Cazoo Group Ltd

Greetings, everyone. Welcome to Kazoo's third quarter fiscal year 2022 earnings call. At this time, all participants are in listen-only mode. In question and answer session, we'll follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that today's conference is being recorded. At this time, I'll turn the conference over to Robert Berg, OBE founder and CEO. Mr. Berg, you may now begin.

Good morning, everyone. Thank you for joining today's call and webcast to discuss Kazoo's third quarter fiscal year 2022 results. You'll be able to find today's press release on our investor relations website at investors.kazoo.co.uk. We appreciate everyone joining us today. With me on the call is Alex Chesterman, Founder and Chief Executive Officer, Stephen Marana, Chief Financial Officer, and Paul Whitehead, 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 a 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'd like to start by discussing our Q3 performance, which despite the very tough macroeconomic backdrop, was an extremely positive quarter in all respects. And then I'll talk about how this performance leaves us firmly on track to reach profitability without the need for any further funding. I'll also spend some time discussing why we remain very confident about achieving our medium and long-term targets. Starting with the third quarter, I'm very proud of our performance during the period. Whilst the challenging macroeconomic backdrop for the UK consumer has impacted demand across most retail sectors and our competitors, with many businesses reporting declining demand and sales in recent months, we've bugged the trend and seen record demand with UK retail unit sales growing over 100% year-on-year to 18,889 units as consumers continue to embrace our offering. This led to record UK revenues of £347 million in Q3, up 103% year-on-year. As you can see from our growth rates, we're taking significant market share as our market-leading proposition continues to resonate strongly with consumers, and the shift to online car buying and selling accelerated. This has and will continue to allow us to grow strongly despite the tough macroeconomic conditions. In under three years since our launch, we've become one of the largest players in the UK used car market, having now sold almost 100,000 vehicles to consumers entirely online. Whilst we've accomplished an enormous amount in terms of our scale in a short period of time, our strong growth rate and market outperformance suggests that we're still just at the start of this exciting journey. Consumers are voting with their orders and their subsequent reviews that the way that we buy and sell cars is the future for the UK used car industry. We're more encouraged than ever about the future opportunity for Cazoo and our ability to capture a 5% or greater market share of the 100 billion pounds per year UK used car market. Whilst our growth and scale positions us as one of the fastest growing businesses in the UK, with revenues of well over a billion pounds in just our third year of operation, we continue to keep both eyes on the road to profitability. We remain laser focused on maintaining our strong balance sheet, and we had cash and self-funded inventory of over £450 million at the end of September, and have a clear plan to reach profitability without the requirement for any further external funding. In Q3, we made strong progress on our operating metrics, including our UK retail GPU, which was up 58% compared to Q2 22, at the same time as reducing our UK SG&A per retail unit by 30% versus Q2. On GPU, we continue to make good progress with a further £179 sequential quarterly improvement driven by continued efficiency gains across buying, reconditioning and ancillary products despite the inflationary pressures. As we constantly improve all elements of our operations, I want to call out the particular success we've had with our direct car buying channel, which now represents over 40% of our UK retail sales transactions and has allowed us to benefit from improved pricing and range. This highlights the strong platform and infrastructure we now have in place to buy cars directly from consumers at scale. We also continue to make good progress improving our reconditioning efficiency a particular note this quarter we made some changes to our reconditioning processes which allow us to lower the cost of vehicle whilst ensuring our customer proposition remains market leading we've also continued to scale our reconditioning capabilities to record levels allowing us to maintain strong inventory levels despite record sales additionally we've made further progress with our ancillary product sales. We launched monthly payment plans in Q3 where customers can now spread payments for our products over a longer period. Whilst it's still early days, we're very encouraged by the impact this is having on our attachment rates and GPU and expect further positive impacts from monthly payments and other ancillary product initiatives in the coming quarters. At the same time that our UK retail GPU is increasing steadily quarter on quarter, we've seen a material decrease in our UK SG&A cost per unit of over 30% in Q3, as our strong growth combined with our focus on cost control is starting to have a notable positive impact on our unit economics. Having successfully implemented our business realignment plan, we're starting to see the benefits and expect to see continued improvement through the remainder of this year and beyond. Our solid Q3 momentum and improvement in profitability comes despite the deteriorating macroeconomic climate. Whilst it's likely that headwinds such as supply chain issues and weaker consumer confidence have negatively impacted our results, our strong performance through this period only serves to show that consumers love our proposition which provides us with even more confidence on reaching our medium and long-term targets. As a reminder, we're addressing a massive market in the UK with around 8 million used car transactions and a value of over £100 billion annually. Digital penetration remains incredibly low and the market remains hugely fragmented, giving us the opportunity to build the leading brand in the sector. Much like we've seen year to date, we expect to continue to rapidly increase our market share towards 5% and beyond over time. As we've said previously, the UK market opportunity is so large that with just a 3% market share and a prudent 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-pound GPU, the opportunity is even more exciting. Before I hand over to Stephen, who will run through the details of our Q3 performance in a little more detail, I just want to discuss the strength of our balance sheet, which remains extremely robust with over 450 million pounds of cash and self-funded inventory at the end of September. We've taken decisive actions to increase our GPU and reduce our SCNA costs, and are focused on ensuring our business achieves profitability as soon as possible. Our business realignment plan announced in June, together with our decision in September to withdraw from mainland Europe, has ensured that we have a clear plan to reach profitability without requiring any further external funding. I'll now pass over to Stephen.