AUTO1 Group SE
XETRA:AG1
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3.35
11.16
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
AUTO1 Group SE
You don't have any saved screeners yet
Hello. Good afternoon, and good morning to American participants. Welcome to the AUTO1 Group First Quarter 2023 Results Presentation. I'm Philip Reicherstorfer, the Group Treasurer. As always, I'm joined today by Christian Bertermann, our Co-Founder and CEO; and Markus Boser, our CFO.
We will start with the presentation followed by questions and answers. [Operator Instructions]
Before I hand over, I must make your way of the safe harbor provisions at the beginning of the presentation here. These will apply to any forward-looking statements made by management today.
And now over to Christian.
Hi, everyone, from Berlin, and welcome to this AUTO1 Group Q1 earnings call. So Q1 was a strong quarter for us. We continued to execute our customer-centric strategy across all areas of the AUTO1 platform. And as a result, we delivered a strong pickup in growth in Q1 in many key metrics and achieved the highest level of gross profit ever. We further strengthened our leading platform by making our products even more convenient, and we continue to invest into providing the best possible experiences everywhere.
We improved EBITDA substantially quarter-over-quarter, marking an important further milestone on our path to group breakeven towards the end of this year. From a strategic point of view, we continue to leverage our unique market position, and we remain very excited by the opportunity ahead of us. AUTO1's largest used car wholesale platform enables us to invest into highly attractive opportunities.
With Autohero, we have built a leading online retailer in Europe, shaping the used car market of the future. And under our financing arm, we continue to build up a growing consumer loan portfolio, which has now a total size of more than EUR 212 million and will become major source of profitability in the future. We believe that we can add even more synergetic products to our platform going forward and aim at strong market share growth in each of our segments.
Taking a look at financials. We delivered strong growth in both units and gross profit in the first quarter of this year. Total unit sales were 157,000 compared to 150,000 in Q4 of last year. Group gross profit hit a new record level of EUR 132 million for Q1. That is EUR 17.5 million more than in Q4. I am very proud of our team delivering this outstanding result in a used car market environment, which is still at historically low volumes.
After several quarters of strong market headwinds, we now observe more stable volumes in our market. Quarter-over-quarter, European volumes grew 4.7%. However, used car transactions remained flat year-over-year, continuing their very low absolute transaction levels, growing in line with the quarter-over-quarter market development, our quarterly market share remained the same at 2.34%, despite the price volatility we observed between the fourth and the first quarter.
In line with our strategic goal of improving price transparency in our market, we launched the AUTO1 Group Price Index in April, which is providing great insights into used car market pricing. By leveraging our unparalleled transaction data of around 3.6 million historic car transactions, this pioneering index tracks the monthly evolution of wholesale used car prices across Europe. The starting point of the AUTO1 Group price index is January 2015 with a reference value of 100. And from now on, we will publish updates on a monthly basis.
To comment on the latest development, we can say that after the steep price decline in Q4 of last year, we are now observing a more stable price environment in Q1. So overall, prices slightly increased by 1% from January to March. And with the most recent data, the price index slightly decreased again by 1.5% from 150.9% in March to 148.7% in April.
So let's take a more detailed look at the performance of our merchant segment. In Q1, we saw a positive trajectory with our merchant business when comparing with Q4 of last year. We sold 139,000 units in merchant to our partner dealers, representing an increase of 4% quarter-over-quarter. Units sold in our C2B business have grown from 114,000 in Q4 and to 120,000 in Q1 and were accompanied by 19,000 units sold via our remarketing channel. Revenue in our merchant segment was EUR 1.22 billion, that is 3.4% more than in Q4.
If we take a look at merchant GPU, that was EUR 769 in Q1, which is at the high end of our medium-term range and one of the best levels we have seen so far. Merchant GPU significantly improved from Q4, where it was impacted by the sharp decline in used car prices. Our optimized inventory turn strategy led to this majorly improved merchant GPU, beating also the pre-work Q1 value of 2022. Merchant gross profit was EUR 107 million in Q1, that is EUR 17 million more than in Q4.
So now let's switch to retail segment performance. Taking a look at retail, we can say that Autohero had a very successful first quarter. Our Retail segment grew strongly in units and revenue. And at the same time, we continued our track of improving unit economics, which remains a key priority for our team. Autohero delivered a record number of 18,100 units compared to 14,600, 1 year ago, a year-over-year increase of 24%. Revenue climbed to EUR 284 million, which is 16% more than in Q1 of last year and EUR 19 million more than in Q4.
Also retail GPU was strong for Q1. We achieved a new record of EUR 1,349, representing an increase of 88% year-over-year. This consistent improvement of retail GPU over the last 5 quarters makes us confident in continued growth and progress towards our GPU of target of EUR 1,500 for Q4 and our long-term target of EUR 3,000. I am impressed by our retail team achieving EUR 25 million of gross profit, a more than twofold increase compared to EUR 10.4 million 1 year ago.
Retail gross profit continued to be a major contributor of total gross profit for the group. It made up 19% of the group's total gross profit in Q1, and that is an increase of 126% compared to Q1 of last year.
Customer experience. Our customers remain in the front and center of everything we do. And as a result, our customer satisfaction continues to be at strong levels starting into the year. In Q1, we achieved a high NPS of 68, which is 1 point up compared to Q1 of last year. Our excellent Trustpilot score of 4.6 across all markets is stable year-on-year, validating our high internal NPS values externally. We believe that providing great customer experiences allows us to build one of the strongest brands in this industry and will lead to continued high growth rates for our retail business in the future.
Taking a look at production. So in-housing, our production volume remains a core driver of our profitability strategy. We ramped up the in-house volume from 6% of all units produced in January of last year, to 62% in March. So as of now, almost 2/3 of all Autohero vehicles are being refurbished in our own production centers and we continue to increase volumes towards our goal of 90% in-house share until the end of this year.
Our production center in Brandenburg, it's our flagship facility, where we decreased the production cost per unit in Q1 to EUR 710, a reduction of EUR 460 compared to Q1 of last year. And across all our production center, costs in Europe are close to the Brandenburg facility with EUR 810 per unit, a decrease by 25% compared to Q1 of last year. And if you look at the combined cost track of all internal production centers, that demonstrates that we are able to reproduce the learnings from our first center across our European footprint.
I'm very proud of these achievements of our production teams that are strong over the last couple of quarters. We continue to make external production more efficient, which is good to see. But if you look at external production only, those costs are on average, 56% higher than in Brandenburg, which shows you again the importance of our own facilities.
If we take a look at marketing and retail, we continue to improve marketing efficiency. And as a result, marketing cost per car delivered decreased to a new low of EUR 700 over the course of Q1. That is a 68% decrease from Q1 of last year and EUR 200 less per car delivered compared to Q4. This is a major success, and I'm happy that we look good against our year-end target of EUR 500.
While reducing marketing costs on the one hand, we in parallel enhanced sales conversion on the other hand. We strongly improved sales conversion, which we measure as the number of Autohero units sold as a percent of total web traffic. We increased that number by 160% in Q1 year-over-year. We see the strong improvements as a validation of our long-term brand strategy. We are expecting to continue our path of conversion optimization while keeping high levels of brand awareness leading to further efficiency of marketing cost per car delivered in the future.
So if we summarize Q1 and take a look at what's coming up. This slide here is from our full year results presentation just a couple of weeks ago. If we compare Q1 results with the outlined strategy for the full year and Q1 is a good step forward. We grew retail GPU once again. We improved unit cost per delivery in retail once again, and therefore, overall retail profitability. We grew merchant GP strongly in a quarter-over-quarter comparison, and together with retail GP, achieved the highest level of gross profit in the history of the company. That did not only make merchants more profitable, but also improve the overall bottom line by nearly EUR 11 million. We are almost happy with our cost base for now. So we believe that the next step for merchant is more volume growth at strong GPUs in order to hit our Q4 profitability target.
We are convinced that we are pulling the right levers to transition our business from high growth rates at negative cash flows to high growth rates at positive cash flows, enabling our platform to trade a steadily growing share of the European market in the years to come.
And with that, let me hand over to our CFO, Markus.
Thanks, Christian. Looking at our Q1 financial results, our top line revenue and units showed stability in growth relative to the volatility of Q4. The Q1 is generally the strongest quarter of the year as it has a least amount of holidays. On a year-on-year basis, the top line comparison was impacted by an extremely strong post-COVID in Q1 2022, and our near-term focus has been our bottom line where our efforts are beginning to bear fruit.
As Christian mentioned, we are -- we achieved our highest gross profit ever, driven by improving GPUs in our merchant business as a result of faster inventory turns and improved pricing as well as both higher units and higher GPUs in the retail business. Our adjusted EBITDA of minus EUR 25 million, a 47% year-over-year improvement reflects both higher gross profit and ongoing cost discipline.
Turning to the EBITDA improvement in more detail. We remain well on track to achieve EBITDA breakeven by Q4 this year. Our approved trading result drove a sequential improvement of EUR 17.5 million of gross profit with marketing discipline contributing a further EUR 6 million in quarterly improvement. Internal logistics improved slightly by EUR 1.4 million, a reflection of the partial easing of the particularly high logistics challenges in Q4 of last year, the logistics costs remain high from a historical perspective. We've maintained our discipline and payroll remaining flat on a quarterly basis.
Other income decreased by almost EUR 4 million primarily a result of lower prior year income, of the EUR 9.9 million increase in other OpEx, the largest amount relates to certain currency exchange losses in prior year corrections, and we don't expect these to repeat. You would expect the other OpEx amount to return to Q4 2022 quarterly levels were better in the quarters going forward. Our overall gross profit growth, that OpEx discipline makes us comfortable path to adjusted EBITDA breakeven in Q4 2023.
In Q1, we generated EUR 24 million of cash as a result of improvements in our operating performance and inventory management, offset by reducing drawings under our inventory ABS by EUR 110 million. Our firm-wide focus on inventory turns, which we will discuss in the following page, enabled us to reduce inventory by EUR 191 million from EUR 628 million (sic) [ EUR 618 million ] to EUR 427 million. As a result, we ended the quarter with EUR 566 million of cash and EUR 455 million of committed inventory capacity in the form of our nonrecourse ABS facility.
We also increased our consumer loan portfolio in Germany and Austria by EUR 26 million, which by way of reminder, is financed by our EUR 250 million nonrecourse consumer loan asset-backed securitization. While we expect negative free cash flow for the next few quarters, this cash and liquidity position leaves us in a very strong position to complete our journey towards profitability and free cash generation.
In Q1, we substantially improved our inventory turns through a change in policy, data analytics and increased firm-wide focus. We accomplished this through the better data and analytical quality of our inventory algorithms, which in turn also enables us to purchase new inventory more proactively. This was accomplished across both our retail and merchant businesses.
While we may see increased retail inventory in the short term as we restock from the very high level of sales in Q1 with the resulting uptick in turns. We believe that the success we are having here represents a sustainable step change in our inventory strategy with the corresponding strengthening of our cash position.
Finally, to our guidance. We maintain all of our guidance targets that we provided in our Q4 call, we can provide the following color. On retail units, we keep guidance of 65,000 to 70,000 units, but feel more comfortable at the top end. On merchant units, from what we see in units in the market right now, we would be towards the lower half of our guidance, but this does not include potential increases in supply at the back of the year. As a result, we maintain our overall group unit guidance of 625,000 to 690,000 units.
On gross profit, we keep our targeted guidance range of EUR 500 million to EUR 550 million, but feel comfortable that we are making progress towards consistently improving gross profit. Finally, on adjusted EBITDA, we believe that we're making solid progress, but maintain our guidance of negative EUR 60 million to negative EUR 90 million for now.
To reiterate and repeat what Christian said earlier, we believe we're taking the right steps now to transition our business from high growth rates at negative cash flows to high growth rates at positive cash flows, enabling our platform to trade a steadily growing share of the European used car market in the years to come.
With that, I'd like to open the floor for questions.
I'm Gary, your Zoom operator. [Operator Instructions]
Thank you, Gary, and we will start with Catherine O'Neill from Citibank.
I've got a couple. I was actually just typing another one in Box. So yes, my first question is on the merchant GPU, which, as you mentioned, increased significantly versus the fourth quarter. So I just wondered how sustainable that level is as we progress through this year and into 2024?
And then my second question actually was just if you could provide an update on sort of financing penetration levels, you've seen any changes there and where you are in the process of sort of securitizing the loans, which I think is potentially one of the big kickers for your retail GPU in the longer term?
Markus, do you want to comment on GPU?
Sure. So we think that the merchant GPU is sustainable at the round about the levels that we have right now. I think, historically, we had given the guidance of between EUR 675 million and EUR 800 million. We obviously hit the top end or towards the higher end of that. And I think the impact that we saw when we were just outside the bottom end of the range in Q4 was very much driven by the extremely fast decline in pricing in that 1 quarter. I think we adjusted very quickly and I think have also adjusted our own pricing algorithms as well as sales speeds and feel very comfortable that we are going to continue to be solidly in that range for the reminder of the year on the merchant side.
Maybe on second question on the financing penetration rates. I think those have come down a little bit over the past quarter or 2, primarily as a result of increasing interest rates. Therefore, I think cash buyers in a lot of cases then advantaged relative to financing buyers. Nonetheless, I think they still remain, as I said, on the one hand, we have our internal financing in Germany and Austria, which had been around about the 50% rate. It's a little bit lower than that, but still in the kind of solidly in the 40s, and then we have the external financing, which has historically been lower than that. And so I think that's impacted both of them.
In terms of the securitization, that's still on track for the second half of 2024. I think as we've talked about in the past, that's something that really for us to go to the public markets and go to the ratings agencies as well as public-side investors, they really want to see the full 3 years of performance history on that portfolio. And so as much as we'd like to, and I think culturally want to get these done and move fast. It's one of those things, which simply requires the -- if you want the performance for people to be able to see the performance of those cohorts. So that remains on track for the second half of next year.
So with that, over to Nizla from Deutsche Bank.
Great. I hope you can hear me. I have 2 from my end as well. The first is, in Q4, we saw some impact as a result of the write-down of prices in your EV fleet, particularly related to the Tesla. How did you mitigate this in Q1? Is there a risk of further price declines among the EV OEMs this year? Some color there would be great. .
And my second question is on the AUTO1 Group index. I mean, it looks like prices are easing on average, but you've kept your average ASPs for the group, largely stable year-over-year and even quarter-over-quarter. Was there a mix effect that you benefited from? And is the working assumption that prices could keep declining over the course of the year? Some color would be great.
So thank you, Nizla. On the first one, with respect to Tesla pricing and EV pricing, I mean, obviously, there's a lot of fluctuation in that part of the inventory in that part of the car market, and it was also correspondingly in our inventory in Q4. So we are at the moment pretty much risk off on these types of cars. This means that we are trading them once we have a bit. So we treat them in the part of our business as so-called risk-free and we feel more comfortable this way. Certain EV types are allowed. So it's not only Tesla that see some volatility in the EV residual values driven very much by their own price action, but also other EVs are not particularly stable at the moment in residual value. That's why our systems put most of them into risk-free trading at the moment. Some of them cheaper ones is cars that we take on balance sheet still.
And with respect to the index, yes. So we look at the March and April data points pretty much as a more stable price level. So we do not see imminent kind of threat of like further massive reduction of prices. We believe that volumes are stable, but we're definitely not on a -- price levels are stable, but we're definitely not on an upward trend in prices right now. And Yes. It's like, as you're saying, it's probably like a little bit of a mixed question. If we look at ASPs Q1 over Q1 for the full business are stable, yes. That's more a mix question, whereas the index really shows you kind of the market development.
I think that actually brings us to the end of our Q&A session. I guess, that was a very strong quarter with very clear messages. So thank you, everybody. Good bye from Berlin.
Okay. That was short. Thank you, everyone and see you soon. Bye-bye.
Thank you. Bye-bye.