Q4 2021 Cazoo Group Ltd Earnings Call

Greetings and welcome to <unk> fourth quarter and full year 2021 earnings call.

Greetings. Welcome to Kazoo's fourth quarter and full year 2021 earnings call. At this time, all participants will be in listen-only mode. A question and answer session.

At this time, all participants will be in listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during todays conference. Please press star zero from your telephone keypad.

If anyone should require operator assistance during today's conference, please press star-zero from your telephone keypad.

Please note this conference is being recorded.

At this time, I'll now turn the conference over to Robert Berg, Director of Investor Relations and Corporate Finance. Mr. Berg, you may now begin.

At this time I'll now turn the conference over to Robert Berg Director of Investor Relations and corporate Finance Mr. Berg you may now begin.

Good morning, everyone. Thank you for joining today's call and webcast to discuss our Q4 and fiscal year 2021 results, you'll be able to find today's press release and accompanying presentation on our Investor Relations website at investors don't because they don't carry the U K. We appreciate everyone. Joining us today with me on the call, It's Alex Chesterman, founder and Chief X.

Robert Berg: Good morning, everyone. Thank you for joining today's call and webcast to discuss our Q4 and fiscal year 2021 results. You'll be able to find today's press release and accompanying presentation on our investor relations website at investors.kazoo.co.uk.

Speaker Change: We appreciate everyone joining us today. With me on the call is Alex Chesterman, founder and chief executive officer, and Steven Marana, chief financial officer. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're all familiar with.

ZIP officer, Steven Mirana, Chief Financial Officer, before we get started I would like to remind you of the company's safe Harbor language, which I'm sure you're all familiar with.

Speaker Change: Management may make forward-looking statements, including guidance and underlying assumptions.

Management may make forward looking statements, including guidance and underlying assumptions forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially for further discussion of risks related to our business. Please see the filings because he group limited with the SEC.

Speaker Change: Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, please see the filings of Kazoo Group Limited with the SEC. Now, I will hand-

Now I will hand, David Coates Alex.

Thanks, Rob and.

Speaker Change: Thanks Rob. Good morning everyone and thank you for joining us today. I continue to be extremely proud of what our team has achieved both since launch and particularly over the last 12 months.

Good morning, everyone and thank you for joining us today.

I continue to be extremely proud of what our team has achieved both since launch and particularly over the last 12 months.

2021 was a landmark year for because of our second full year of operations on a year in which we made a huge strategic strides towards achieving our mission of transforming the car buying and selling experience across the UK and Europe .

Speaker Change: 2021 was a landmark year for Kazoo, our second full year of operations, and a year in which we made huge strategic strides towards achieving our mission of transforming the car buying and selling experience across the UK and Europe .

Speaker Change: Along with listing on the NYSE last summer, we achieved a number of our key strategic goals last year, including bringing our UK vehicle reconditioning in-house and launching our own in-house car buying channel where we now purchase a significant volume of cars directly from consumers.

Along with listing on the NYSE last summer, we achieved a number of our key strategic goals last year, including bringing our U K vehicle reconditioning in house and launching our own in house call buying channel, where we know purchased a significant volume of calls directly from consumers.

Speaker Change: We also launched our subscription service and already have over 10,000 subscribers across Europe .

We also launched our subscription service.

Already have over 10000 subscribers across Europe .

Speaker Change: And in December , we launched Kazoo into France and Germany. We continued to put all the strategic building blocks in place to enable us to execute on our ambitious growth plans whilst also creating significant moats around the business.

And in December we launched kazoo into France, and Germany, we continue to put more strategic building blocks in place to enable us to execute on our ambitious growth plans, while also creating significant moats around the business.

Whilst we've accomplished an enormous amount in just two years, we're still just at the start of this very exciting journey, we're more excited now than ever about the future opportunity for <unk> and our ability to capture a 5% or larger market share of the huge three.

Speaker Change: Whilst we've accomplished an enormous amount in just two years, we're still just at the start of this very exciting journey.

Speaker Change: We're more excited now than ever about the future opportunity for Kazoo and our ability to capture a 5% or larger market share of the huge £300 billion addressable market that we currently operate.

<unk> hundred billion pound addressable market that we currently operate them all.

Speaker Change: Our customers love the kazoo proposition and consistently tell us that they will only consider using us for their next car transaction, which is reflected in our market-leading truss pilot rating of 4.8 stars, and this continues to give us increased confidence in both our strategy and the growth opportunity.

Our customers love, the kazoo proposition and consistently tell us that they will they will only consider using us for their next car transaction, which is reflected in our market leading trust pilot rating of four eight stars and this continues to give us increased confidence in both our strategy.

And the growth opportunity.

Before we discuss recent trends I'd like to quickly recap the significant progress we've made on the two years since launch we spoke about this in detail on the recent fund raising call. So I'll just summarize the key points today.

Speaker Change: Before we discuss recent trends, I'd like to quickly recap the significant progress we've made in the two years since launch. We spoke about this in detail on the recent fundraising call, so I'll just summarize the key points today. A commitment toatted the States- Fitzange. On the other hand, where the

When we launched in December 2019, our mission was and remains to transform the car buying and selling experience across the UK and Europe .

Speaker Change: When we launched in December 2019, our mission was and remains to transform the car buying and selling experience across the UK and Europe .

Speaker Change: As you can see on slide 4, in just over two years since then, we've established a market leaning platform, brand, team, and infrastructure, and have already sold over 60,000 retail units in the UK, putting to rest the question of whether consumers are ready to buy a car entirely online.

As you can see on slide four in just over two years. Since then we've established a market leading platform brand team and infrastructure and are already sold over 60000 retail units in the U K putting to rest of the question of whether consumers are ready to buy a car entirely on.

In line.

Speaker Change: We built a highly trusted brand across the UK with over 80% national brand awareness.

We've built a highly trusted brand across the U K with over 80% National brand awareness.

Speaker Change: And we now have a world-class team of over four and a half thousand employees working tirelessly across the group to deliver a materially better car buying and selling experience for our customers.

Now have a world class team of over four and a half thousand employees working tirelessly across the group to deliver a materially better car buying and selling experience for our customers.

Speaker Change: We've started to replicate our success in Europe , having launched in France and Germany at the end of last year, and the recent acquisitions of Swipcar in Spain and Broom Broom in Italy have provided us with strong local teams, infrastructure, capabilities and relationships which will expedite our launch into those markets in the coming months. Combined with the

We've started to replicate our success in Europe , having launched in France, and Germany at the end of last year and the recent acquisitions of Swift car in Spain, and Bruce Rome in Italy.

Provided us with strong local teams infrastructure capabilities and relationships, which will expedite our launch into those markets in the coming months combined with the U K those five key markets. We're focused on have an addressable market of over 300 billion pounds, a year, which we expect.

Speaker Change: Those five key markets we're focused on have an addressable market of over 300 billion pounds a year, which we expect to become the largest player in.

To become the largest player in it.

Speaker Change: On slide five, you can see that a significant amount of this progress took place during 2021.

On slide five you can see there are significant amounts of this progress took place during 2021 .

Speaker Change: In July , we launched our in-house car buying channel in the UK, where we now buy cars online directly from consumers. It's been performing well ahead of expectations so far, and has materially increased our sourcing capabilities and diversified our buying mix, which will have significant long-term benefits to our GPU.

In July we launched our in house call buying channel in the U K, where we now buy cars online directly from consumers. It's been performing well ahead of expectation so far and has materially increased our sourcing capabilities and diversified all buying mix, which will have us which will have.

Long term benefits to our G. P M.

Speaker Change: We've also recently added service plans to the suite of additional products that we sell at checkout, and that now includes consumer finance, warranties, pain protection, and insurance. And we're very encouraged by the growth in attachment rates that we're seeing on these products.

We've also recently added service plans to the suites of additional products that we sell at checkout and now includes consumer finance warranties paint protection and insurance and we're very encouraged by the growth in attachment rates that we're seeing on these products.

Speaker Change: In addition to our used car retail proposition, our new car subscription service is resonating extremely well with consumers and with over 10,000 active subscribers we are the leading consumer car subscription business in Europe .

In addition.

<unk> to our used car retail proposition.

New call subscription service is resonating extremely well with consumers.

And with over 10000 active subscribers, we are the leading consumer call subscription business in Europe .

Speaker Change: Importantly, however, whilst we're driving forward very fast, we continue to maintain extremely high levels of quality and customer service, and are incredibly proud of the exceptional feedback that we receive from our customers every day. Our trust-pilot rating of 4.8 stars, with 95% of our customers rating us as either excellent or great, is the highest of any player in our sector globally.

Importantly, however, whilst we're driving forward very fast we continue to maintain extremely high levels of quality and customer service and are incredibly proud of the exceptional feedback that we receive from our customers every day our trust pilot rating of four eight stars with 90.

5% of our customers racing else's either excellent all great is the highest of any player in all sector globally.

Yeah.

Speaker Change: Perhaps the biggest strategic step that we've made over the past 12 months is bringing UK reconditioning in-house, a challenging process for sure, but one that has significant operational and financial advantages. We now have 11 in-house reconditioning sites across the UK and EU, up from just one at this time last year.

Perhaps the biggest strategic step that we've made over the past 12 months is bringing UK reconditioning in house.

A challenging process for sure, but one that has significant operational and financial advantages. We now have 11 in house reconditioning sites across the U K and EU up from just warm at this time last year.

Speaker Change: Our UK vehicle preparation sites can currently recondition over 120,000 cars a year and we have the potential to double that volume from those existing sites over time once they are offered.

Our U K vehicle preparation sides concurrently recondition over 120000 calls a year when we have the potential to double our volume from those existing sites overtime once they all optimized.

Speaker Change: We now operate 21 customer centres across the UK for collection, distribution, storage and servicing and have a fleet of over 250 car transporters for deliveries. The investment we've made in our in-house infrastructure will be pivotal to our ability to grow materially over the coming years whilst maintaining the high quality experience that our customers love.

We now operate 21 customer sensors across the U K for collection distribution storage in servicing and have a fleet of over 250 car transporters for deliveries the investment we've made in our in house infrastructure will be pivotal to our ability to grow materially over the coming years, whilst maintaining.

Painting, the high quality experience that our customers love.

As a reminder earlier this year, we also announced the news of all significant additional $630 million of convertible notes funding a transaction, which was further endorsement of our business and strategy from both new and existing investors who are extremely excited about our progress to date.

Speaker Change: As a reminder, earlier this year, we also announced the news of our significant additional $630 million of convertible notes funding, a transaction which was further endorsement of our business and strategy from both new and existing investors who are extremely excited about our progress to date and the huge market opportunity ahead of us.

And the huge market opportunity ahead of us.

We are now very well funded for the coming years to continue to capitalize on the huge future opportunity I'm about to remind you of.

Speaker Change: We are now very well funded for the coming years to continue to capitalize on the huge future opportunity I'm about to remind you of.

Speaker Change: As I said at the start of this call, whilst we've achieved so much in just two years, we're still just at the start of the journey.

As I said at the start of this call whilst we've achieved so much in just two years, we're still just at the start of the journey.

Speaker Change: As you can see on slide six, we're addressing a massive market opportunity. The UK alone has a used car market of around 8 million transactions a year with a value of over a hundred billion pounds annually.

As you can see on slide six we are addressing a massive market opportunity. The U K alone How's he used car market of around 8 million transactions a year with a value of over 100 billion pounds annually. We're now live in France, and Germany and plan to launch into Spain, and Italy later this year.

Speaker Change: We're now live in France and Germany and plan to launch into Spain and Italy later this year. This increases our addressable market to around 26 million transactions a year with a value of over 300 billion pounds annually.

This increases our addressable market to around 26 million transactions, a year with a value of over 300 billion pounds annually.

Speaker Change: Not only is this a huge addressable market with one of the lowest digital retail penetration.

Not only is this a huge addressable market with one of the lowest digital retail penetrations.

Speaker Change: But it's also an extremely fragmented market with no dealer having more than a 3% market share, which means that we have a significant opportunity to build a leading brand across Europe in this space.

But it's also an extremely fragmented market with no dealer, having more than a 3% market share, which means that we have a significant opportunity to build a leading brand across Europe in this space.

Customers are embracing our offering and we fully expect to continue to rapidly grow our market share over time.

Speaker Change: Customers are embracing our offering and we fully expect to continue to rapidly grow our market share over time.

Speaker Change: That said, as you can see on the right-hand side of the slide, the market opportunity is so large that with just low single-digit market shares and prudent medium-term GPU targets of 1500 to 2000 pounds.

That said as you can see on the right hand side of the slide the market opportunity is so large but with just low single digit market shares and prudent medium term GPU targets of 1500 to 2000 pounds.

We would have an enormous business generating meaningful free cash flows.

Speaker Change: we would have an enormous business generating meaningful free cash flow.

Speaker Change: Our long-term target, however, is to capture a 5% or greater market share with a 3,000-pound GPU, which is why we are extremely excited about the future growth opportunities.

Our long term target however is to capture a 5% or greater market share with a 3000 pound G. P O which is why we are extremely excited about the future growth opportunities.

I will now pass over to Steven who will run through the details of our 2021 performance and future guidance in a little more detail.

Speaker Change: I will now pass over to Stephen who will run through the details of our 2021 performance and future guidance in a little more detail.

Thank you Alex and good morning, everyone.

Stephen Marana: As you can see on slide seven, in 2021, we achieved group revenues of 668 million sterling, which grew up over 300% year on year.

As you can see on slide seven in 2021, we achieved revenues of 668 million styling, which grew up over 300% year on year.

Stephen Marana: Growth was driven primarily by UK retail revenues, which increased 234 percent.

Growth was driven primarily by U K retail revenues, which increased to 34%.

But also by strong performances from our wholesale and other revenue streams.

Stephen Marana: but also by strong performances from our wholesale and other revenue.

Stephen Marana: During 2021, we sold 49,853 cars, 233% year on year growth.

During 2021, we sold 49000 data I'm talking 53 cars soon.

233% year on year growth.

Stephen Marana: including 34,731 retail units, 187% year-on-year growth.

Including 34700, and that you won't be kind of units.

87% year on year Greg.

Stephen Marana: This growth in retail units came despite the move to transition our UK renditioning in-house, which had short-term impacts on our available inventory and hence sales.

This growth in retail units came despite the move to <unk>.

Transitional U K, even beginning in house.

That's short term impacts on our available inventory and hence styles.

Stephen Marana: Ringing reconditioning in house is a huge strategic benefit and we believe well worth the short-term pain experience during the transition. We are now already starting to see the best

Bringing reconditioning in house is a huge strategic benefit and we believe well worth the short term pain experience during the transition.

We are now already starting to see the benefits of these investments as we are no longer reliant on third parties for any of our key processes.

Stephen Marana: as we are no longer reliant on third parties for any of our key processes.

Stephen Marana: and I've seen our available inventory numbers grow to over 6,000 cars, up from 2,000 in October .

<unk> seen our available inventory numbers grow to over 6000 calls.

2000 in October .

Stephen Marana: To be clear, our inventory challenges at the end of last year had nothing to do with the supply of cars.

To be clear while inventory challenges at the end of last year had nothing to do with the supply of cars.

Stephen Marana: where we have not seen any issues, but it was all about our ability to reconditioning cars to the right specification and quality at the speed required.

Well, we have not seen any issues, but it was all about our ability to reconditioning costs. So the right specification and quality at the speed required.

Stephen Marana: The increase in website inventory has helped lead to a record start to 2022 as expected with unit sales of both sequentially and year on year.

The increase in website inventory has helped lead to a record start to 2022 as expected with unit sales of both sequentially and year on year.

Stephen Marana: UK retail GPU was £427 in 2021, a significant improvement compared to the loss of £229 we made in the prior year.

U K retail GPU to spool up and getting 27 pounds and 2021, a significant improvement compared to the loss of 229 pounds, we made in the prior year.

Well I do think it's worth taking a bit of time to go to the G. P you're going a bit more detail than usual and try and get a little more insight into the shorts and quarter on quarter fluctuations you will see in an early stage business like ours, which is making some big strategic decisions for the long term.

Stephen Marana: I do think it's worth taking a bit of time to go through GPU in a bit more detail than usual and try and give a little more insight into the short-term, quarter-on-quarter fluctuations you will see in an early stage business like ours which is making some big strategic decisions for the long term.

Stephen Marana: We've stated we see a clear path to £2,000 retail GPU in the medium term.

We have stated we see a clear path to 2000 and retail GPU given the medium side.

Stephen Marana: and we remain confident of reaching this level and beyond, given the steps we've taken in 2021.

And we remain confident of reaching this level and beyond given the steps we've taken in 2021 .

Stephen Marana: To get there requires a number of small ongoing operational efficiencies, together with some big strategic steps forward.

To get that'd be quasi but a small ongoing operational efficiencies together with some big strategic steps forward.

In the second half of last year weekly true at the major strategic hurdles it got to a longtime GPU target.

Stephen Marana: In the second half of last year, we cleaved two of the major strategic hurdles to get our long-term GPU target.

Stephen Marana: The ability to recondition all our cars in-house and the ability to source a large proportion of cars we sell directly from consumers.

The ability to be condition, all all calls in house.

<unk> serves a large proportion of michele directly from consumers.

Stephen Marana: Both of these have a significant positive impact on costs and hence media and firm GPUs.

Both of these have a significant positive impact on costs and hence medium term GPU.

The conditioning, all all causing annually allows us to control costs man hours per car logistics and Stockton much more efficiently going forward.

Stephen Marana: Reconditioning all our cars internally allows us to control costs, man hours per car, logistics and stock term much more efficiently going forward.

And as Alex said, we launched I'll call buying channel in July 2021.

Stephen Marana: And as Alex said, we launched our car buying channel in July 2021.

Stephen Marana: As a reminder, before then we only source cars from consumers as a part exchange, which accounted for around 2% of the cars sold in any market.

As a reminder, before that we only show its costs and consume it as a pause exchange, which accounted for around 2% of the car sold in 19 months.

We initially set ourselves a long term target of getting to 30% of the car so coming from Michigan.

Stephen Marana: We initially set ourselves a long-term target of getting to 30% of the car sold coming from this route and we now believe we'll get to that level much sooner and significantly exceed it over time.

We now believe we'll get to that level much sooner and significantly exceed that over time.

We're very happy with the progress we're making.

Stephen Marana: We're very happy with the progress we're making. But to deliver these two key strategic goals, there has to be a short-term cost, some of which will flow through OPEX.

To deliver these two key strategic goals that has to be a short cost some of which we'll throw flow through opex.

By a G P M.

Stephen Marana: You can see on slide eight the investments we've made in both these areas, way on our Q421 and Q122 UK retail GPU.

You can see on slide eight the investments we've made in both these areas why on our Q4 'twenty one in Q1, 'twenty two U K retail GPU.

Stephen Marana: But from which we believe we will start to enjoy the benefits in Q2 2021.

Well from which we believe we will start to enjoy the benefits in Q2 'twenty two onwards.

On the left hand side, you can see the short term impact on our metal margin.

Stephen Marana: On the left hand side, you can see the short impact on our metal mod.

Stephen Marana: which is the amount we make on the car itself due to the launch of our car bank.

Which is the amount we make on the car itself.

Due to the launch of I'll call buying channel.

Stephen Marana: This purchasing channel has two long-term benefits, minimizes the risk and reduces the cost of supply.

These purchasing channel has two longtime benefits minimizing the risk and reduces the cost of supply.

Stephen Marana: to launch this channel in a competitive market. We've deliberately over invested to build the brand and proposition and wow customers largely through competitors.

So launch this channel in a competitive market, we deliberately over invested to build the brand and proposition and why customers largely through competitive pricing.

Stephen Marana: So the launch costs for the SIRS six months largely come through the GPU line rather than through a large marketing or CAP expense.

So the launch costs for the first six months largely come through the GPU line, rather than through a large marketing or capex.

Spend is.

Stephen Marana: This resulted in a cohort of cars with a suboptimal gross profit profile, which have worked its way through our inventory, negatively impacting our GPU in Q4 last year, but having more of an impact in Q1 of this year.

Resulted in high voltage cause with a suboptimal gross profit profile.

It worked its way through our inventory.

Negative impacting our GPU in Q4 of last year, and having more of an impact in Q1 of this year.

As a reminder, it's typically a one quarter lag compared to single reconditioning due to the sale of any vehicle.

Stephen Marana: As a reminder, there's typically a one-quarter like from purchasing and reconditioning through to the sale of any vehicle.

Stephen Marana: So car purchases in Q3, impact Q4, and so on. This is a short-term impact. I've launched a new product line, which in context could have had a marketing budget of five million pounds, but instead had a GPU impact of a few hundred pounds per car.

So car parts using Q3 impact Q4, and so on.

This is a short term impact of launching a new product line, which in context could've had a marketing budget of 5 million pounds, but instead, the GPU impact of a few hundred pounds per cow.

Stephen Marana: As a reminder, each million pound of cost on 10,000 units, for example, although fairly small in absolute terms, equates to a hundred pound of retail g.

As a reminder, each million pound of costs on 10000 units. For example will look fairly small in absolute terms acquaints to Dupont retail GPU.

Stephen Marana: The long-term benefits are significant, the consumer feedback's been fantastic, and we've been blown away by the consumer interest in the property.

The long term benefits are significant the consumer feedback has been fantastic we've been blown away by the consumer interest in the proposition.

Stephen Marana: We're already at almost 30% of car sold being sourced directly to consumers and now believe we can double that figure over the long term.

They're already at almost 30% of costs, so being sourced directly from consumers and now believe we can do a lot to figure out over the long term.

On the right hand side of the slide you can see the effects on our reconditioning the vehicle as we brought it in house.

Stephen Marana: On the right-hand side of the slide, you can see the effects on our reconditioning cost for vehicle as we brought it in-house.

Let's recap what we did here.

Stephen Marana: Originally, we out-soaked our vehicle reconditioning to a third party on a single site.

Originally we also stopped vehicle reconditioning to a third party on a single site.

Stephen Marana: Within the past 12 months, we have fully internalised this and now operate this end of our own vehicle prep sites across the UK.

Within the past 12 months, we have fully internalize this I'm not walk right and they've all road vehicle prep sites across the U K.

This has resulted in some short term additional operational costs as we work to optimize these sites as well as the obvious capex requirements.

Stephen Marana: This has resulted in some short additional operational costs as we work to optimize these sites as well as the obvious capex required.

Stephen Marana: Combining these two strategic initiatives in H2 last year has had a double whammy effect on costs which continued into Q1 this year, given the typical one quarter lag from purchasing and reconditioning through to sale.

Combining these two strategic initiatives and hates to last year I got a double whammy effect on costs, which continued into Q1. This year given the typical one quarter like what you're seeing in reconditioning through society.

Stephen Marana: We believe the impact from investment in the car buying channel and high re-conditioning costs will be highest in 2 weeks.

We believe the impact from investment in the car buying channel and high reconditioning costs will be highest in Q1.

Stephen Marana: Looking at Q2 and beyond, we have clear visibility on the more recently purchased and reconditioned inventory at lower cost, so expect to see a notable increase in GPU for Q2 and beyond.

Looking at Q2 and beyond we have clear visibility on the most recent b pack just be conditioned inventory a lot of calls so I'm expecting to see a notable increase in GPU for Q2 and beyond.

We have lots of further improvements in place, which will also continue to drive GPU growth during the year.

Stephen Marana: We have lots of further improvements in place, which will also continue to drive GPU growth during the year. So let's just highlight a few of these, many which can be seen on slide.

So, let's just highlight a few things menu, which can be seen on slide nine.

Stephen Marana: First, thanks in a large part to the data we've acquired organically since...

First thanks to the large parts of the data we've acquired organically since launch.

Stephen Marana: and notably through the acquisition of Kazana in September 21, we're continuing to enhance our

Notably through the acquisition of Kazan and September 21.

We're continuing to enhance our buying and pricing strategy.

Stephen Marana: taking learning from 60,000 cars which sold since launch.

Taking learnings from 60000 cars, we've sold since launch well.

We're now able to make far more off given that the assumptions on vehicle depreciation desirability fuel type them alike.

Stephen Marana: we're now able to make far more accurate assumptions on vehicle depreciation, desirability, fuel type and the like at a car by car level in order to better predict margin and speed of sale.

Call by call level in order to better predict margin on speed of site.

Stephen Marana: In addition, from the data we've sourced since the launch of our car buying channel, we're in the process of making specific enhancements to our purchasing model, allowing us to take a more nuanced approach to vehicle condition.

The mix issue and the data, which sourced since the launch of our car buying channel.

In the process of making specific enhancements to wipe out interesting model.

Allowing us to take them on humans to approach the vehicle condition.

Stephen Marana: while continuing to operate this as our largest single acquisition.

While continuing to operate this is our largest single acquisition channel.

We're also using our increased scale to evaluate all relationships with a number of existing buying channels.

Stephen Marana: We're also using our increased scale to evaluate our relationships with a number of existing banks.

Stephen Marana: We believe these changes will have the biggest near-term benefit to our region.

We believe these changes will have the biggest near term benefit to arbitrage.

Stephen Marana: Second, given we'd now bought vehicle re-conditioning in-house, we're in a position to implement a number of efficiency driving measures across all our production.

Second given we've now bought vehicles reconditioning in house, we're in a position to implement a number of efficiency driving measures across all production sites.

Stephen Marana: in parts and paid supply, staffing, systems integration and process.

Paulson page supply staffing systems integration and processes.

Stephen Marana: Each of these is expected to reduce vehicle preparation costs and increases.

Each of these is expected to reduce vehicle preparation costs and increase capacity.

Stephen Marana: Binance and ancillary revenues have both performed strongly in recent years.

Finance and ancillary revenues at both performed strongly in recent months.

There are however, a number of enhancements to both our finance uncalled cat propositions planned for Q2 and beyond and we believe these have the advantage that unlike purchasing go vehicle production. Once launched the benefits is expected to be felt immediately both by the consumer and then our GPU performance.

Stephen Marana: There are however a number of enhancements to both our finance and car care propositions planned for Tutor and beyond. And we believe these have the advantage that, unlike purchasing or vehicle product,

Stephen Marana: Once launched, the benefit is expected to be felt immediately, both by the consumer and in our GPU performance.

Stephen Marana: It's worth touching on the current dynamics of the UK used car market and the impact on retail GPU progression through the year.

It's worth touching on the current dynamics of the U K used car market and the impact on retail GPU progression through the year.

Stephen Marana: As you'll know, use car pricing has been robust for some time now, thanks to strong demand and a continued shortage of new vehicle support.

As you'll know used car pricing as being robust for some time now thanks to strong demand and a continued shortage of new vehicle supply.

Stephen Marana: 2022 year to date, I've seen low depreciation overall, but our UK retail GPU forecasts factor in that depreciation will normalise with a year progress.

2022 year to date have seen low depreciation overall.

But our U K retail GPU forecasts factoring not depreciation will normalize as the year progresses.

Stephen Marana: while moves in car prices have limited impact on GPU over a period of...

While moves in car prices have limited impact on G. P. You over a period of quarters.

Stephen Marana: as the wholesale market moves in tandem with the retail market, there can be an impact with the retail market.

The wholesale market moves in tandem with the retail market.

That can be an impact within a particular quarter.

Stephen Marana: We are, however, taking proactive steps to try and minimize the needs and impacts from moves in useful prices by continuing to invest in faster vehicle reconditioning and in acquiring the most desirable jobs.

We are however, taking proactive steps to try and minimize the meantime impacts from new to used car prices by continuing to invest in fast the vehicle reconditioning and then acquiring the most desirable calls.

Stephen Marana: Taking all this into account, while our UK retail GPU is expected to be sequentially lower in Q1 2022, we expect to see material improvements through the rest of the year.

Taking all this into account, while our U K retail GPU is expected to be sequentially lower in Q1 2022.

We expect to see material improvements through the rest of the year.

Headwinds fully go away on the benefits from actions I've just described.

Stephen Marana: The headwinds falling away and the benefits from actions I've just described, we believe the GPU will be up significantly in Q2 2022.

The GPU will be up significantly in Q2 'twenty two.

Stephen Marana: versus Q122 and will approach £900 for the film year.

That's just Q1 'twenty two I'm going to approach 900 pounds for the full year.

Stephen Marana: Looking further ahead, as we previously detailed, we have a medium-term GPU target of £2,000 per car. And over the longer term, if we can bring consumer financing in-house, we believe this could expand.

Looking further ahead as we previously detailed we have a medium term GPU targets 2000 pound per car and over the longer term. If we can bring consumer financing in house. We believe this could expand to 3000 pounds.

Stephen Marana: Turning to slide 10, we have no change in overall guidance.

Turning to slide 10, we have no change in overall guidance to.

So what we've already said.

Stephen Marana: We're targeting total retail sales of around 100,000 units for 2022, which, when combined with the ancillary sales and wholesale business, we believe should drive revenues towards 2 billion pounds.

We're targeting total retail sales of around 100000 units for 2022, which when combined with the ancillary sales in wholesale business. We believe should drive revenues with revenues towards 2 billion pounds with year on year growth approaching 200%.

Stephen Marana: As discussed, we believe we'll see continued GPU improvement during the year, with Q1 being our low point, and expect annual UK retail GPU approaching £900.

As discussed we believe we'll see continued GPU improvement during the year.

Q1, being a low point.

Expect annual U K retail GPU approaching 900 pounds.

Quarterly GPU will always be impacted by strategic decisions.

Stephen Marana: As a reminder, we will not be giving any guidance on EUGPU at this stage. We expect it to be negative for the first year in any market in much the same way as our first year in the UK as we grow that business.

As a reminder, we will not be giving any guidance on EU GPU at this stage, we expect it to be negative for the past year in any market in much. The same way I was off last year in the U K as we grow that business.

We are aware of the inflationary pressures facing the U K and EU marketplace at the moment, whilst we do not believe.

Stephen Marana: We are aware that the inflation repression is facing the UK and EU marketplace at the moment, and whilst we do not believe they should impact top-line growth, given our current market share, there are obvious risks to short-term GPU if we see that cost inflation coming.

They should impact top line growth given our current market share or obviously the shorts M. G. P. U if we see that cost inflation coming through.

Finally, I just wanted to take a moment to highlight to all sound balance sheet.

Stephen Marana: Finally, I just wanted to take a moment to highlight our sound balance.

In February we raised $630 million from the issuance of convertible notes to an investor group led by biking global.

Stephen Marana: With February , we raised $630 million from the issuance of convertible notes to an investment group led by Viking Global.

Stephen Marana: This transaction is a further endorsement of our business and strategy from both new and existing investors who are excited about our progress to date on the market opportunity ahead of.

This transaction is a further endorsement of our business and strategy from both new and existing investors who are excited about our progress to date on the market opportunity ahead of us.

Stephen Marana: Combined with our existing liquidity, we believe that we're now very well funded to continue to capitalize on this huge opportunity and to execute on our ambitious growth strategy over the next 24 months, by which stage we expect our UK business to be reaching profitability.

Combined with our existing liquidity, we believe that went out very well for them, but to continue to capitalize on this huge opportunity and to execute on our ambitious growth strategy over the next 24 months by which stage, we expect our U K business to be reaching profitability.

Alex.

Thanks Steven.

Stephen Marana: So in summary, the team has accomplished an incredible amount in the two years since launch, establishing a market leading platform, brand, team and infrastructure in the UK and a strong presence now in the four biggest markets in mainland Europe .

So in summary, the team has accomplished an incredible amount in the two years since launch establishing a market leading platform brands team and infrastructure in the U K and a strong presence now in the four biggest markets in mainland Europe .

Stephen Marana: We believe that we are very well positioned and well funded to capture the huge opportunity across both the UK and the EU.

We believe that we are very well positioned and well funded to capture the huge opportunity across both the U K and the EU.

Stephen Marana: And we believe that we put all the strategic building blocks in place and have seen great momentum so far in 2022, which we expect to continue throughout the year and beyond.

And we believe that we've put all of the strategic building blocks in place and have seen great momentum. So far in 2022, which we expect to continue throughout the year and beyond.

Speaker Change: I will now pass the call back to the operator who will open up the line for Q and A. Thanks.

I will now pass the call back to the operator, who will open up the line for Q&A.

Yeah.

Thank you.

At this time, we'll now be conducting a question and answer session.

Speaker Change: If you'd like to ask a question today, please press star one on your telephone keypad and the confirmation tone will indicate your line is in the question queue.

If you'd like to ask a question today. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press Star two if you like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: If the participant is using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Okay.

Thank you.

Speaker Change: Thank you. Our first question is coming from the line of Rajat Gupta with JP Morgan. Pleased to see you through.

First question is coming from the line of Rajat Gupta with Jpmorgan. Please proceed with your questions.

RI Cook: Hi. Good morning. Good afternoon. Thanks for making the question. Just for the initial question on, you know, contingency planning for this year, you know, there's increasing concerns around, you know, inflation affordability, maybe a recession, you know, if the macro environment doesn't deteriorate, you know, and the slide at the back of the deck on, you know, the prior cycle was helpful, but maybe, you know,

Hi, good morning Kathy.

Thanks for taking the question.

Just for the initial question.

Contingency planning.

For this year.

Hum.

How long you know inflation affordability, maybe a recession.

If the macro environment.

Terry.

Slide at the back of the deck on you know the prior cycle was helpful. But maybe you know.

RI Cook: you think that things could be different this time around if there is a downturn.

If you think back things could be different this time around if there was a downturn.

RI Cook: Can you talk about, like, the levers you might have to protect, you know, GPUs, you know, expenses, and maybe cash flow, and how to follow?

Can you talk about like the universe.

To protect you know Gpus.

Now on expenses, and maybe cash flow and I have a follow up.

Thanks.

Speaker Change: Yeah, thanks Roger. I'll make a couple of comments on that and then I'll let Steven add to it.

Yes, Hi, Suraj.

I'll make a couple of comments on that and then I'll, let Steven add to it so from a in terms of inflation. We don't think that there's going to be a material impact on our gpus are suddenly all the cost areas of the business.

Speaker Change: In terms of inflation, we don't think that there's going to be a material impact on GPU. There are certain other cost areas of the business that could see inflationary pressures, but unlikely to have a huge impact, we think, on GPU, but it's unpredictable, obviously, depending on which areas are hit. I think if you look at the...

Cause the inflationary pressures.

But unlikely to have a huge impact we think on GPU, but it's unpredictable obviously, depending on which areas are hit I think if you look at the.

Speaker Change: sort of the macro recessionary potential.

Sort of the macro recessionary a potential use calls have historically.

Speaker Change: youth cause have historically.

Speaker Change: performed relatively well in a recessionary environment, new cars.

Performed relatively well in a recessionary environment, new cars tend to be much more effective you know as a discretionary or luxury purchase whereas used calls are functional and you see that in the in the slides you referred to.

Speaker Change: tend to be much more affected, you know, as a discretionary or luxury purchase, whereas used cars are functional, and you see that in the slide you referred to.

Speaker Change: in the appendix. So we think, as Stephen referred to, from a top-line perspective, given our very small market share and strong growth trajectory, we think top-line is unlikely to have a big

In the appendix. So we think a Stephen referred to from a top line perspective, given all very small market share and strong growth trajectory. We think top line is unlikely to have.

It'll be a materially affected.

Speaker Change: material affected by a downturn. We have

By a downturn and we have.

Speaker Change: a number of ways. We raised a significant amount of money earlier this year, as you know, which gives us a very long-run way. And we have a lot of levers that we can pull in terms of cost savings if that's required. So I think we're in relatively good shape to weather any potential storm that may come.

A number of ways you know we raised a significant amount of money earlier. This year as you know, which gives us a very long runway and we have a lot of levers that we can pull in terms of cost saving was if things are if that was required. So I think we're in relatively good shape.

Two.

To weather any potential storm that may come statement.

Yeah.

Speaker Change: Yeah, I think nothing really to add for much.

Right.

Maybe on the coffee I think nothing really planned for myself.

Speaker Change: Maybe on the cost side, you know, any color you can give us around today, you know, what's the fixed versus variable components like, you know, just to understand like how much flexibility they could be.

Maybe on the cost side, you know any color you can give us around today.

You know, what's the fixed versus variable component like you know just to understand like how much flexibility that could be.

Speaker Change: Well, a significant portion of our plan obviously is in marketing, and Stephen, you might want to talk to some of the other areas.

While a significant portion of the last one I know this is in marketing.

And Stephen you might want to talk to somebody Alvarez.

Stephen Marana: Yeah, if we just look at the cost of sales line, obviously the biggest spend itself is the cause that we buy the metal cost of them and any inflationary pressures on them, you'd argue would flow through into the sales price that we generate. So we don't see.

Yeah. So if we just look at the cost of sales line. Obviously the biggest spend itself is the cause that we buy the metal cost than on any inflationary pressures on them you'd argue would flow through into.

The sales price that we generate so we don't see you.

Stephen Marana: you know, inflationary pressures on car prices shouldn't really impact us. Obviously the cost of sales line includes the work that we do on cars, the refurbishment costs from a people perspective, from a parts, from a paint, and they could be obviously under some inflationary pressures over time. As Alex said, marketing the big spend, a lot of our costs are pre-booked, I wouldn't expect many inflationary pressures there.

Thanks.

My question is on car prices shouldn't really impact us obviously, but the cost of sales line and includes.

The work that we do on calls the refurbishment costs from a people perspective from a pulse from our paint and they could be obviously under some inflationary pressures over time as Alex said marketing the big spend a lot of our costs are pretty booked up.

Wouldn't expect many inflationary pressures that.

But it's hard to predict at the moment I think as an industry and we're in relatively good shape.

Stephen Marana: But it's hard to predict at the moment. I think as an industry, we're in relatively good shape. And as a business, it's pretty masoned as we are. Even if the industry contracts, we don't have that much concern because we're still taking significant market share from a low base. So I think it's more around individual cost lines where there could be some movement in the short term. But we'll just have to see how that plays out.

That's a business that's pretty nascent as we all are.

Even if the industry can trucks, we there's not that much concerned because we think there's still taking significant market share from a low base. So I think it's more around individual cost lines, where there could be some movements in the short term.

Just have to have to see how that plays out.

Speaker Change: Got it. And in terms of like, you know, some of the SGNA competence, you know, like, you know, the administrative expenses and.

Got it and in terms of like you know some of the SG&A component.

No I do not know.

Australia of expenses.

Speaker Change: You know, that's a pretty healthy extent item. Any sense of how much of that is like fixed versus variable?

You know that that's a pretty healthy.

I didn't mean any sense of how much of that is just like fixed versus variable.

Sorry, I forgot that one can you just repeat that one again please.

Yeah. So the cost structure, you know wouldn't be SG&A expenses.

Speaker Change: Yeah, so within the cost structure, you know, within the S. G. N. A. Expenses.

Speaker Change: you know the administrative expenses is a pretty big bucket of those expenses so I was curious if there is any quality to give us on the fixed sources.

Administrative expenses as a pretty big bucket of those expenses so.

Was curious like if there is any color you could give us on the fixed sources revel expense component of that as you know I'm I'm, just trying to get a sense of like how much flexibility.

Speaker Change: Wave will expense component of that, you know, I'm just trying to get a sense of like how much flexibility that is to flex that cost bucket, you know, if there is some pressure or so a lot of side.

So flex that cost bucket I don't know if that was.

Some pressure so a lot of sites.

Speaker Change: apologies yeah a lot of heads so on the sgna line a lot of heads

Apologies, yeah, a lot of tests and so on the SG&A line of luggage heads.

Speaker Change: A lot is marketing and marketing really splits into two amounts.

Along with marketing and marketing really splits into two amounts the above the line, which is relatively fixed deals that have already been in place sponsorships that are in place where they won't be inflationary pressures in the short term and then your your P. P C.

Speaker Change: the above the line which is relatively fixed, deals that have already been in place, sponsorships that are in place where there won't be inflation requests in the short term and then your PPC, your specific targeted marketing for which they're

And your specific targeted marketing for which that.

Speaker Change: that could be emplacing the pressures. And then other kind of SG&A costs, some of the logistics could come under pressure as well in the short term if you're looking at kind of energy costs as well, cost of oil etc. But there's a smaller proportion of that overall SG&A line. Bigger proportion is marketing and understanding.

That could be inflationary pressures.

And then there was this kind of SG&A costs some of the logistics could come under pressure as well.

In the short time, if youre looking to get out of energy energy costs, as well as cost of oil et cetera, but that they're a smaller proportion of our overall SG&A line bigger proportion is marketing on the other side.

<unk>.

Understood.

Speaker Change: Great. Thanks for the call. I'll jump back in queue and let us ask a question.

Thanks for the color I'll jump back in queue.

Great question.

Sure.

Our next question is from same site private Investor. Please proceed with your questions.

Speaker Change: All right. Thank you for taking my questions. I spent my first is about 60,000 retail units sold up until now. Figure. I just want to correctly interpret that. If that's as of April , I guess that implies floor of, say, 13,000 retail units I was sold in Q1 2022. If you subtract 60,000 with cumulative units sold up until Q421.

Yeah.

Alright, Thank you for taking my questions.

I spent my first is about 60000 retail units sold up until now take it I just wanted to correctly interpret that.

If that's as of April I guess that implies for say 13000 retail units sold in Q1, 'twenty 'twenty Qi <unk> subtract 60000 cumulative units sold up until <unk> or 'twenty one.

Speaker Change: So that's around about a 50% quarter and quarter growth rate. I'm just curious to understand how do you expect, say, the quarter and quarter growth rate to progress during the year if you want to achieve that 100,000 retail unit target in 2022?

So that's around about a 50% quote unquote the credit rate I'm, just curious to understand how would you expect say the.

Quote unquote, a credit rate to progress during the year. If he wants to say achieve that 100000 retail unit targets in 2020 Chi.

Speaker Change: Secondly, it would be quite useful to understand that in terms of the 250,000 capacity figure you've given for the UK and 120,000, that's actually usable. Any idea of when do you expect to sort of phase your investment to get to that 250,000 figure. And finally, in terms of the UK wholesale unit mix,

Secondly can be quite useful.

I understand that in terms of the 250000 capacity figure you've given but the U K and 120000 tons actually usable any idea of when do you expect to sort of phase of investment to get to that 50000, Sega and finally in terms of the U K wholesale unit mix in key.

Speaker Change: in Q4 is for nearly 50% versus retail.

So nearly 50% versus retail.

Speaker Change: and I guess in Q3 it had also risen to 30% versus 20% earlier. Longer term, can we expect to sort of stay at 30% or would we expect to go back to 20% that we saw in earlier quarters? Thank you.

And I guess in Q3, and it also right in that 2% versus 20% earlier longer term can we expect to sort of stay at 30%. So what do we expect it to go back to 20% that we saw in earlier quarters. Thank you.

Speaker Change: Great, yeah, let me pick up on some of that and then I'll let Steven jump in. So I wouldn't read too much into the 60,000 retail units number. It's a round number that we've just generally, typically, we're not announcing an actual number there. So I wouldn't use that number and make any subtractions from it. We're saying that we've sold, you know, well over 60,000 units since launch, as opposed to giving a specific number that you can deduce Q1 from. In terms of.

Great Yeah, let me pick up on some of the other and I'll, let Stephen jump in so I wouldn't read too much into the 60000 retail units number. It's a round number that we've just generally typically went on announcing an actual number that so I wouldn't use that number them make any subtractions from Ed with thing that we've sold.

Yeah, well over 60000 units since launch.

As opposed to giving a specific number you can the juice Q1 from in terms of the reconditioning capacity growth from the doubling from the 120 plus thousand a year in the UK for 250000.

Speaker Change: reconditioning capacity growth from the doubling from the 120 plus thousand a year in the UK to 250,000 and that is a month on month.

That is a month on month incur.

Speaker Change: increase that we've been seeing throughout this year and will continue to see as a number of things happen as we reorganize the sites and remove

The increase that we've been seeing throughout this year and we'll continue to see as a number of things happened as we reorganize the sites and remove the third party partners that were on those sides. When we bought them. So they were at 100% capacity for non kazoo work six months ago, a when we bought.

Speaker Change: third-party partners that were on those sites when we bought them, so they were at 100 percent capacity for non-Kazoo work six months ago when we bought one of those businesses in September , and in six months' time, they'll be 100 percent dedicated to Kazoo as we line up end-to-end processes at all those sites as we add additional shifts.

One of those businesses in September and all in six months' time there'll be a 100% dedicated took a zoo AR as we lineup M to M processes at all those size as we add additional shifts.

Speaker Change: So there's a lot of optimization being implemented on those sites and so there's no one thing and there's no one site. So that's happening across all ten UK sites and just taking steps in that direction continually.

So there's a lot of optimization being implemented on those sites and so there's no one thing and there's no. One site. So that's happening across all 10 U K sites and just taking steps in that direction continually.

Speaker Change: Wholesale mix in Q4 was higher than we expected to be long term. We deliberately, for reasons that Stephen alluded to earlier, in terms of the reconditioning constraints that we had in the latter half of last year, we decided not to continue to sit on inventory for too long, and therefore we sold more through Wholesale than we ordinarily would. I would expect a long term number to be in the 20-30% range, not in the 40-50% range.

Wholesale mix in Q4 was higher than we expect it to be long term, we deliberately for reasons that Steven alluded to.

Earlier in terms of the reconditioning constraints that we had in.

In the latter half of last year, we decided not to continue to sit on the inventory for too long and therefore, we sold more through wholesale than we ordinarily would.

I would expect a long term number to be in the.

20% to 30% range north in the 40% to 50% range.

Speaker Change: Got it. Thank you. And if I may just have another quick follow-up question.

Got it thank you and if I may just have another quick follow up question.

Speaker Change: If we were to say look at retail, average selling price and wholesale selling price, it increased quite significantly in this quarter.

If we were to say look at retail average selling price in wholesale selling price increased quite significantly this quarter.

Would you be able to give us an idea of how much of that is G. H, a general ease contemplation pricing increasing.

Speaker Change: Would you be able to give us an idea of how much of that is due to general use car inflation pricing increasing and how much of it was due to sourcing more from consumers? Thank you.

How much of it was chi Chi sourcing more from consumers. Thank you it.

Speaker Change: It was more mixed than general price appreciation and we saw some appreciation in the second half of last year as everybody knows that's been a global phenomenon. We're starting to see the air come out of the tires a little bit now and so with a little bit of price deflation as Stephen said we've built that sort of depreciation on

It was more mix than general General General price appreciation I mean, we saw some appreciation in the second half of last year as everybody knows that it's been on a.

Global phenomenon, we're starting to see come out of the tires, a little bit now and so was it a little bit of a price deflation as Stephen said, we've built that sort of depreciation on on on retail price into our model. So expect to see that happening a little bit throw out.

Speaker Change: on retail price into our model, so expect to see that.

Speaker Change: happening a little bit throughout this year, but no, it's more related to a mix of what we were buying and selling.

Throughout this year, but now it's it's more related to to mix of what we.

Buying and selling them.

Speaker Change: than, you know, there's an element of market in it, but that's not the lion's share.

There's an element of market in it but that's not the lion's share.

Okay. Thank you very much.

Speaker Change: Thank you. As a reminder, if you'd like to ask a question today, you may press star one from your telephone keypad.

Thank you as a reminder, if you'd like to ask a question today you May press star one from your telephone keypad.

Speaker Change: The next question is from the line of Doi and Sola Sanyalu with Citi. Please see if there are questions.

The next question is from the line of di and sell the Sunnyvale with Citi. Please proceed with your question.

Hi, Adam.

Dian SOA: Hi, I had a couple of questions, and then I will jump back into the queue. My first one was on your view on the outlook for market supply and pricing, just because I feel like we started to see it stabilise at an elevated level. And the second was around web traffic, because we've kind of seen it soften. Have you seen any change in your demand from consumers? Thank you.

I have a couple of questions and then I'll jump back into the queue.

My first one on your view on the outlook for market pricing.

Tyson just because I felt like the stripes yet stable.

Stabilize at an elevated level and the SEC.

I can read around web traffic, because we kind of see that and.

Have you seen any change in your demand from Christine it. Thank you.

Speaker Change: So I'm not sure I entirely heard the first question, but if it's related to sort of retail use car pricing, which I think it is, then I would say, you know, we've seen a continuous increase in pricing for the last 18 months.

So I'm not sure I entirely heard the first question, but if it's related to sort of retail used car pricing, which I think it is then I would say.

We've seen a continuous increase in pricing for the last 18 months again as Stephen mentioned, mostly related to <unk>.

Speaker Change: Again, that's being mentioned, mostly related to.

Speaker Change: access demand because of shortages in the supply chain and new cars.

Excess demand because of shortages in the supply chain a new cause.

Speaker Change: That continued a little bit in Q1, but we're starting to see that trend reverse.

That continued a little bit in Q1, but were starting to see that trend.

Reverse and I think there's potential for further supply chain issues and in the new car market. So we don't expect.

Speaker Change: And I think there's potential for further supply chain issues in the new car market. So we don't expect the market to give back all of its games.

The market to give back all of its games.

Speaker Change: this year, the last 18 months game, but we certainly expected to normalise over the next

This year.

The last 18 months games, but we certainly expect it to normalize over the next 12 to 24 months and we think prices will get back to a normalized level in terms of web traffic that is really a factor of the mix of the marketing and seasonality that we do and no no.

Speaker Change: you know, 12 to 24 months and we think prices will get back to a normalized level in terms of web traffic. That's really a factor of the mix of the marketing and seasonality that we do and no impact on retail units and sales. And, you know, we've had, as we said, very strong momentum and, you know, hitting record levels for far in 2020.

Impacts on our on our on retail units themselves and.

As we said very strong momentum in.

Hitting record levels, so far in 2020 five.

In terms of sales.

That's great. Thank you.

Speaker Change: That's great. Thank you.

Thank you.

Speaker Change: So I'd like to take a moment to mention that Siam is from Baruch Siam, Sayid is from Baruch Siam.

I would just say to take a moment to mention that Sam.

From there Sam.

So he is from Vandenberg my apologies.

Speaker Change: And we do have another question coming from the line of Diane Sola, Siawood City. Please receive your follow-up.

And we do have another question coming from the line of dying So same with Citi. Please proceed with your follow up.

Dianola Sauwa: So my next question was, in terms of the bottleneck on refurbishment, do you feel like you're fully coming through that? And what do you see as the main challenges over the next six to 12 months?

Okay and my next question, one and intended to Altra and of course, it was flattish I mean do you feel like you're fully coming through that and what do you see as the main challenges.

At 12 months.

Speaker Change: Yes, we do feel like we're certainly overcomerative. If you look at our website, Inventory, which is the best reflection of how quickly we're able to recondition cars to keep up with the demand of selling them, if you think about how our business works on any given day, it's going to be a great deal.

Yes, we do feel like we have we suddenly overcome it if you look at our website inventory, which is the best reflection of how quickly we're able to recondition cars to keep up with the demand of selling them. If you think about how our business works on any given day.

We have to recondition as many calls as we sell just for our inventory to stand still so what happened between August last year. In October last year is we were selling more cars every day than we were able to recondition them. We saw our inventory slide from about three and a half thousand calls in.

Speaker Change: We have to recondition as many causes we sell just for our inventory to stand still.

Speaker Change: So what happened between August last year and October last year is we were selling more cars every day than we were able to recondition and we saw our inventory slide from about

Speaker Change: 3,500 cars in the summer to about 2,000 cars.

And in the summer to about 2000 cars in October now that doesn't mean, we won't reconditioning a lot of calls we were we were reconditioning 3000 calls a month.

Speaker Change: in October . Now that didn't mean we weren't reconditioning a lot of cars. We were. We were reconditioning 3000 plus cars a month. We were just selling more cars than we were reconditioning on any given day. If you look at what's happened since then, we finished December with about four and a half thousand cars.

We were just selling more cars than we reconditioning on any given day. If you look at what's happened. Since then we are we finished December with about four four and a half thousand cars on the web site up from 2000 and in early October .

Speaker Change: on the website up from 2000 in early October , which shows that we were able to keep pace with sales and add to inventory. And if you look at what's happening in Q1, we've grown from four and a half thousand.

Which shows that we were able to keep pace with sales and inventory and if you look at what's happened in Q1, we've grown from four and a half thousand two six and a half thousand whilst also setting record sales levels. So not only have we been able to keep up with our highest level of sales in Q1, but we've also been able to.

Speaker Change: to 6,500 whilst also setting record sales levels. So not only have we been able to keep up with our highest level of sales in Q1, but we've also been able to add to inventory. So I think that sort of is the best indication of the bottleneck.

Our inventory so I think that that sort of is the best indication of the bottleneck.

Speaker Change: is largely through. Now, we're not where we want to be because, as we've said, we want to be

Is largely through it now we're not where we want to be because as we've said we want to be up 250000 calls a year rather than 120000, but we don't need to be that.

Speaker Change: 250,000 cars a year rather than 120,000, but we don't need to be there, we don't need to be there yet. So I think that bottleneck has been solved. So I'm not sure if there was a second part.

We don't need to be there yet so.

I think blah.

Bottleneck has been solved so I'm not sure. If there was a second part of the question.

Okay.

Speaker Change: Yeah, that was my first question. I actually had two more questions if that's okay. The first is on, in terms of how we'll expect unit growth to go across this year to get to 100 units, how is that going to be phased through the quarters and do you see any major risks?

And yes that was my first question actually had two.

Two more questions.

Okay and the fastest.

And in terms of how that price to go to questions.

The 100 G.

How is that gonna be safety the quote.

Do you see any like major risks to that.

Speaker Change: So it obviously grows quarter on quarter in line with our growth in reconditioning output and, you know,

So, it's obviously growth quarter on quarter in line with all growth in reconditioning outputs.

Yeah.

Speaker Change: what we see and the reason we are seeing record sales

What we see and the reason we have not seeing record sales.

Is it because if we have the right inventory.

Speaker Change: is because if we have the right inventory and we price it sensibly, we're able to sell it. And we've said this many times before, we have not seen any demand constraints within our business.

And we priced it sensibly, we're able to sell it and we said this many times before we have not seen any demand constraints within all business. We if we have great cause when price them sensibly consumers love the proposition offering we sell those calls so as you can see the the reconditioning.

Speaker Change: If we have great cars, we price them sensibly. Consumers love the proposition and offering. We sell those cars. So as you can see, the

Speaker Change: the reconditioning capacity grow months on months.

Honesty grow month on month, so the inventory on sites will grow them on for a month and the unit sales will grow. So you would expect to see obviously a significant quarter on quarter.

Speaker Change: so the inventory on site will grow month on month and the unit sales will grow. So you would expect to see obviously a significant quarter on quarter up tick and the second half of the year much stronger than the first half of the year. And we don't see a lot of sort of risk to being able to produce those cars.

Uptick.

And on the second half of the year much stronger.

And then the first half of it yet and we don't see a lot of as sort of a risk to to being able to produce those cause and neither do we see a lot of risk to being able to sell them. Despite the macro issues.

Speaker Change: And neither do we see a lot of risk to being able to sell them despite the macro issues that we've discussed because of...

We've discussed because of the resilience of the used car market are sensible pricing.

Speaker Change: You know, the resilience of the used car market, sensible pricing, so we are, you know, that's why we're sort of increasingly calm.

So we all know that's why we're sort of increasingly confident of.

Speaker Change: of, you know, not only our guidance, but also, you know, our medium-term market share and retail GPU opportunities.

Not only our guidance, but also you know all medium term market share and retail GPU opportunity.

Thank you and I have one last question.

Speaker Change: Thank you. I have one last question and then I will be quiet. It was just around, I know now you're in all of the major European markets, but did you have any further M&A requirements? And is there anything else you feel like you might need to do to establish your footprint in Europe ? Thank you.

Okay great.

It was just around and I know you're in one of the major European market did you have any further M&A requirement.

And is there anything else you need to do you feel like you might need to do to establish a footprint in Iraq.

Yeah.

Speaker Change: Yes, that's a great question and I think that the sort of the key word there is, you know, do we have any M&A requirements anything we need to do and the answer is no, whereas historically, all of the M&A that we're

Yes, that's a great question and I think the sort of the key word. There is you know do we have any M&A requirements anything we need to do and the answer is no, whereas historically all of the M&A that we did we didn't need to do in order to establish the infrastructure across the U K organic.

Speaker Change: we did need to do in order to establish the infrastructure across the UK.

Speaker Change: organically to get to 10 reconditioning sites in the UK would have taken us a very long time. So we needed to do M&As to take reconditioning in-house in order to launch

Please forget to 10 reconditioning sites in the U K would have taken us a very long time, so we needed to do M&A to take reconditioning in our house in order to launch this year into Italy, and Spain to have teams on the ground and to be able to get that has thought we needed to do M&A.

Speaker Change: this year into Italy and Spain, to have teams on the ground and to be able to get that, is that what we needed to do, to do that, so no, we have those key markets in the four biggest markets.

To do that so now we have with those those key markets in the full biggest markets, France, Germany, Italy, Spain, and mainland Europe , plus the U K of the five markets that we're calling we're focused on we have the infrastructure that we require we have the teams would be required. So we don't need to do.

Speaker Change: France, Germany, Italy, Spain in mainland Europe , plus the UK are the five markets that we're focused on. We have the infrastructure that we require. We have the teams we require, so we don't need to do any M&A, and I don't expect us to do M&A at anything like the pace that we did over the last 18 months.

The M&A and I don't expect us to do M&A I have had a thing like the pace that we did over the last 18 months.

Speaker Change: This is not to say we won't do anything. We're always, you know, exploring opportunities to, you know, accelerate growth and enhance infrastructure and things like that. But certainly, you know, we wouldn't expect the volume of M&A transactions to look anything like it has over the last 18 months as we were putting those building blocks in place.

To say, we wont do and I think we're always exploring.

Exploring opportunities to.

Accelerate growth and and enhance infrastructure and things like that but but certainly we wouldn't expect the the volume.

M&A transactions to look anything like it has over the last 18 months as we were putting those building blocks in place now we have them.

Speaker Change: largely in place, so there's nothing more we need to do in Europe .

Largely in place so there's nothing more we need to do in Europe .

Thank you very much shopping one of my question. Thank you.

Thank you we do have a question from the webcast is coming from David Reynolds said D. V. He asked how is the competitive dynamic changed through 2021 in both the U K and Continental Europe .

Speaker Change: Thank you. We do have a question from the webcast coming from David Reynolds at Davy. He asks, how has the competitive dynamic changed through 2021 in both the UK and continental Europe ?

Ah Thanks for that question, David So actually the competitive dynamic has remained largely the same in that there is.

Speaker Change: Thanks for that question, David. So actually, the competitive dynamic has remained

Speaker Change: largely the same in that there is

Speaker Change: one other key competitor in the U.K. and one in mainland Europe , cinch in the U.K., autohero in mainland Europe , but as we've said many times before,

One of our key competitors in the UK and one in mainland Europe since in the U K also hero in mainland Europe , but as we've said many times before its really not that that's not the competition because all of these businesses are sub one.

Speaker Change: It's really not that that's not the competition because all of these businesses are sub 1% market shares and all of these businesses are going after the 99% opportunity. And so they're not really competing with each other, they're reinforcing each other's message of the sort of the new way to buy and sell your car.

Sent market shares and all of these businesses are going after the 99% opportunity and so they don't really competing with each other they're reinforcing each all of his message of the sort of the new way for bond cellular call.

Speaker Change: But as we've seen, you know, this is a complicated business that requires multiple different skill sets and incredibly deep pockets in order to execute very well and build a brand and build the infrastructure, et cetera. So we haven't seen sort of new competitors emerge.

But as we've seen you know this this is a complicated business that requires a multiple different skill sets an incredibly deep.

Deep pockets in order to execute very well and build the brand and build infrastructure et cetera. So we haven't seen sort of new competitors.

Emerge and we continue to think that it's helpful to have a couple of other players in each in each market, but we're going we're going after the <unk>.

Speaker Change: We continue to think that it's helpful to have a couple of other players in each market, but we're going after the 150,000-plus offline dealers as the opportunity.

Hundred 50000, plus offline dealers is the opportunity.

Speaker Change: for us the 26 million transactions across those five markets the fact that

Off the 26 million transactions across those five markets. The fact that another player has firstly, a 40 or 50000 of those 26 million transactions is not relevant from a competitive standpoint.

Speaker Change: 30 or 40 or 50,000 of those 26 million transactions is not relevant from a competitive.

Okay.

Speaker Change: Thank you. The next question is, how do you see interest rates affecting the dead heavy model? Will this affect the stocking loan?

Thank you.

The next question is how do you see interest rates affecting the debt heavy model well this affects the stocking loans.

Speaker Change: So, interest rates have a number of impacts.

So interest rates have how have a number of impacts.

Speaker Change: Stocking loans, yes, our interest rates go up. The cost of carrying a car goes up marginally, but it is very small. We hold the cars.

Stocking loans, yes, as interest rates go up the cost of carrying a car goes up marginally but it is very small we hold the cause for AR days, rather than Hum moms. So yes.

Speaker Change: for days rather than months or years, 30 to 60 days. And I always say slightly flippantly, but it has been true.

30 to 60 days and I always say, it's sort of slightly flippantly, but but but it has been true that we spend more on the pre delivery valet of.

Speaker Change: that we spend more on the pre-delivery valet.

Speaker Change: of the vehicle before we deliver it to the customer than we do on the stocking, on the financing of the vehicle during the period that we stock it. So it's not a material number.

The vehicle before we delivered to the customer than we do on the stocking on the financing of the vehicle during the period that.

But we stuck it so it's not a.

Material number.

The other impact of higher interest rates could be on.

Speaker Change: higher interest rates could be on consumer finance and attachment rates, but actually what we've seen is very

Consumer finance.

Cashman rates, but actually what we've seen is very strong.

Strong finance rates.

Speaker Change: strong finance rates during the so far in 2022. And we think, again, looking at sort of historic numbers, as you have a cost of living increase and a squeeze on consumers

During the so far in 2022, and we think again looking at sort of historic numbers as you have a cost of living increase and a squeeze on consumer as they tend to buy more on finance.

Speaker Change: They tend to buy more on finance than otherwise, so we think that there's a potential upside in terms of consumer finance attachment rates through, you know, with inflation and cost of living issues, et cetera.

And then otherwise so we think that there's a potential.

Sides in terms of consumer finance attachment rates through.

With inflation and cost of living issues.

Issues et cetera.

Thank you.

Our next question is from Rajeev <unk> with J P. Morgan.

I think thanks for getting back in the queue.

Speaker Change: Great. Thanks for getting back in the queue. I just have one follow-up on the 2022 guidance on the GPU. Is there any way for us to bridge?

Just had one follow up on that.

Turning to guidance.

On the GPU is there any way for us to bridge.

Speaker Change: How much of that is just the method margin versus, you know, you know, the financing and service contracts, etc., or maybe like if you could bridge, you know, the 2021 to 2022, in terms of how much of those individual components contribute. Thanks.

How much of that is just a matter of margin versus you know you know.

The financing and service contracts et cetera.

Or maybe like if you could bridge the 'twenty to 'twenty, one to 2022 in terms of how much of those individual.

Contribute.

I'll leave I'll answer Steven.

Yeah, we do.

Speaker Change: Yeah, we don't break out specifically the difference between the metal and the non-metal. Over time, when we say getting towards 2000, you'd expect it to roughly 50-50. So I think for now, the non-metal would be higher than the metal elements. I think metal will grow more during the course of the year for all of the reasons we touched on. So the strategic initiatives of last year, bringing refurbishment in the house,

We don't break out specifically the difference between the metal and metal you know overtime, when we say getting towards 2000, you would expect it to be 50 50.

So I think for now the no method will be would be higher than that than the metal element I think metal will grow more joining the course it began for all of the reasons, we touched on two of the strategic initiatives of last year, bringing beside fishman to in house and.

Speaker Change: and launching the presumed kind of buying channel direct from the consumer will mean that you know

Launching because you kind of buying channel direct from the consumer will mean that.

Quite a bit of the growth towards the second half of this year will be coming through the metal line.

Speaker Change: quite a bit of the growth towards the second half of this year will be coming through the metal line.

Got it okay, great. Thank you and good luck.

Thank you.

At this time this will conclude today's teleconference. We thank you for your participation.

Speaker Change: At this time, this will conclude today's teleconference. We thank you for your participation. And for joining today's webcast, you may disconnect at this time. Have a great day, everyone.

And for joining today's webcast you may disconnect at this time have a great day everyone.

Okay.

Yeah.