Cazoo Group Ltd

Greetings and welcome to the GAZOO second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. 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. I would now like to turn the call over to Robert Berg, Director of Investor Relations and Corporate Finance. Thank you. You may begin.

Good morning, everyone. Thank you for joining today's call and webcast to discuss our second quarter and first half fiscal year 2022 results. You'll be able to find today's press release and accompanying presentation on our investor relations website at investors.kazu.co.uk. We appreciate everyone joining us today. With me on the call is Alex Chesterman, Founder and Chief Executive Officer, Stephen Murana, Chief Financial Officer, and Paul Whitehead, our Chief Operating 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. 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 of Kazoo Group Limited with the SEC. Now, I'll hand over the call to Alex.

Thanks Rob. Good morning, everyone, and thank you for joining us today. I'm extremely proud of what we've accomplished so far in 2022 as we continue to transform the car buying and selling experience for consumers. Against the tough macroeconomic backdrop, and whilst many businesses across all retail sectors are witnessing declining demand, we continue to see record sales. It's becoming very clear that our market-leading brand and fully digital world-class proposition is continuing to resonate strongly with consumers and that the shift to online car buying and selling is accelerating. Whilst our growth remains very robust, we remain laser-focused on maintaining our strong balance sheet where we have cash of over 400 million pounds and self-financed inventory of over 175 million pounds. Our primary focus is on preserving cash and materially reducing the need for further external funding as we drive towards profitability. We've successfully implemented our recently announced business realignment plan, and we're starting to see the early benefits, which we expect to continue into H2 and beyond. Given our focus on cash preservation, we're also currently undertaking a full strategic review of our business in mainland Europe with a view to further reducing cash burn and reducing the requirement for any further external funding. Whilst we've accomplished an enormous amount in just two and a half years, we're still just at the start of this exciting journey. We're more encouraged than ever about the future opportunities for Kazoo and our ability to capture a 5% or greater market share of the huge addressable market that we operate in. Before we discuss recent trends, I'd just like to recap the significant progress we've made. We spoke about this in detail on our last call, so I'll just summarize the key points today. Since our launch, Kazoo has been one of the fastest growing businesses globally. I'm very proud of the world-class platform, team, brand, and infrastructure network that we've built. As you'll see on slide four, we've now sold over 80,000 cars to consumers, with over 30,000 of those in the first half of this year alone, making us one of the largest used car retailers in the UK. We've proven that we can buy and sell cars at significant scale with a market-leading consumer experience. Despite significantly growing our sales, we continue to source over 30% of our retail units directly from consumers, highlighting the infrastructure we now have in place to buy cars of scale whilst achieving exceptional consumer feedback. The strength of our brand and customer experience remains a key differentiator, and we now have over 80% national brand awareness across the U.K., We're also incredibly proud of the exceptional feedback that we continue to receive from our customers, giving us one of the highest feedback ratings globally in our sector. Looking specifically now at the most recent period, we continue to make strong progress. You can see on slide five that we achieved record revenues of £333 million in Q2, up 145% year-on-year. with retail unit sales of over 17,000, as we grew our market share significantly despite the macroeconomic backdrop. Whilst our growth remains very strong, we are laser-focused on preserving cash and materially reducing any need for further funding as we drive towards profitability, and I'll talk more about this shortly. We saw a very positive trajectory in our UK retail GPU in Q2, which was up notably by 150% compared to Q1 of this year. Despite our record sales, we've also grown our UK website inventory to record levels of over 7,500 cars, highlighting the progress we've made with our reconditioning capabilities, which, as you'll remember, was the key bottleneck for us at the back end of last year. In more recent weeks, I'm particularly pleased that despite the weak economic environment affecting growth in many other businesses and sectors, we've maintained our strong momentum in Q3 with record retail unit sales and revenues in July, whilst continuing to also grow our website inventory further. Whilst our growth remains strong, we are not immune to the rapidly shifting external factors in the global economy, which include deterioration in consumer confidence, volatility in the stock market, and the possibility of a recession in the coming months. And whilst we have a very strong balance sheet with over 575 million pounds of cash and self-financed inventory, we've already acted decisively to right-size the business to ensure that we are well positioned to achieve our long-term ambitions. Our business realignment plan focused on cash preservation, sustainable growth margins, and reduced SG&A costs, while still expecting to grow over 100% year-on-year in 2022. As I mentioned earlier, we're also now conducting a full strategic review of our business in mainland Europe. with the aim of further reducing our cash burn and ensuring that the company has an executable plan to reach cash flow break even without the need for any additional external funding. In times like these, businesses like ours need to be laser focused on what's most important. Our number one priority is to reach cash flow break even without the need for further capital and our realignment plan combined with our current review of our business in Europe, will be recognized significantly. On slide seven, you can see all the building plots that we've put in place to achieve success in our core market, the UK, which is by far the biggest used car market in Europe. We now have eight in-house reconditioning sites, which have increased their output significantly since the turn of the year. We operate 21 customer centers for collection, distribution, storage, and servicing, and have a fleet of around 250 delivery transporters. The investment we've made in our infrastructure will be pivotal to our ability to grow materially over the coming years. And as you can see on slide eight, we're addressing a massive market opportunity in the UK, which has a used car market of around 8 million transactions annually with a value of over 100 billion pounds. Digital penetration remains extremely low and the market remains hugely fragmented, giving us the opportunity to build the leading brand in the sector. Customers love our proposition and we expect to continue to rapidly increase our market share towards 5% and beyond over time. The UK market opportunity is so large that with just a low single-digit market share and a proven medium-term GPU target of £2,000, we would generate gross profits of close to half a billion pounds annually and meaningful free cash flows. With our long-term target of a 5% or greater market share and a £3,000 GPU, the growth opportunity is even more exciting. I'll now pass over to Stephen, who will run through the details of our Q2 and H1 performance and future guidance in more detail.