Q4 2022 Cazoo Group Ltd Earnings Call

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Greetings and welcome to the <unk> fourth quarter 2022, preliminary financial results and revised 2023 plan at this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host Mr. Robert Berg Director of Investor Relations and corporate finance. Thank you. Mr. Burke. Please go ahead.

Thank you.

Good morning, everyone. Thank you for joining today's call and webcast to discuss our fourth quarter 2022 preliminary financial results and revised 2023 plan, you'll be able to find today's press release on our Investor Relations website at investors could be coded UK.

We appreciate everyone joining us today with me on the call, Alex Chesterman, founder and Chief Executive Officer, who will.

<unk> financial officer.

Ted <unk> Chief operating officer.

Before we get started I would like to remind you of the Companys Safe Harbor language, which im sure Youre all familiar with 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.

<unk> of risks related to our business. Please see the filings with the SEC now I'll hand over to Alan.

Thanks, Rob.

Morning, all thank you for joining us today.

You will hopefully have seen from today's press release, we've set out a high level preliminary fourth quarter 2022 results.

Which we believe showed a strong end to last year.

And they've revised 2023 plan.

Aimed at rapidly further improving our unit economics and conserving cash.

Purpose of todays call is primarily to give you the opportunity to ask any questions you may have.

We're very early in our 2020 through year end close process, but today disclosed that in Q4. Despite the significant macroeconomic headwinds we had another strong quarter of UK retail unit sales of around 17750 units in the quarter up over 100.

3% year on year.

Now sold well over 100000 calls in Cali online in the U K in just three years since our launch which is which is testament to the strength of our proposition on the continued adoption of online callable.

Our UK revenues in Q4 were approximately 315 million pounds on almost 1.25 billion in August for the full year O'neill stood Europe operation.

We also saw our U K retail GPU increased to around 600 pounds in Q4, showing continuous improvement every quarter during 2022.

Given the momentum has continued into 2023.

So far in January we've seen solid unit sales on record finance and ancillary attachment rates.

Our balance sheet remains strong with over 250 million pounds of cash and cash equivalents plus over 75 million pounds of self funded vehicles at the end of Q4.

During 2022, we demonstrate our ability to buy and sell calls a significant scale.

However in the current economic climate, we believe the right course of action for 2020 three is to focus on further improving our unit economics materially reducing our fixed cost base.

Preserving cash as we make continued progress towards our goal of reaching profitability without the need to raise further funding over the next 18 to 24 months.

To enable these improvements we are resetting all of 2023 top line ambitions for 40, thousands of 50000 retail unit.

Wowing us to focus on higher margin ballston, moving vehicles and to rationalize our operational footprint to it.

Increased cost efficiencies.

Knowing this week that we expect retail unit sales to return to growth in 'twenty 'twenty four and beyond.

This plan is in the process of being finalized and implemented will provide more detailed information of the part of our full year results in due course in.

In summary.

Whilst 2022 was a challenging year in many respects our continued strong unit sales notable improvement in unit economics during the year and market leading proposition gives us strong confidence that we can both deliver on our 2023 plan and realize the attractive long term opportunity because it.

I'll now turn back to the operator, so that we can take any of your questions. Thank you.

Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May press star two if he would 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.

Once again that is star one to register a question at this time.

The first question today is coming from Rajat Gupta of Jpmorgan. Please go ahead.

Great.

Thanks for taking the questions and thanks for the update here.

Maybe a question you know firsthand in the fourth quarter and then you know in 2023.

Cash and equivalents was down roughly $60 million quarter over quarter.

Could you help us bridge that gap.

Between the different items.

Contributions from EU.

The divestiture proceeds.

The core our U K business.

You're trying to bridge that and then I have a question on Franklin Street.

Yes things are resolved and I'll, let Paul will pick up on any detail, but generally Q4 was a combination of the cash burn of UK bond of the old rate of fixed cost.

Which obviously are materially lower as we go into 2023 following this.

Right sizing and restructuring plan.

And also a number of one off costs related to the wind down of our operations in the EU, which we'll see a little bit more of in Q1, but beyond that.

There should be no forever.

One off costs relating to <unk>.

Restructuring either of the EU or the U K.

Yes.

Right.

So just to pick up on that I think that I mean, thats right and broadly the yes.

The majority of the cash was related to the U K trading business, but then with some positives and negatives in Europe .

Which more or less offset but was slightly negative overall.

Got it got it that's helpful. And then maybe on 2023, it looks like you're suggesting you know roughly $115 million in cash burn.

Could you give us.

So the cadence of that.

And Relatedly could.

Could you talk a little bit more about the cost efficiencies from the pull back in growth.

Is it is it more geared towards GPU improvement or SG&A reduction or I'm trying to think there's an element of events you didnt do but.

The confidence would be helpful.

Should we continue to expect EBITDA breakeven by the fourth quarter or has that also been accelerated.

With this in your plan.

And that will be all for and I'll get back in queue.

So again I'll pick up a high level of impulse to pull to sort of expand on it.

In terms of there's a combination of <unk>.

Improvements in 2023, so yes, there is a materially improved GPU expectation as we progressed throughout the year and also.

A significant cost savings, we expect SG&A savings of about.

About 100 million pounds in 2023 versus the Q4 2020 to run.

Run rate as a result of our restructuring.

Our restructuring and of course.

They are all one off costs. When you look about the cash burn number that you talked about there are one off costs associated with the restructuring, which will largely be in Q1 of this year makes it a little bit into Q2.

Yeah.

Got it alright, great. Thanks for the color I'll get back in queue.

Thank you once again, ladies and gentlemen that is star one if you would like to register a question at this time. The next question is coming from Adam Berlin of UBS. Please go ahead.

Yeah, Hi, Alex Thanks for taking the questions and I just wanted to.

Thoughts on GPU for Nextgen, that's doing fewer units help you accelerate the G. P. M will move more quickly and is there a number in mind for where you'd like GPU to be by the end of 2023.

That's the.

The first question.

I think the other questions actually have been asked I guess, sorry, I want to ask you, how big that restructuring charge offs as well.

So on good morning, Adam.

GPU, yes.

Reduced volume does help improve GPU because it allows us to focus when we're not.

Rising volume it allows us to focus on higher value cause a higher margin cause fast moving because foster stocked.

Et cetera, so we can be more selective and focus on higher GPU, we have aspirations to reach.

What we set out as our medium term GPU target some time ago, a 1500 pounds.

We have aspirations to get there by the end of this calendar year.

Yeah.

And on the restructuring charge.

Yes.

The plan is still in progress so.

Haven't yet been finalized, but Paul you might want to talk to that.

Yes happy to.

So the I mean, as Alex said, it's not with <unk>.

There is a.

The E.

We're still evaluating the property side of it so because I mean, there's obviously a difference between the P&L and the cash flow.

From a cash flow side, it's going to be.

Some some a significant proportion of the restructuring charges will be funded by the fact that we were running at a lower inventory and we have.

Being consistently hold significant cash tied up in inventory.

So we will clarify all the full results announcement, but it's not say, it's not a significant cash out over 2023 because of this sort of free up some inventory.

Especially I suppose what I'm trying to work out if theres $150 million of cash burn next year.

That's after the $75 million benefit you got from the <unk>.

The subscription cost inventory being sold.

That's implying underlying $225 million.

Cash burn in the U K business.

I'm just trying to work out that's all EBITDA.

Mostly because as you say you should be getting in inventory working capital benefit as well.

Self funded inventory doesn't it doesn't come down from 75 to 75 billion isn't entirely subscription. So we will always will still have many many thousands of calls which are largely funded but also.

Have some self funded.

So you shouldn't expect but we will throughout the year continue to have 30 or 40 million pounds of cash tied up in.

And all of that inventory.

Yes.

Okay. Thanks very much.

Thank you once again, ladies and gentlemen that is star one if you would like to register a question at this time one moment. Please while we poll for any additional audio questions.

Were showing no additional audio questions via the phone at this time.

Great well, thank you everybody for joining and feel free to reach out to Rob or if anyone.

He wants to follow up directly.

Thank you ladies and gentlemen, this does conclude todays event you may disconnect. Your lines at this time or log off the webcast and enjoy the rest of your day.

Okay.

Uh huh.

Okay.

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