen in that in the we momentum

businesses. for We are are of to that track the caveats we that recently, all external gave the on the unknowns subject guidance affecting

and potential. and So not what we topline has seeing how impact, have yet that any concerns that inflation direct terms may the of but we consumer pressures happen in how about are confidence impact might

long-term objectives delivering on months or just see short-term, on impact which flagging note but cautionary on The in that the medium the at are of same. to that the internal terms we and track opportunity, remain not would that said, those long-term which one couple issues and somewhat is hit all these targets. exactly we're we've we of hopeful macro set all having a to quarters, being as So I remain certainly thing any a reiterate,

Rajat Gupta

the quarter Understood. the that Got second that GPU give you've how if of January, that you expect through could you a sense -- you sense press already progress release, And in back in of that improvements give -- retail that February, so retail far Can seen us course it. you to could bounce and us XQ beyond. maybe GPU you of a through the the you or you mentioned March. mentioned expect

us Just comfort the and recovery here some to second the in quarter beyond? give around,

Alex Chesterman

Yes, uplift in second we're expecting a the significant quarter.

we in-house. be quarter first -- So Xx what into Xx specific that the so very about certainly bringing and the in inefficiencies were Stephen seeing And GPU cause, or specific to there would mentioned of we're with it of expect cohorts in to the that -- quarter. was reconditioning the reasons the relating far transition as

things through start system. you that strongly. to see through, then the those bounce And these are things washing of get relatively All that back number as washed

of QX -- we're that's confident QX. are our higher GPU number So materially we than

Rajat Gupta

sense a last it to the at or quarter the of one this Thanks. the range provide That'll ending for rough or end QX? was all end. EBITDA a one. be from Is cash my Got it. of balance possible the what And

Alex Chesterman

and one over all don't on one. specifically to I'll talks you leave that that to we obviously guide EBITDA Steve, but basis, Stephen, a on quarterly on about

Stephen Morana

Yes.

As far where not less off the be Alex kind of guide. extrapolate QX the losses Cash you'd over Obviously, losses, would were. QX don't said, year. we we

UK. be to course You'd continue to in move expect profitability of them year the we over the coming down towards the as

So and with the will than quarter, QX expectations, really. losses be higher exactly standard line in future

Alex Chesterman

Our currently. months based cash plus, on runway are where remains we XX

Rajat Gupta

Got and for luck. it. Great. color all Thanks the good

Stephen Morana

Rajat. Thanks,

Operator

you. Thank

proceed please questions. your Adam question line next of UBS, from the with with Our Berlin coming is

Adam Berlin

Is the good Hi, you of units there a QX, number on Three in pretty can, in driving selling. XX% questions units, of talking everyone. from if me, about talked linear site improvements about at higher question. should more first -- QX QX? I units sold higher expect beginning that XX%/XX% morning, Yes. we inventory thing were in the If first That's quarterly units the the than beginning of equation? QX you're

Some the we about Second discussion question, above to QX? would then this still it many below GPU GPU, missed in you big I helpful. what think the the QX then about something And business the on is target improvement the it need on clarify you expect question, for And you an about the I break-even. the in third £XXX retail. when -- that? Steve, do sounds cars you you we is like just all said that mentioned sense or to -- Thanks. around UK can timing to carry a for second as in be timing Can some through how you I the be you QX, point? to just gave it break-even UK to sell think going something get to go UK half of the year to Will see going timing you say the

Alex Chesterman

first the third. up pick and the I'll Stephen let two pick then up

But very more they're strong is you The become a of it's for, that of unit what inventory other customer there propensity So is to words, have. payment, time looking a sales, of the more correlation. sales. linear. not weeks equates to the eight And find well, about in terms relative right to target six should hold over linear. In of amount to the inventory very, it

we somewhat to increase that So in line inventory, with continue as ramp we should that. see sales up

inventory standard are to you run the we growing, grow sales just but faster as to Of not on course, have just replenish sale. the to have website, the

been beyond add highest because we think that we've replenishment able but why ever also to of seen level had, at inventory. that's to a QX change So you've step in the real I gone sales

monthly that can we we sold a the on if where basis, then grow significant so to do and stock replenish to see can start sales. inventory, we'll growth unit And continue in

the In terms £XXX. No, a QX. won't is the GPU in target year. it near average of anywhere for £XXX be

we you see sales volume should more that We basis volumes see go on throughout on be unit the to And and sales year sequentially year. in a a so up a selling both will monthly expect therefore, GPU unit up the weighted go quarterly throughout and will QX could terms low GPU. the be both units basis, and so throughout and a quarterly point on year basis of progressively would

in the efficiencies, just a both second the half be and lot of the So benefit GPU. at more to expect and and that the get, see the year more an as £XXX, And half probably of the not improvements buying, the of of about volume first year average reconditioning, the by -- we efficiencies logistics; processes, and is will also, benefit. be we scale on average sub spot you higher the it's the of we're an driven but terms see which is also drilling, in this we

to of In I'll UK Stephen. terms pass breakeven,

Stephen Morana

Yeah.

XX so we of we said and it rolling monthly 'XX the of So would UK positive towards basis, away what a showed into territory. end from move months towards was even, about breaking on a the kind

Adam Berlin

Okay. Thank much. you very

Operator

Our with Instructions] of your Thank from Saeed please the questions. come questions you. with next Saim [Operator line proceed Berenberg,

Saim Saeed

Thank [Indiscernible] of out for but You attain being more give be my about capacity of around UK I in in refurbishment first somewhere much have a expecting fully afternoon, know as is also it [Indiscernible] or and of notice you completely sort the question. would first-party from in be flexibility your My be high the next to it managed the just are us third-party a consumers, your maybe to do gain significantly average another year expect final that? is I the some It for would And as maybe it have by will will I you second indications if that fallen proportion that gain share wholesale where at high very forward? potential if And seems to directly thought entirely I you you helpful? given could quite first-party share everyone. had will asking you sense made pace, if seems generally. be flexibility? typically my any you one market XXX,XXX well, do refurbishing meaningfully of odd to And peers, refurbishment [Indiscernible] year unwilling end they [Indiscernible] taking my you about that's of you where we between of third-party some of higher leading market selling correct about quarter-in-quarter [Indiscernible] of the much aiming refurbishment. price. quite are would say it that now, reasonable or And Hi, to first-party from is be slightly year? out one end [Indiscernible] any be the one getting guess vehicles vehicles. quality which [Indiscernible] QX. to

explanation also that behind you. any be very So would Thank useful.

Alex Chesterman

Thank you for questions. the

improvement So expect on of month this first terms to of is that in all, see. gradual month a capacity, we

to the We capabilities will this targets are to year. XXX,XXX the this we've the we recondition have talked comfortable that year meet about, enough cars

that, in that. in we're to confident we're our monthly do a So ability and seeing improvement

would next out is we year. run by to year but of of the end at expect where end so come we And it be the rate, at doubled this almost the

versus the question, third-party. In terms first of second not. party Absolutely

we problem can absolutely share sales the can a ourselves. terms as we having as that our important, costs the get from are to In stock, boast well right, as and But our using you're quality as preference the if capabilities much most of market do third-parties. to third-party internal with

the bolster those we we parties beginning own open capability as our start in in-house Italy, we're to to third have the Spain. in in add in-house that also a the we doing of discussions with are relationships beginning and already own fact, have in third-party in and UK is to that partners where in can capability, to and Germany, We UK our to France, how which are that to EU mix and are that,

as the use whatever we that long the close will are as to can we not costs get opportunity we quality maximize we opportunities and we're will, want So the and there to capability.

of straightforward that answer the on number the question that sold in last we Which as there's been we in a otherwise had of to terms cars backlog have is, wholesale, In would QX of QX. the reconditioning, in very calls in that. a through Higher-value issues retailed. third year wholesale result

XX,XXX costs. backlog cars. the cars the need put they and Now our within that we've we That's into sell to of retail, the via reconditioning We're too now no but no we position was queue we by can longer years, were keep we QX wholesale. sold outside for retail things originally wholesale. We them saw them because become we happen zero them anything sold to bottleneck sold the thought going reconditioning, we of for miles. to in on to in long, were what those you where that All the sitting that forced sell are we longer for zero six our to

buy with it we into goes in some view ended intention refurbishment, to So a anything bought is of whereas now that the we the with retail now being up it and car, cars car being of retail retail in wholesale. a QX,

Saim Saeed

you. quick any one it's going? and thank just CapEx find And on Great, you your this for guidance factor Can spend lag follow-up. year maybe

Stephen Morana

said for predominantly to million Should we around? million by the refurbishment. start looking £XX year, around We £XX

outlook there constant ongoing and down have continuously the said you that upgrades do continuing it's big just refurbished incentives XX this out, in Europe so in to obviously improving just one one isn't this build them. UK, is we So here, upgrading,

need capacity, continue to to them more refurbishment as our you machinery think capability improve some capability. when I

Saim Saeed

you very Thank Great. much.

Operator

at time. Thank are appreciate further participation. We today's your teleconference. no you. conclude this There does questions This

You Enjoy of day. this the may at your time. lines rest disconnect your

Alex Chesterman

you. Thank

Cazoo (CZOOF) 3 May 222022 Q1 Earnings call transcript