Auto1 Group U/Adr

Welcome to the First Health 2021 Trading Update for Auto One Group. I'm Philipp Reikersdorfer, Director of Corporate Finance and IR. Today I'm joined by Christian Bertelmann, our CEO and co-founder, as well as Markus Boser, our CFO. I'm also very happy to be joined today by Alexander Enger, who joined us at the beginning of the week as Senior Manager in Investor Relations. I'm sure that you will soon hear much more from him and work with him. Today we plan to have about a 20-minute presentation followed by an opportunity for Q&A. Hopefully we'll be able to keep the call to an hour or so. Before we start, some housekeeping points. If you want to ask questions, please use the Q&A tool via the webinar and Zoom to submit your questions. We will then call on you after the presentation to ask a question in person. Please also note that this call will be recorded. Please also on the next page note the disclaimer and safe harbour statement. And with that, I will hand over to Christian after a brief video.

Yeah, hi everyone, and welcome to our first half 2021 trading update. So this video just showed you the brand new jerseys from our first football sponsoring activity in the first Bundesliga, and how this is tuning up the volume on the Auto Hero brand across Germany. I have to say, we're extremely proud to be HETA BSC's main club sponsor in the Bundesliga, a club with nationwide reach. And I think their jerseys just look absolutely fantastic with our AutoHero logo on them. So as you know, at AutoOne, we're building the best way to buy and sell cars online. Where are we on that mission today? The answer is simple. We are the industry leader. We are the fastest growing online seller in the European Union. We are the largest buyer from private consumers. and our platform is aggregating the used car trade across 30 markets in the European Union. And this way we have assembled the leading automotive data set for any trade. We fully control our used car production centers and we're rapidly building out our own production capacities. On top of that, we have created our own consumer financing and inventory financing facilities. In addition, Auto One is run by an extremely experienced and proven management team in this market. Together, all of those key skills enable us to grow Auto One as one company, running on one homegrown platform with one technology setup and one management philosophy. At the same time, we have built the strongest platform effects in the industry. You can see that on the next slide. Everything that we do while scaling any part of our platform has immediate positive effects on our other business units. You can see in the Auto One flywheel that as we're getting more inventory, we can provide a larger selection of cars to our auto hero consumers. This leads to directly more buyers and more buyers allow us to benefit from economies of scale. And this enables us to, again, of the higher purchase prices for our sellers. Those higher purchase prices then lead again to more sellers, and this means more cars and more inventory. And here we start again. As you can see, our unique platform effects make us stronger every single day. Together, our key skills and the flywheel that I just described also allowed us to make incredible progress with our mission in the second quarter of this year. We are very proud to announce that we have achieved more than 1 billion Euro in revenue in our second quarter of this year for the first time ever. We increased our revenue by more than 18% quarter on quarter and achieved thereby our strongest performance in history. At the same time, we achieved 99 million Euro of gross profit which is also our highest quarterly gross profit ever, growing 15% quarter on quarter. And now, looking back, we are accelerating this growth momentum even further. Based on our extremely strong performance in the first two quarters and our hyper-growth trajectory, we are raising our 2021 revenue guidance to 4 to 4.4 billion euro of annual revenue. We have worked, again, incredibly hard in Q2 and delivered on all of our key objectives that you see on the next slide. So we scaled Autohero deliveries much further. We increased the Autohero brand awareness across all markets. And at the same time, we controlled our Autohero GPU to the upside. You will see that later. C2B and remarketing units grew strongly despite the ongoing COVID environment to vast parts of Q2 across Europe. And we did this while controlling nicely, also here a little bit to the upside, our merchant cross-profit unit. So let's get into the details and let us deep dive into AutoHero. Atahiro is on a very strong growth track with 7x year-on-year unit growth leading to 8,400 units delivered for Q2 coming from just 1,200 units last year. While our Q2 deliveries were fully on plan, we're today seeing more demand for Atahiro than we initially expected. We're attributing this additional demand to the success of our branding activities so far. We are therefore as a result of this, increasing our 21 guidance for auto hero deliveries as well. We previously stated that we will deliver 32 to 38,000 units in 2021. We're now raising this target to 38 to 43,000 units in 21. Our customers love our value proposition and the benefit of ordering their car completely online. On this slide, let me show you for some of you again, why we are building the best online-only used car dealer in Europe. As we have the broadest inventory online, customers don't need to travel anymore to find their dream car, and we maximize customer demand. Our easy online checkout provides customers a haggle-free experience and enables us to have highly efficient processes. Our fully controlled production ensures high-quality cars and enables us to benefit from economies of scale. The home delivery with our unique hero truck is a true highlight in the customer journey and gives customers maximum comfort. At the same time, we're able to increase our brand awareness without costly showrooms. And our long-time money-back guarantee gives our customers maximum safety and us maximum customer trust. And with our seamless trade-in, only a net payment is required. And that maximizes our conversion. Now on the next side, the best thing, we are sourcing more cars from consumers than anyone. For example, and this is just a random pick, in June, we were buying more than 10,500 cars from consumers per week. And this is a true competitive advantage. that enables us to create a fantastic variety of cars for customers to choose from. Now to another topic, refurbishment and used car production. We were from now on call it used car production because that's what it is. We're massively ramping up our own used car production capacities. For this year, we estimate to have a total own production capacity of round about 50,000 cars. We will increase that production capacity to approximately 150 to 200,000 cars in 2022. So this is a capacity that we are creating and then has to be utilized by a staffing and more and more cars being produced in those facilities. In order to reach this target, we are currently screening capacities across nine markets with a total capacity of more than 500,000 cars. We're expecting that the target capacity of 150 to 200,000 cars will be built across six to eight sites in Germany, France, Spain, and Poland. So with the ramp up of our in-house production capacity on the next slide, we're expecting our own production to be equivalent to 20% of delivered cars by December, 2021. And from there on, this share to be growing from 22 and beyond. We're expecting that those in-house production capacity investments will bring down our total refurbishment costs per car in the midterm to roughly 50% of what it is today. So this is why we're doing it. Next to our strong expansion of our production capacity, We're bringing even more of our unique glass trucks on the road to deliver the best customer experience to more customers faster. We will rapidly ramp up our fleet because our customers simply love the glass trucks and we see it being a clear NPS driver. By the end of next year, we expect to have 267 glass trucks on the road. In comparison to our last earnings call, we increase our projection for 21 by more than 28% to having 143 trucks on the road by the end of the year. Now to NPS. As you know, we're laser focused on our net promoter score. We've seen a strong increase in our Auto Hero NPS scores across all markets this year. One of the key drivers of our NPS increasing is the growing glass truck delivery share that you can see on this chart. From just 7% in February, we were able to grow it to 25% in June for the overall group. The average NPS score of 63 across all of our markets for June is just 17 points away from our target of 80. With the continuous increase of our glass truck delivery share and our strong focus on customer satisfaction, we are on an excellent track to further increase customer happiness. Now on branding. in the next slide. As already mentioned at the beginning, we closed in Q2 our Hertha BSC sponsorship deal for Germany. With our presence on the jerseys, the boards, and through a wide range of joint promotions in the club environment, we will strongly increase our brand awareness in Germany. Next to Hertha, we closed another very exciting sponsorship deal with European reach. So we're extremely proud to support Paris Saint-Germain PSG as premium partner with strong presence during all their home games and access to the players' collective image rights to promote the Auto Hero brand. So that was Jorginho Wijnaldum, the newest addition to the PSG team enjoying the Autohero shopping experience in France. So as you just saw, we further intensified our Autohero brand buildup. We increased our web sessions in Germany by more than 33% quarter on quarter to over 2.3 million sessions for the quarter. And this impressive growth shows you that AutoHero is really becoming the leading online-only used car brand. So let's switch to the merchant segment and its Q2 numbers. We know that our customers love our superior sell-from-home solution, and thanks to it, we are on an excellent growth track. With 116,000 units sold, we sold more than 10% more units in Q2 over Q1. And with nearly 800 million Euro of revenue, we increased our Q2 revenue by more than 19% compared to Q1. And also in our remarketing segment, we continue to show strong growth as well. We sold 18,000 units in Q2 with a revenue of 152 million. If you look at this on a year-on-year basis, our marketing is growing 2.3 times per year and in units. And if you look at it in revenue, it's even 3.3 times year on year. At the same time, we more than doubled the number of active remarketing dealers to 2,195 in Q2, coming from just 912 in Q2 last year. So this is one of the key KPIs. Sorry, I'll switch back to the video here. This is one of the key KPIs that we watch for remarketing as the active dealer base is a strong driver of future business growth in that segment. Let me now hand over to Markus for an update on financial performance during Q2.

Great. Thanks, Christian. If we go to the next page, We're very proud of what we've achieved this quarter, having hit both a billion euros in revenue and our highest ever gross profit of almost 100 million euros at 99 million euros. On the top line of the merchant segment, this was driven by queue on queue growth in merchant units of just under 10% and an ASP growth of circa 8% due to ongoing release of Corona lockups and continued improvement in our sell from home product. As noted, Autohero revenue grew almost 20% on a quarterly basis and over 600% on a yearly basis as our investments in inventory, marketing and refurbishment have paid off. Gross profit increase was driven by both by higher GPUs in both our merchant and retail segment per car. Our gross margin was at 9.3%, down as a result of higher ASPs on the one hand, as well as the dilutive effect of faster auto hero growth. Adjusted EBITDA landed at minus 23 million as a result of 21 million euros increase in OPEX, primarily as a result of an increase in marketing in Autohero and an increase in personnel expenses, primarily related again to Autohero, including refurbishment. If we turn the page, as Christian mentioned, our GPUs improved in both our merchant and Autohero businesses. In merchant, we saw GPUs increase relative to both quarter one and our guidance. Relative to the guidance of 650 euros per card IPO, we saw the improvement as a result of consistent sales speeds since last year. higher quality cars as a result of our sell from home initiative, where we can choose more of the cars we want with a higher GPU, to some degree, higher logistics attach rates, and also fewer remarketing cars in the mix than expected. On the retail GPU, our retail GPU of 363 euros per car was primarily the result of an improved trading margin driven both by faster sales speeds, notably in Germany, where we've invested significantly in marketing, but also across all of our markets, an improved pricing strategy in terms of deciding how we price our cars up, down and so forth. If we turn the page onto inventory, We continue to invest in building our inventory, particularly for retail, which represents more than 100% of the growth in inventory quarter on quarter. At the same time, we see sales speeds improving, both in merchant, but also in retail, as a result of a lot of that marketing, so that even with increased inventory, our inventory turns continue to remain best in class at 25 days of sales. If we turn the page, we've maintained a disciplined approach to cash management. And while we'll be providing more detail on the 15th of September with our half-year report, we wanted to provide an indication of our cash investments over the past quarter. Starting with our Q1 opening balance, after the adjusted EBITDA loss of 23 million, we paid out 9 million euros in IPO expenses, which are a one-off. We invested further 30 million euros in inventory to grow our business and additionally 12 million euros in consumer finance receivables. These consumer finance receivables represent consumer loans from consumers purchasing our cars, which today is exclusively happening in Germany and Austria. All the cars that we financed in those markets are through our own platform. And you can see how quickly we've been able to build up a pretty substantial book of assets, which we then intend to refinance going forward. Lastly, we spent around 7 million euros in capex, primarily in this quarter, a result of our investment into delivery trucks and to a lesser degree of refurbishment equipment, leading to an ending balance of 789 million euros. Note importantly that there was no incremental drawdown of our 500 million Euro ABS facility this quarter. Other than the already existing 20 million Euro drawn amount, the rest of that remains undrawn. We made that decision really just due to the negative interest rate environment in order to really to maximize the cash on our balance sheet. But that facility continues to remain open for us. If we then move to guidance, as we approach the second half of the year, we are narrowing our guidance relative to what we provided at the beginning of the year. Overall unit guidance has been narrowed to 592 to 623,000 units, with more units from Autohero and fewer units coming from the merchant business. As always, the assumption is that we have the current level of COVID restrictions. In merchant units, we are increasingly optimizing out of our lower end units to improve GPU and see that the ongoing shortage of new car leads to fuel remarketing business leads resulting in our guidance towards the lower end of the merchant unit range. Nonetheless, merchant revenue continues to be strong and in fact has been driving our revenue upgrade. In Autohero, we see more demand than expected and investing further in marketing, refurbishment and delivery capacity, which has led us to increase our unit guidance to 38,000 to 43,000 units this year. Now, before going to the revenue guidance, I'd like to provide a little bit of color to Christian's comments on our refurbishment plans and the impact on CapEx and cash flow. As noted, we are currently in discussions with a number of potential sites to accelerate the in-house build-out of production sites. The capacity that we've presented represents the maximum capacity at full utilization, and this generally takes around two years from signing a site to reaching that maximum capacity level. For modeling purposes, we estimate around a 750 Euro investment per car of maximum production capacity. The majority of that is real estate, which we will then be renting or leasing. To move on to the financial guidance, for revenue, we're bringing up our guidance primarily as a result of the strength in our merchant business to 4 to 4.4 billion euros for 2021. Likewise, on gross profit, we see the ongoing GPU trends in both the merchant business and the retail business as sustainable and therefore bringing us to the higher end of gross profit guidance for the full year. we are bringing our adjusted EBITDA guidance down to minus 2.5% to minus 3%, mainly reflecting our decision to accelerate marketing in light of the positive operating impacts that we're seeing from the German marketing investment that we did in Q2, now continue to expand that over the course of the reign of this year. With that, I'd like to turn it over to Q&A. Thank you.