- Earnings call transcript Q3 2022

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Operator

Greetings, everyone. Welcome to Cazoo's Third Quarter Fiscal Year 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 Instruction] Please note that today's conference is being recorded. turn CEO. over I'll OBE Robert time, and Founder this the to conference Berg, At Mr. may begin. you Berg, now

Robert Berg

Good morning, year everyone. and webcast Thank you for discuss third joining Cazoo's quarter fiscal XXXX to results. today's call

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

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

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

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

I'll the Now Alex. to over call hand

Alex Chesterman

the backdrop year-on-year. XX,XXX our as we over many and and with of led demand record and was joining offering. our of QX consumers remain demand proud discussing Good million consumer to U.K. up confident leaves you also XXX% sectors then quarter, U.K. businesses some backdrop, track macroeconomic despite Rob. today. recent Thanks, for macroeconomic about very continue which seen our impacted I'm U.K. in year-on-year in quarter I'll months, by and sales declining performance, challenging thank everyone, demand trend XXX% start talk like embrace period. our performance respects. QX, any sales all we the firmly reporting I'd an growing positive discussing in the with retail £XXX morning, most the on And to extremely further tough without and medium spend to Starting has revenues profitability targets. with how this This during to the very competitors, why record need performance funding. for the achieving our retail us us I'll about units long-term to reach bugged time across for very Whilst the unit third

despite September subsequent and to As taking buying reviews encouraged per continues buy way players launch, to accomplished allow over ability a profitability. the the the cash grow with for more in We requirement the was on U.K. market, QX we further is has and the progress We're cars retail XX% at any industry. up U.K. on QX, one GPU, GPU, quarterly which to rates, share strongly future revenues end three future sell greater 'XX that enormous we're at market macroeconomic selling the on £XXX self-funded sold including U.K., clear sequential you shift improvement, road our have of start In good balance products of and further scale progress to compared to keep online the metrics, both continue and funding. their and car of same growth continue and U.K. market accelerate. third despite just of well make an the our strong On amount the now remain over of versus can eyes strong consumers our reach our a made conditions. strongly we U.K. year period this see the tough continued used Consumers of still maintaining than positions billion from and in with in laser-focused orders In external just will that reconditioning for X% consumers Whilst online. our our journey. SG&A This fastest-growing exciting with Whilst about gains at had Cazoo us without market in year the growth a strong our scale of as share of the unit QX. opportunities our to and XX% and billion market-leading the suggest sheet, are and largest ancillary our to U.K. since inflationary their terms or as in voting to £XXX our reducing market. driven continue to become and capture operation, a car retail entirely we've we our of operating rate businesses efficiency to under growth XXX,XXX buying, the used car we for outperformance inventory by with per £XXX of by £X and we having vehicles years almost profitability the proposition resonate one we've across pressure. the our significant plan as to time car short us used we're that time, the million ever

to improve operations, which XX% our out the success want constantly our retail channel, over we allowed to with buying This U.K. directly infrastructure platform elements call consumers strong had car of our represents buy improved direct now sales to and all has I As we've from the and we of from benefit us in cars now have highlights transactions range. at scale. pricing place and particular

inventory our maintain continued whilst to in quarter, improving changes vehicle made We market-leading. A despite note particular remains our levels, per which also We've to we record the processes, reconditioning scale ensuring reconditioning lower our this to our customer make progress continue cost sales. proposition allow also reconditioning to us record to some levels capabilities good strong efficiency. to us allowing

in a with we're GPU a as that where combined growth, is on from early spread cost starting a increasing XX% U.K. initiatives with quarter-on-quarter, on we've expect encouraged time for steadily our our plans unit sales. made We seen through and focus other payments payment business product see positive notable in realignment our impacts payments our economics. same to our remainder strong is progress longer per quarters. by the in the over positive this expect coming our At products we've starting to our customers the the ancillary improvement and our attachment in QX to material and see Having continued and unit plan, ancillary we're it's having rates is further of monthly impact monthly our Whilst over cost now very U.K. still can on launched control, successfully decrease retail of further period. impact Additionally, and days, SG&A have beyond. QX GPU benefits year implemented product this the

it's as and to supply chain macroeconomic headwinds profitability and performance our such which improvement Our negatively on targets. likely that this and weaker our solid the long-term consumers medium momentum QX Whilst results, in deteriorating that confidence reaching love our provides period issues have with serves show confidence proposition, comes strong consumer us even only through our despite climate. more impacted

us time. we leading share U.K. year-to-date, we've giving over reminder, market Digital the seen in to billion like market As towards rapidly penetration a remains incredibly transactions to in million annually. the a our sector. addressing to a and X value low with expect are massive the of beyond around car £XXX X% Much market brand the fragmented, and hugely over we used and build increase remains continue the opportunity

£X,XXX we gross a prudent that previously, or just of with As generate medium-term flows. share market meaningful and we've of share of free a even close £X,XXX, target said more so a greater U.K. X% billion X% and is £X.X our long-term would to GPU the large GPU, target market annually opportunity market is exciting. profit cash and opportunity With the a

will who inventory extremely a through and million end robust, taken to self-funded which over want of September. our hand with the possible. little decisive our detail, achieves performance I our Stephen, our balance actions focused to profitability discuss details QX over are I soon remains of our SG&A ensuring run of business of strength and at increase Before the £XXX sheet, more on We've just cash as costs in and as GPU reduce to the

Europe, funding. to in have ensured withdraw realignment June, profitability now with a without has over plan business external I'll requiring reach plan we Stephen. decision that clear in further Our our to from to announced September pass any Mainland together

Stephen Morana

and Alex, morning you, everyone. Thank good

through I from highlight that our today, segment, want all as which QX go discuss that result to during our report decision operations, I our how the discussed a we've going will in release, will just the and to of Before numbers numbers, withdraw made I forward. U.K. quarter relates be the we solely to the EU

results. operations in discontinued as FY 'XX segment the European our report will We

For which was strong our XXX% reference, increased only were which which the by we XXXX, is up as revenues by and U.K. trends. have see achieved driven £XXX useful U.K. able we QX well year revenues, be U.K. XXXX, as XXX% this to driven uptake Growth primarily of hopefully QX retail year-on-year, continued year-on-year. to proposition. of million, QX over restated In QX

During QX, significant to growth. representing we macroeconomic share XXX% came representing as climate we in retail This a retail cars year-on-year growth the again market the units, offering. yet XX% to year-on-year in despite growth, the sold challenging including XX,XXX our U.K., units continued take XX,XXX strength testament of

are grew a to inflationary in and QX. product Moving QX. been our efficiencies, This £XXX QX result confident continue in ongoing we've QX. to which strong £XXX again buying, and of Alex improvement improvement by pressures will seen to discussed, we £XXX came We sales from has despite as a GPU, in improved reconditioning into XX%

normal reminder, cars that process were countries the the costs QX the date as that September appreciation a wind-down by used and was the four quarter. anticipated impacted strong XXXX quarter. from seen in carrying obviously of this As some Xth operating price in of GPU of We European the until positively began close

all down was forward, pass rate than lower cash trading to we run overall Alex, will now four the of activities the The plan. countries who I'll we'd to less be half investment process. of trading as cash back U.K. and and outlook. and current our complete the significantly wind burn stop the in current through expect Going run

Alex Chesterman

affecting peers the we momentum our to maintain year-on-year October, growth share. all growth continue weak amongst of and retail strong and maintained to expect across sectors, our where over rate other to Thanks, environment market we've our very Stephen. our increase XXX% QX into Despite macroeconomic

U.K. our with through to costs lower to the retail we cars ancillary consumers, our remainder U.K. We strong reconditioning QX unit over sourced optimize further continuing of retail improvements GPU at continue revenue continued see increase proportion growth increase progress our along as our and directly with the and of sales financing to XXX% year-on-year, significant from operations, expect streams.

said to to many but reach need any we expect profitability worth it's additional external stressing times without for I've funding. the continue again, As

remain the and ability very the line We're October. in you. for than economic strong ambitions. the significant the well positioned record sales incredibly extremely become we've and achieving confident QX less We breakeven, quarter I'm launch. growth, in market years against maintained online of backdrop, the about future entirely funded back cars summary, now the further and shown call biggest taking opportunity, very the into So since players period. also we've will had delighted and that to economics XXX,XXX almost progress we've our our Q&A. in levels, of to share, marked excited a Thank three I'll with towards market to share well tough momentum strong unit our very sold improvement having market, huge a reach a up operator, the market in who pass capture our We've one in our in open

Operator

for session question-and-answer question questions. proceed Ladies from our and the the gentlemen, Rajat start question. and [Operator line Gupta call of Instruction] from And open first with Thank Please JPMorgan. we'll your comes the you. now

Rajat Gupta

of off market. While grow Maybe able used part in and low, good penetration expectations and the a small question. consumer the online heading to industry and the morning, a starting it next afternoon. for to year you year? base Thanks into broader later a health market car just should declining be taking off volumes into give of good your just the us the is and is still with backdrop, early even start Cazoo sense can of Hi, share

as environment step down further but the consumer for takes vehicle a just expectations supply improves, your normalizing. probably backdrop to new as curious before Just the

So have are and power concerned you to all follow-up. hit just I ability the at XXXX targets? And pricing a about GPU

Alex Chesterman

So U.K. facing the beyond U.K. consumer a time. and clearly, the challenging is

challenges in so the encouraged by the performance far are and very various into market. QX given We performance QX, in the the

got of market. inflationary pressures, demand effect in elevated consumer look in supply, challenges car challenges, years over you've at affecting course, you there supply knock-on have of driven market, supply supply car are used gone for result And of obviously etcetera. confidence, If on which the now the both issues chain well as the and by new pricing, are two a

And that, now. XX% going the -we all some growth a on despite This year-on-year, this consumer. significantly, very for XXX% of new been quarter-on-quarter. with isn't growing phenomenon are has So months

we're seeing behavior the consumers So We're that. lower already in price of that less generally cost, gravitating seeing towards value.

the in unlikely sequential significant get market. we this expect still the better in us And QX wider in issues the supply, normalized normalized in improvements we expect In pricing, takes is significantly numbers in term. perform our is to in very things term, year, better that fact but future, to than beyond for look So the the despite model the next GPU going into short to a on difficult very into opportunity market in of we unit those as long account demand, budget normalized significant. opportunity and the normalize with our are and and medium growth market,

Rajat Gupta

you've you mix color perspective? And and And funnel on the from give SG&A particularly it on a of more spend? months still curious moving was share from if couple driver But or the then improving around in as last drop-off terms made of you on brand in a X,XXX headcount target, leverage, performance away if seeing support benefits the detail progress little like advertising, conversions could any of any Thanks. maybe you've higher back over to are also us of you on target. obviously, customer you're marketing. a metrics And headcount could the pulled

Alex Chesterman

unit think cost so per you SG&A one the the we target if volume units, SG&A simplest we're we simply per because the terms, about in SG&A is very per if unit, half unit. confident of the Yes, double

takes plan and of We course, the group Europe, into those costs from see obviously, combination end actually will notable as the a in fully months. quarters £X,XXX those but of seen some the last from we've numbers, down costs result QX, a we out system. And loaded, getting the European the a all towards also then, to a costs, are actually actions realignment QX. and of of we for growth under carried where two of that to a there of continue because into in about the of group year over and last benefits that costs, including the unit, the £X,XXX that number the as still So realignment full from time effect. having end of the taken next was unit take or But loaded the costs to from lot see where go QX we of QX. the decrease There some And of all into in it have completed things, less reduction we've down QX per the couple £X,XXX next pre of in got plan year, in SG&A X costs. obviously, by withdrawal

decline. confident ability to our to very number we're see so that continue And in

Operator

line comes with of Our proceed question. the Adam Please with Berlin from UBS. your next question

Adam Berlin

question from cash of me, to it. I just to that the business. said outflow one confirm, you that wanted taking Stephen, U.K. QX, Just half for only that the in thanks related

So right position I at It's now was is the end the cash of math, £XXX. QX. £XXX think

that. of the be cash million which So QX, in there's half would just U.K. of £XX outflow

of So that is a the... what good idea

Stephen Morana

think you at. I when look

away with assumption. that not a You're miles million Yes.

£XXX, that. cash the think, way, Looking would at U.K. dropped equivalents and cash just have of a been and half you've in over I

Adam Berlin

£X,XXX for the basis is the month, units still on XX,XXX So breakeven? GPU that basis, a right

Stephen Morana

at do look will we we SG&A do get the there how coming I for over Can efficient be line, How the months. all at get effective. that less? more we think and more looked of

think that that can either or efficient So finding I volume base was like a lower we'd at that to hope GPU, lower ways. even we effective the more but assumption. a Obviously, and means break

a centers. built processes CCCs, got lot. got refurb built done a delivery we've Alex We've said, the out in place. infrastructure As now. We've We've we've big the the

yet the don't on haven't breakeven, but there ways getting is are So changed can lower. that that getting of find sales we faster significantly need GPU. that kind or to the back marginal that on come ways of and we But cost hope of

Adam Berlin

be question yet? just doesn't marketing to in unit Because was seem the back of the talk help you dialing marketing more And impacting that to I the maybe per a one spend know there the happened growth. Has on side. down get plan, U.K. little unit. it SG&A bit

despite that is to delivering marketing? So less growth still on actually, still Or come? you're unit spending

Alex Chesterman

come the to of of more a lot of beyond move performance and start some year as more unwind still performance that XX-XX of favor balance in brand and that. we actually towards A next is brand to because tilt spend

further in the So there's still benefit come to some

Adam Berlin

the that's to off? think that comes don't rate brand you slow But as growth going down spend

Alex Chesterman

No. If anything, is based. response buying you're spend, future. the opposite is Performance true more because spend brand

three it So we've brand rate. brand have us continue the unnecessary and up awareness already over given to an built years, really spend that it's the doesn't last impact at strong for on to

less So moving efficient are marketing and a you're efficient actually, in pound brands performance. from who more

So But that And therefore, from volume. reduced impact. impact you is non-performance you drive absolute true, an spend, performance, if opposite actually, if to then you're see the you volume. would shifting massively more don't

Adam Berlin

do of shift. cut It's So marketing you're just spend to you not the going that It's to marketing spend keep to it a broadly actually is? in level absolute where a need

Alex Chesterman

a single market grew same and XX% down XXX% brand, from parties digits, car but to QX if low used spend think overall may don't because look other double high volume. materially in somewhere have impacts we the year-on-year. was on reduction various between continue our versus and marginal it we And you we the overall don't who reported, growth There year level need overall be in next market, at digits, X% the probably spending

significant taking share. we're So very

in biggest next to but year. this third grow certainly We to us continue of XXX,XXX our grow. year-on-year the important to makes year. grow think two three units as highlighted, one at takes players the us year, That XX% remember, at year-on-year, we we'll next or is in it's think will over will continue to U.K. And retail the XXX% I we I don't market. over

We haven't yes. reached our three-year anniversary, our even

you be not is XX,XXX volumes of scale right? of that. the volume units, low infrastructure grow that our unit those I and base, off top player low a U.K. sorts the look So think, rates, at delivering, If base. to at levels the of at those not the the this to brand three a and And XX,XXX a and year, grow continue to important. we're That to that's to in is base able

Operator

The next Saeed line your question. the question is with Berenberg. Sam with Please proceed of from

Sam Saeed

I guess one something my is X-K. just first the to related in

of of mean rate I guess... stocking of overall think have base should seems at representative very rate XX.X%, your one assume not of we interest this all is bulk? like your loans plus to just lines a amount I I stocking small

second update an another target, after think provide the £XXX I Steve. on per retail it longer-term I might us unit And where now? your target. reconditioning to Sorry. one, Maybe relative My longer-term you maybe could right have your is was one

Alex Chesterman

Yes.

months being months cars last are of delay increased things. actually, the all bought changes months are the we've there over through and benefits sorts than an three on that cars time of they loans, the because shift And today in sell a to and at materially that. to Reconditioning So bought, to patterns, things month processes, those costs, three through so lower the good sold, a over with a course, those come implement of from efficiency changing starting of that we've four rates going progress you couple reconditioned some ago implemented very numbers seen that or you the ago. stocking now is you because sites, system the being last or anomaly that's

the and the GPU. improvements further that of very drivers by area we we to is see of improvements to are expect encouraged and the that So improvements, making in that expect we're see continued further in one

you of from by this QX QX. £XXX at to course our year, If GPU it throughout the QX have look grown per quarter about to we QX,

month year per And throughout in broadly so continue a expect GPU QX. entire So we to the £XX that in improvement far.

of expect the to and £XXX to QX, further further still we reconditioning we comes as have to see year. some and £XXX to of to efficiencies, into get from of So go, but we'll to again more that a sequentially QX improvement that next improved start GPU we from see

Sam Saeed

And demand units and for supply When improving, I finally, mentioned just QX. I I improvin, gradually twice to we're getting early of decline about next year, for incrementally from to so worse. pricing environment clearly, remainder isn't into is but said think maybe already half the going call, the maybe flat the retail that you you in the quarter a was then When think saw last remain you've onwards. think X% in quarter thinking

sort should So as run to from of it sort a good would this Or X% helpful. flat decline view just of moving on And going forward? kind remain rate of anything that quite be level? we quarter-on-quarter is this

Alex Chesterman

improving. supply is something said. So That's that we not not

levels, continue. relatively back Pricing flat. until think new constrained and will back that I is remains to and normalized suppliers to pricing remaining think used car previous I levels car supply is until

the got and push-pull of You've issues there. balancing out demand supply

demand of even on pricing shortage sort supply pricing our two is out. challenge, of is other the each So weighing and those things up driving

that very to make much depends macro Doesn't on So over from we flat a in really perspective. happens a coming difference see pricing the us but months, what remaining GPU the as relatively environment. huge

sort think X%, pricing up whether doesn't is difference down to or a it make of numbers. I material our So

Operator

Catherine proceed O’Neill your question. Citi. of [Operator with the Instruction] comes with Our question from next line Please

Catherine O’Neill

question if shift, in at said or don't sort pricing a GP for demand what you of to is pricing you think the and moment your discussing down I the improve then I've more say, just were would about the question up second consensus just I had challenging EBITDA on market, I it And flat wondered the you it for And can if impact for GPU. could us broadly follow-up to is on pricing. expect degree that would starts to you manage the about Actually, be to year. X%. How think you let's that? need help got

think wondered I it's fairly minus million. if savings comfortable run just £XXX about sort for I you're with looking number EBITDA adjusted around about given that the the rate in U.K? for of

Alex Chesterman

cars bought between one on largely If one to that because retail So pricing if another GPU you're and a its impact moves moves wholesale and pricing is direction. on or there's moves itself impact ago, the market potentially over because tandem, three and in there in market the two selling effect. a impacts pricing month-to-month slight you out. But pricing delay materially either quarters, months one way

a really impact doesn't have it material GPU. so on And

you out year, look take QX happened pricing quarters we flattened if average that out, the pricing out. you significant the saw effect you If at it But appreciation last sort what of in on and then of number.

there. material a I think expect So don't we change

In I of think, terms for to related you number the EBITDA better significantly might base. change HX of some the adjusted mentioned, and be of group cost HX to And the Stephen we expect there. have the plan things than out realignment because the year,

Stephen Morana

brand than that. once a And everything process consensus the perspective going just only. going Yes. U.K. now forward, obviously, the then from be and lower mean, we I U.K. through we're group, Europe it's out. group of is so down a be the The closing U.K. only EBITDA will for will

Operator

of Our next Berenberg. the question from line is Saim Saeed follow-up with the

your You proceed question. may with

Sam Saeed

Yes.

just Sorry, other one question wholesale on units. quick

a think forward? XX% now of moving it's total to Is percentage sort mix. think the unit I good U.K. about of that

Stephen Morana

a our retail not choose end retail. byproduct you wholesale business, that Look, so. think not cars with business, you it's the up wholesale I somewhat core of is and to

reason generally So core two them either, business. you They your fall one into bought than categories. they of other for a

were exchange, car to reason, a you mind were. the channel providing driver wholesale to change your buying you're them and what thought direct because business. whatever for is You then consumers. through you a bought through Or, not you Or, of you your thought going that's large part they're they service them which retail

buy getting very Those would getting we cars on And maximum that wanted buying greater the not channel. retail. recondition those a drive and therefore, have the number from range, business. I car or to trying other to that are at to thing have we otherwise the when inherit is expect think, better couple year to we you a for and either consumers. is part fluctuate perspective sensible through this it. look being we're reconditioning much choose at are the able from the better capabilities the year-on-year, wholesale we data for much So selective sort we exchange of But in of volume retail cars we time whereas we in a we that a between at cars, some if place volume that last of absolute XX% to positive reasons. cars is and wholesale now actually And drop were to look One, XX% constrained reconditioning, sent to largely in to

context auction to, effectively, more BXC a a consumer, trying win, to selective the buying in you're an we effect, or is we BXB from which if directly to everything. process we're auction it's So about in it's context, want in being whether buy what versus much process choose

if a historically. reaffirms a to more positive is we were we because buying it So anything recondition that it's and only absolute able -- than to we're buy, what we're number want not that

Operator

this Ladies call. today's and concludes gentlemen,

you time. this lines your wonderful at day. for a have and disconnect may participation, your You Thank

Alex Chesterman

everyone. Thanks,

Cazoo (CZOOF) 27 Oct 222022 Q3 Earnings call transcript