AUTO1 Group SE
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AUTO1 Group SE
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Hello. Good afternoon, and good morning to American participants. Welcome to the AUTO1 Group Third Quarter 2024 Results Presentation. I'm Philip Reicherstorfer, Group Treasurer. Before we start with today's call, I would like to update you on our Investor Relations team. I'm delighted that Maria Shevtsova will be joining our Investor Relations team and drive our Investor Relations efforts going forward. Maria has over 15 years of IR experience. Welcome, Maria.
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 you aware of the safe harbor provisions at the beginning of the presentation. These will apply to any forward-looking statements made by management today. And now over to Christian.
Thank you, Philip. Hi, everyone, and welcome to the AUTO1 Group Q3 earnings call. Q3 was a landmark quarter for us. We achieved record-breaking results and double-digit growth across all metrics and business units. Is it just me? Do we have the presentation on, because I'm seeing Philip's screen.
Okay, fine. So back to Q3. We achieved record-breaking results and double-digit growth across all metrics and business units. I'm very proud of everyone at AUTO1 for pushing hard and delivering these outstanding achievements, and I want to thank our partners and customers for their continued trust and increase in our products and services. We are continuing our journey to transform the used car market at a fast pace. And looking at our recent growth trajectory, I'm incredibly excited about the future and the massive long-term potential ahead of us.
In Q3, we reached the highest number of units sold since our foundation with 177,000 units. This is an exceptional result. It represents 26% year-on-year growth, and it demonstrates the strength of our unique business model. We also generated record gross profit and achieved our highest ever adjusted EBITDA.
We are increasing our 2024 guidance, reflecting this great Q3 performance. Looking ahead, we have all the building blocks in place to amplify the strong momentum further while we steadily progress towards our long-term market share and profitability goals. With EUR 187 million for Q3, a year-over-year increase of 39%, we delivered the highest group gross profit in company history. We also set a new record for adjusted EBITDA with EUR 34 million, an improvement of EUR 33.5 million year-on-year. This quarter was driven by strong demand acceleration across both our retail and merchant segments, very good GPU performance and significant operating leverage. We continue to leverage our unique business model through our 6 technology products, which are increasingly gaining traction on our platform.
With C2B buying, we offer private consumers a dense network of local branches where they sell their vehicles to us for great prices at maximum convenience. Our remarketing solution offers our B2B partners competitive Europe-wide prices for selling their wholesale inventory and best-in-class sales processes. AUTO1.com, is our buying platform for partner dealers in more than 30 markets. Our merchants have access to more than 30,000 cars 24/7. Merchant financing is our in-house financing solution. It supports our partners in growing their business together with us without having to invest their own capital.
Autohero is the most promising technology-enabled used car retailer in Europe. We operate in 9 markets. We are offering thousands of used cars of all makes and models, and they are reconditioned in our own used car production centers. They're ready to be shipped quickly to our growing customer base. With Autohero consumer financing, we are offering a strong financing solution, generating a current loan portfolio of EUR 339 million for Q3. We are convinced that our financing products are a major input factor of current and future demand. All of our products and services are developed in-house. Together, they create the unique platform with strong network effects that AUTO1 is today, incrementally driving future market share gains.
Let's take a look at purchasing. Our sourcing network expansion is going well. We are increasing year-on-year growth rates on additional branches built. We believe that increased densification of our network increases convenience for our selling customers and that, in turn, expands the available selection for our retail and merchant buyers. We plan to further accelerate our rollout speed going forward.
Now we take a look at Merchant segment performance. The merchant business performed very well in Q3. We made outstanding progress. Over the last quarter, we sold 158,000 units to our partner dealers. That is an increase of 25% year-on-year. Units sold from C2B have grown from 111,000 in Q3 of last year to 144,000. That is an increase of even 30% year-on-year. And in addition, we continue to sell 14,000 units via remarketing, keeping volumes stable.
Merchant GPU was EUR 914 in Q3, which is an increase of 9% year-on-year. Together, we achieved record merchant gross profit of EUR 144 million, growing 37% over Q3 of last year. These very strong results are driven by a significant increase in demand for our B2B offering, leading to more partners buying on the AUTO1.com platform. In the last quarter, 25,600 merchants bought from us. That is an increase of 18% compared to Q3 of last year. We also saw a positive 7% average basket development year-on-year from 5.8 to 6.2 cars, signaling a growing share of wallet among our buyers. If we take a look at AUTO1 merchant financing, merchant financing also had a fantastic quarter. We continued the rollout of our financing solution for professionals in Q3, and we recently launched it in Belgium and the Netherlands. In parallel, we also made it available to more partners in Germany, France, Spain and Austria.
Our merchant financing portfolio grew by EUR 44 million quarter-over-quarter from EUR 134 million in Q2 of this year to EUR 178 million. We continued to receive great feedback from our partners and register growing demand. In Q3, we financed EUR 220 million of merchant sales. That is an increase of 20% quarter-over-quarter. The number of units financed grew to 20,000, and that is 18% more compared to Q2 of this year.
We will continue our ambitious growth track and will rollout AUTO1 financing to more and more markets and more partners in the coming months. Given these strong results in the merchant business and the current momentum, we are raising our merchant GPU guidance again to a new range of EUR 825 to EUR 925 after already raising the lower end of that range to EUR 800 in Q1 of this year. Since our IPO, we either have consistently hit the midpoint or outperformed our merchant GPU guidance. The consistently strong GPU results of the last quarters are driven by superior demand levels, very good AI pricing performance and the strong execution of our teams. Our flywheel is driving high levels of growth across our business by creating powerful network and platform effects, expanding our sourcing network and offering tailored remarketing products lead to an even better selection for partner dealers, in turn, increasing their demand.
AUTO1 financing further expands this demand, attracting more buyers. And our digital platform, AUTO1, which is centered around AI pricing, extensive data and effective matchmaking technology continues to power and amplify this growth cycle, driving our steady progress towards our long-term market share target.
Now let's look at our retail segment, Autohero. Autohero also had a very strong Q3. It's gaining more and more traction, and I'm very happy about the significant progress we made in both units and GPU. Autohero delivered 19,100 units compared to 14,800 in Q3 of last year, a year-over-year increase of 28%, driven by increased consumer demand for our brand. GPU also grew strongly to EUR 2,263, increasing 18% year-on-year. With this latest increase, we continue to be well on track towards our long-term target of EUR 3,000. Strong unit and GPU development led to EUR 43 million of gross profit, a new record level and 49% higher than 1 year ago. When it comes to profitability per unit before headquarter costs, we closed Q3 with a unit loss of around EUR 200 to EUR 300 per car, a significant multi-hundred euro improvement over last year, and that paves the way for a further reacceleration of growth in retail.
We are convinced that Autohero will become the leading pan-European retail brand for buying used cars, and we are incredibly excited about its immense growth potential. We continue to invest, learn and optimize our retail business, further developing the autohero.com technology, the selection, the logistics capabilities, the production infrastructure, sales conversion and delivery times. Let me point out 3 investment areas in particular. We reduced the average delivery time from almost 14 days in Q3 of last year to slightly below 12 days in the third quarter of this year that makes us 15% faster. We aim at much improved delivery times and lower delivery costs in the future, improving the quality of our offering further. Over the course of Q3, we also launched the Autohero native app for Android and iPhone, completing a major milestone. Now customers in all Autohero markets have our inventory at their fingertips.
First results of the app usage look very promising, showing higher engagement and better returning behavior compared to the website. Looking ahead, we will continuously invest into further development of the app. We also integrated AUTO1 car audit technology, in short AUTO1Cut, our in-house AI powered vehicle damage detection technology in our flagship production center in Berlin Brandenburg. AUTO1Cut is the very first step for inspecting retail cars, and it is seamlessly integrated into our refurbishment systems. It consists of hardware scanners and AI image recognition algorithms to quickly identify and analyze car damages. AUTO1Cut is already detecting around 90% of damages such as dents and scratches automatically and in real time. We plan to further develop our AI damage detection efforts as we scale our used car production.
Let me now hand over to Markus for detailed financials.
Thank you, Christian. With 26% unit growth and 24% revenue growth, while achieving a EUR 34 million adjusted EBITDA, Q3 was indeed a landmark quarter and almost 70x improvement in profitability versus the same quarter last year, a result of both selling more units, but also improving our profitability per unit at both the gross profit but also OpEx level. Taking a look at a bridge of our adjusted EBITDA profitability from Q2 to Q3, you can see the significant operating leverage inherent in our business as we continue to focus on improving our unit economics. Quarter-on-quarter, our gross profit improved by around EUR 14 million, of which EUR 10.6 million came from increased units, while EUR 3.2 million came from the improved consolidated GPU.
At the same time, we were able to keep our core OpEx flat to actually marginally lower while selling far more units, resulting in better unit economics, leading to an overall OpEx per car sold under EUR 900. This impact, of course, will be even greater if you were to look at it on a yearly basis. As always, we maintain a strong balance sheet with no corporate debt. Cash developed very profitability positively this quarter, primarily the result of our inaugural publicly rated ABS on our consumer finance portfolio, which we issued in July, releasing significant cash through a higher loan-to-value while also achieving a lower cost of capital. At the same time, we have continued to invest in our inventory, which grew EUR 65 million quarter-on-quarter, financed at 80% loan-to-value currently through our rated inventory ABS facility.
Our captive finance business also grew substantially with the merchant portfolio growing almost EUR 50 million over the quarter and the consumer loan portfolio growing by EUR 16 million over the quarter. Each of these portfolios are financed by their own respective nonrecourse ABS facilities. As we move on to guidance, I would like to remind everyone that Q4 tends to be seasonally our weakest quarter, both from a unit but also from a merchant GPU perspective as Q4 has fewer workdays and dealers tend to be more cautious at year-end. With that as background, we increased our unit guidance to a range of 665,000 to 679,000 for the full year, of which merchant units are increased to 593,000 to 607,000 with 600,000 merchant units as the midpoint, and retail unit guidance increased to circa 72,000 from 70,000 for the full year.
Our gross profit guidance increases to a range of EUR 682 million to EUR 700 million and our expected 2024 adjusted EBITDA increases to a range of EUR 72 million to EUR 84 million from EUR 45 million to EUR 65 million previously. Our success this quarter and this year has been driven by our investments into a business model that combines proprietary data, algorithmic pricing, the lowest cost of capital and operational excellence through technological innovation. We believe that this unique formula enables us to create terrific products for both consumers and merchants and will enable us to continue to grow and outperform the market in the coming years.
With that, I'd like to open up to questions.
[Operator Instructions] We will start with James Tate from Goldman Sachs.
It's James Tate from Goldman. I've got two questions, please. Firstly, you've previously spoken about waiting until Autohero reaches segment or variable profitability before increasing reinvestment to drive unit growth. Could you just provide an update on where you are with this given the big increase in group profitability? And have you reached segment profitability in Q3? Or will it likely be in the first few months of next year? And then secondly, merchant unit's growth accelerated significantly in Q3, far outpacing the broader used car market. Could you provide some more color and detail on what drove this outperformance? And do you expect to be able to maintain these levels of share gains into next year?
So James, maybe I'll start with the segment profitability. So in the presentation, we mentioned -- or I mentioned that we see Q3 Autohero profitability before headquarter cost at a level of around EUR 200 to EUR 300 negative at the moment, which is a strong multi-hundred euro improvement over the same Q3 last year. And we are positive on the path that we have been seeing throughout the full year. And while we are not there yet completely, we are starting preparations for a reacceleration of Autohero units under the condition that we'll hit that segment profitability before headquarter cost soon. But that's our current view on it.
And secondly, you asked about merchant growth. This was indeed a fantastic quarter with outstanding growth rates. Drivers were a little bit like mentioned. So really strong demand, very good execution, high levels of auto pricing performance. When it comes to guidance on merchant growth rates going forward, I would pass on to Markus.
Sure. I mean I think your question, James, was also related to market share gains and so forth. And ultimately, I think we, of course, do think that merchant share gains that -- we have the best product out there. And as a result of that, I think that's really the reason why we've been able to gain market share. I think we consistently -- last quarter, when we talked about kind of future, we're talking about mid- to high single-digit unit growth. And I think we will stick with that, obviously, on the back of, though, a higher set of units for this year. But I think we think that we can continue the growth above the overall used car market also in the coming years.
And with that, we are moving over to Chris Johnen from HSBC.
First, coming back to the comment on mid-single digit to high single-digit merchant unit growth in 2025. I mean, given we think about the expansion on the merchant financing side, adding new partners, potential new markets, you're still not in relatively huge markets like Italy, probably Poland will also be interesting next year. Given how the sort of average amount of cars a dealer is taken with the product, the overall growth of the portfolio, I mean, I think even high single digit would be somewhat disappointing unless my math is wrong here. I guess it's still early and 2025 is still a bit away, but is there anything that you would want to flag to us that would suggest that I may be getting a little bit ahead in terms of the potential for unit growth in '25. Yes, I'm just trying to understand if you're just being conservative or whether there is something really mathematically wrong with my assumption.
Second question about a slide that you haven't shown ,#32 actually. It's the first time that I've seen in, I don't know, maybe 2, 3, maybe even more years, that you mentioned your long-term margin guidance again. Correct me if I'm wrong. 5% to 9%, I think that was given at the IPO. I think that's quite a statement, no. I mean, I just basically want to pick your brain on why this is reappearing now? Obviously, you've had 3 quarters of positive EBITDA, quite a milestone for the company. Can you just help us understand the path to the bottom end? When the IPO was given, that was a long-term target. A lot has happened. So the question is, what is long term? And yes, maybe you can give a bit of color as to why this has reappeared.
So I think in terms of the first point, I would say, like -- clearly, I think we have, I think, a terrific product. I think we're coming out of a lot of variance in the overall market. And I think as it now normalizes, we see ourselves to continue to grow market share. We're not making any assumptions that the overall market will grow next year. And so I think kind of by giving that mid- to high single-digit growth for the merchant unit, I think, is appropriate for where we are right now. And obviously, we'll update you when we kind of give our overall guidance for 2025 in the beginning of next year.
With respect to your second question, we did actually slip it in there. We put in an introduction to AUTO1 slide on our IR website over the course of last quarter, which I think we thought was appropriate as we've moved from, I would say, 2023 being a, if you want, kind of consolidation year where we really focused heavily on our unit economics, really focused heavily on kind of the overall Autohero business. And as 2024 has evolved and you've seen it in Q1, Q2, Q3, we started out, already in the first quarter, with just about some growth and then saw a significant growth and much higher profitability than I think we or the market were expecting and really kind of seeing those investments now really paying off. And so while I think over '23, we were focused really more on, if you want, sort of very core operational sort of business. And ultimately, I think from a capital markets perspective, we're blunt, we were a show-me story. We kind of feel now that we are showing you with that performance, and it's now appropriate to start thinking again about the future, about what is our long-term margins. And so therefore, have put those kind of back on the website, starting, as I said, with this more of an introduction to AUTO1 slide deck, which I'm happy to take you through, but it's on our web page and then putting that in here in the appendix, I guess, to remind everybody, look, this is where we're going. We're a business that has an incredibly -- already a very, very big top line. We're growing certainly in units at the moment in a pretty high clip.
And I think there's not much that I think you need to sort of believe, if you will, to see us getting to that point. So I think that was the logic behind putting that back out there now that I think we've hopefully achieved some credibility in our ability to do what we had consistently been saying we're going to do.
Over to Nizla Naizer from Deutsche Bank.
I hope you could hear me. I have two questions from my end. The first is on the Q4 implied EBITDA with your upgraded guidance. So now it's ranging from EUR 0 to EUR 12 million. Could you maybe give us some color as to what could bring it to the lower level versus the upper end? And where you're sort of targeting your investments in the fourth quarter? Would it be increasing marketing? Some color there would be great.
Secondly, on the macro sort of environment. I think you mentioned you're not sort of forecasting any market growth next year for used cars. But could you maybe remind us what sort of an impact the macro environment typically has on your business, on your dealers, your consumers sort of offering to sell their cars, et cetera? And where your market share now sits in the overall context of the number of transactions that happen in the market? Some color there would be great.
Nizla. I mean on the Q4 EBITDA, that's correct, the range that you were mentioning with the implied full year EBITDA range that we've given and the associated Q4 calculation. Pretty much the drivers are units and GPU. So we are on the OpEx side, I would say, relatively set and would rather increase a little bit on that because we prepare for additional growth in Q1 and then throughout the rest of the year, meaning that it very much depends on merchant GPU and retail GPU performance if we will be on the lower or on the upper end. And that is, again, a reflection of how well can we manage seasonality and how well can we keep demand, especially in the last 3 weeks of December, which tend to be seasonally quite weak. But we believe that this is the best corridor to assume at the moment. And then depending on how throughput management and how margin management works, we will be on the lower or on the upper end of that.
And yes, when it comes to macro, I mean, overall, you can see it already in our numbers, I mean, macro, I would say, environment overall is not the most positive at the moment in Europe and also not in Germany. This did not influence the numbers in a large way rather than the opposite. So we're able to build a lot of market share out of our own power because we are driving the input factors in the right direction, and we can increase our market share step by step if we continue to follow the strategies that we've been implementing over 2024, also successfully in '25. So we are not worrying too much at the moment about macro. So we would think there is, I mean, at the moment, around about 6% to 8% growth in the used car market, but you can see that we are growing much more than that on a year-on-year basis. And we are also not assuming that we are getting any help of the used car market in terms of growth rate for the growth in 2025. But we're convinced that because of all the factors that we've been talking about and also as Markus just summed up again that we have a lot of capabilities to grow further in market share throughout '25. Markus, I don't know if you want to add anything to that?
No. I mean, I think that's right. Obviously, the used car market tends to be generally quite a defensive one. I think we had some sort of extraordinary situations post-COVID. But yes, I would echo everything Christian said.
And maybe as a last comment here, I mean, when you hear bad news about BMW or Mercedes or Volkswagen, then it's not because of their German business, right? It's because of their Chinese business and the high revenue share these OEMs have there. In fact, the new car market so far, for instance, in Germany until October is pretty much stable year-on-year. So yes, it very much depends on which viewpoint you are taking. But from our point of view, for our business, the macro conditions are not the decisive factor. And at the moment, we are clearly outgrowing them on our own.
And now over to Shaqeal Kirunda from Morgan Stanley.
Shaqeal Kirunda from Morgan Stanley. I understand you've kind of addressed these already, but a little bit more detail would be helpful just to discuss the drivers of the strong volume growth this quarter, particularly in merchant and the sustainability. How much of that do you attribute to volumes rebounding in the overall used car market? How much is due to the increase in digitalization, the sort of addressable market for you guys? And then how much is market share gains for AUTO1? And if you could please actually share a figure on that, that would be great.
And then after that, increase in volumes in the overall market? I mean, what kind of analysis are you guys doing on where that's coming from and how sustainable it is? Do you think that this is because of better affordability for consumers? Or is there any other metrics that you're looking at?
Yes. I mean, key drivers of volume growth, particularly in the merchant business, pretty much how many customers can interact with our offering, right? So it's like how many inquiries do we get from customers that want to sell their car, how big and dense is our branch network and how much pricing power can we bring as an offering to those customers via our merchant network. And that depends again on how many merchants do we have, what kind of basket are they asking for, how active are they, how well do they find the car on AUTO1.com, how quickly are they informed via the mobile app of a relevant new offer, how good do they find our financing solution, how much more volume does it give them if we finance them and then how expensive is the car for them. And yes -- so there's a variety of input factors that are leading to the strong results that we see. And together, they are clearly outperforming the development of the used car market in particular. So we usually tend not to give market shares during the year anymore because a lot of the data for most of the markets will be only published in a safe and reliable way at the end of the year. But Markus, I think we have around about a corridor, right, that we maybe could pass on.
Yes, exactly. I mean, and I think this also addresses -- so we think that we'll end up with around 2.5% market share. Maybe also kind of addressing your overall question. I mean, it's, I think, difficult to get too granular in terms of where the overall market is now going. I think you could spend huge amounts of time on that. But more generally, if you look at it, the used car market pre-2019 was generally growing at kind of a 2% to 4% per year unit basis. 2019 for our market was about 29.2 million units. And obviously, 2024 is not yet done, but it's still below that 2019 level if we assume that it will end the year with sort of 27 million to 28 million units. So I think potentially, at least some of it is still some catch up to a normalized level relative to where we were pre-COVED, which itself was on a normal level, kind of growing in that sort of low single-digit kind of level. So hopefully, that gives you some color on that macro question.
And then we got Yulia Kazakovtseva from UBS.
So I have two, if I may. So just wanted to confirm the guide on Autohero units for the next year, and apologies if I missed it. So I think it was previously mid-teens growth for next year previously. Is this target still relevant given the strong progress towards profitability? That's question number one.
And the second question is on the drop-off network. So you continue to open new locations. Could you please provide some color on how much incremental costs you have to open one branch in terms of OpEx, but also CapEx and lease would be helpful.
Markus, you're on mute.
Sorry about that. So just to take each of those in turn. So in terms of Autohero for 2025, we're not providing any further guidance at the moment beyond, I think, what we had said in Q3 other than -- as we see ourselves approaching more unit profitability, we're preparing to accelerate that, but we will provide more guidance when we report our full year results at the beginning of the year. In terms of the drop-off network. As you saw, I think we gained around 20 additional drop-off locations over the course of this past quarter. I think we think that, that's going to accelerate over the course of -- over the next few quarters. I think broadly speaking, I mean, we don't provide very sort of granular detail on each of these. But the branches, if you think about them, these tend to be sort of slightly smaller branches. So think about CapEx being in the range of, say, kind of EUR 20,000 to EUR 35,000 with the rent around the EUR 3,000 per month or so, maybe a little bit less for those branches?
Thank you, Christian and Markus. That concludes the question-and-answer session.
For investors, if you actually want to meet up Markus and Maria actually in Frankfurt tomorrow at MWB Fairtrade at their Inspire event. And then Markus, Maria and myself will be in Barcelona next week at the Morgan Stanley TMT Conference. And otherwise, I think we have already follow-up calls booked. And otherwise, we will talk either later this year or in February for the year-end numbers. Thank you.
Thank you so much, everyone. Have a good day. Bye-bye.