AUTO1 Group SE
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AUTO1 Group SE
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Hello, and good morning to American participants. Welcome to the AUTO1 Group Fourth Quarter and Full Year 2021 Results Presentation.
I'm Philip Reicherstorfer, Group Treasurer. As always, I'm joined by Christian Bertermann, Co-Founder and CEO; and Markus Boser, our CFO. We will start with the presentation followed by questions and answers.
You can now find these slides also on our IR web page. If you would like to ask a question following the presentation, please raise it via the usual Zoom Q&A [ shown ] at the bottom of your screen. We will then call you to ask your questions directly at the end of the presentation. Before I hand over, I must make you aware of the safe harbor provisions at the beginning of the presentation. This will apply to any forward-looking statements made by management today. And now over to you, Christian.
Thank you, Philip. Good afternoon, everyone from Berlin, and welcome to the AUTO1 Group Q4 and Full Year '21 Earnings Call. When we set out on our IPO journey in February of last year, we articulated our goal to become the largest and most profitable car dealer in the EU by creating outstanding experiences for our customers. We were investing from a strong base.
Our profitable merchant business had already become the largest wholesaler of used cars in the EU in 9 short years as a result of us thinking in digital systems.
By raising around EUR 1 billion equity at IPO, we set out to leverage our technology, logistics and branding strength to invest for a massive prize, creating the leading retailer in the EUR 600 billion used car market in Europe, in which we believe online buying will become the dominant transaction in the future.
Despite the markets have been brutal for technology companies over the last couple of months and certainly for AUTO1 Group shareholders, '21 was a year with many key accomplishments.
By almost any measure, AUTO1 is in a stronger position today than at any time in the past. In '21, we achieved new records in revenue and total gross profit. And we cemented our market-leading position in wholesale. We are proud to say that only 1 year after our IPO, we are the leading online retailer in the EU.
As a result of our relentless focus on outstanding experiences, our retail customers awarded us with a Net Promoter Score of 69, 16 points or 30% higher than in March of last year.
Our merchant business continued to be a profitable and cash flow generating segment for us, about which we will give more details later in this one-off disclosure. And despite high levels of investment in our retail business, our balance sheet remains strong with more than EUR 720 million of cash and cash equivalents at the end of the year.
In the following, I will share more details about each of our key accomplishments in '21 and then continue with our outlook on '22, our goals and our view of the current market environment.
Please note that I share my thoughts on '21, our history, our skill sets, the investment opportunity and the financial profile of a successful online retailer in my first annual letter to shareholders, which is available on the IR section of our group website as of this morning.
Taking a look at our Q4 group results, we grew revenue by 99% to EUR 1.55 billion. This impressive growth was driven by a 40% increase in average selling price last year and a 42% increase in units sold year-over-year. These 2 factors led to a record level of EUR 129 million of total gross profit, growing 56% year-over-year.
Both results reflect the strength and the unique nature of the platform we have built, which is able to gain market share in a constrained market environment. The strength of our platform allowed us to cement our position as Europe's largest used car platform in '21.
We increased total units sold by 31% and average selling price by 29%, leading to a group revenue of EUR 4.8 billion, EUR 2 billion or 69% higher than a year ago.
Total gross profit increased by EUR 145 million to EUR 431 million, which represents a 51% increase. We are proud of the excellent levels of growth we achieved in '21 because we realized them in the market that shrunk in overall available units, confirming the advantage of our way of thinking and operating.
And our path to the company we want to become, we are operating under 2 strategic goals, representing the cornerstones of our way of doing business. First, we aim to create outstanding customer experiences. We believe that our competition undervalues the importance of customer happiness for our market, reducing their future market share potential. We are convinced that providing excellent customer experiences will allow us to build one of the strongest brands in this industry, expanding our future market share and profitability potential. Second, we aim to leverage the unique platform we have built to gain market share.
We believe that by continuing to think in digital systems, we will be able to add a significant amount of buyers and sellers over time. Growing momentum in our platform will allow us to expand our market leadership in automatic pricing and precision, reduce logistic cost per car further and leverage price differences across our markets better. We assume that those factors will directly translate into higher future market shares and increased profitability.
In '21, we created numerous outstanding experiences. Our retail customers gave us a Net Promoter Score of 69 for February of this year, which is 16 points higher than 12 months ago. Throughout the full year, it was our aim to make our retail product experience more desirable, which we believe is primarily driven by 5 elements: selection, price, effort, delivery time and quality. While we learned a lot about our retail business last year, it still feels it's just the beginning, and we need to learn so much more.
We are very focused on understanding those inputs to our business model, and expect to make significant progress on each of those inputs over the course of this year. We're investing a considerable amount of resources to tailor the selection of cars offered in our store to the demand of our customers with the goal to drive up the number of cars sold through the same amount of [ sessions ].
We aim to start pricing retail cars fully automatic in 2022, leading to less errors enhancing our gross profit per car. We are investing a significant amount of our technology resources into the further development of our retail store with the aim to reduce conversion blockers and help our customers to find their next car faster.
We have started to learn how to connect our retail business to our existing logistics infrastructure better with the aim to reduce delivery time for our customers, in turn, driving up conversion of units sold.
And finally, we started to understand the relation between our refurbishment standard, our customers' quality expectation and the associated refurbishment costs much better and expect significant progress in this area over the course of this year.
We believe that progress in each of those input factors will allow us to create the desirable experiences that we associate with buying a car online, in turn, growing the strength of our brand. While brand awareness is certainly not the only element of a successful brand, we have made considerable progress with it over the course of last year.
Turning to our second strategic goal, leveraging our platform to gain market share, we have made substantial progress. In a market environment that was characterized by strong competition in sourcing, substantial price increases in many of our core markets clearly below the unit volumes of 2019, our platform executed well.
We were able to grow our market share by 23% back to the 2019 pre-pandemic level of 2.1% while COVID certainly continued to have an impact on our business throughout the last year.
Notably, we also changed the mix of cars sourced versus 2019 by reducing the segment below EUR 800 and growing the share of cars [ larger ] EUR 800 to an all-time high of 88%. This trend reflects the introduction of sell from home in 2020 and our growing confidence in pricing cars for retail resulting in strongly improved unit economics for the merchant business.
In addition to our 2 strategic goals, we are operating under a set of 3 financial goals, navigating our path to the company we want to become. First, we aim to grow the number of units sold in both our merchant and retail businesses, as they are the multiplier behind our revenue and gross profit. Secondly, we aim to grow total gross profit by unit and GPU increases. And third, we start executing our plan to reach group profitability.
Units in our merchant business have grown by 109,000 over the course of last year, representing a growth of 24% year-over-year. Despite the challenging environment described earlier, and high absolute amount of cars selected for our retail business, our merchant business proved to be solid with substantial growth rates.
We started strongly into the new year and see our initial results as a confirmation of our strategy and the strength of our platform. Nevertheless, current market conditions present a heightened level of uncertainty.
For the full year, we expect between 580,000 and 680,000 merchant units sold. Since the start of the war, the demand from dealers, especially in our Eastern European market has reduced momentarily, and it is quite hard to forecast how it will develop given the ongoing conflict.
The low end of the corridor represents our forecast, assuming the currently reduced demand will carry on throughout the rest of the year. The high end of the corridor assumes a return to pre-war demand levels within the next couple of weeks in the market environment that is comparable with '21 in terms of absolute units sold in our market, relative price level and overall demand for used cars.
Units in our retail business have grown substantially throughout '21, making us the leading online retailer in the EU. For the full year, we sold 41,400 units, which represents an increase of 308% year-over-year. Our retail business crossed EUR 200 million of revenue per quarter for the first time in Q4 of last year, indicating the strong demand for our offering and representing a 296% increase year-over-year.
With respect to Q1 units, we were seeing the following trends: first, continued increases in used car prices led to certain segments of buyers delay their purchases. This especially affects buyer segment with lower incomes; second, the ongoing spread of the Omicron variant with its higher transmissibility is impacting the output levels in used car production and logistics. Finally, since the start of the war in Ukraine, we have seen an overall reduction of purchase intent for retail cars as a result of heightened geopolitical uncertainty. Therefore, we took the decision to concentrate on improvement of our retail GPU, accelerating our track towards our midterm target of EUR 1,000 that we originally set out for '23.
For Q1 units sold, we expect between 14,000 and 15,000 deliveries. Nevertheless, for this year, we're expecting between 70,000 and 90,000 units sold for the full year. Our investments in smarter selection, improved store conversion and automatic pricing for retail cars make us confident in our full year unit guidance.
While Q4 retail GPU improved slightly over Q3 last year with an increase of EUR 53, we expect retail GPU for Q1 to be between EUR 600 and EUR 700, representing an increase of EUR 345 to EUR 445 versus Q1 12 months ago.
We're attributing the expected increase primarily to a reduction of third-party refurbishment costs and a smarter selection of units within our refurbishment operation that match our GPU requirement. We are not yet seeing effects from improved selection, automatic pricing, internal refurbishment, improved delivery time or conversion improvements within our store. Each of those measures will drive different buckets of GPU expansion on our path towards EUR 3,000.
Our announced production plans continue to be on track, representing a key GPU driver of the future. In total, we signed 4 production centers with a capacity of 90,000 units at maximum utilization until now and expect further announcement over the course of 2022.
As of today, our centers in Hemau, Germany and Warsaw, Poland have commenced operations and are now in ramp-up mode. We expect our centers in Berlin and Toledo, Spain, to start production in Q2.
Early data of our refurbishment centers in operation suggests that despite being far off their maximum utilization levels, internal refurbishment is already 30% cheaper than buying it from a third party. We have increased our total gross profit for the group by EUR 145 million over the course of last year, representing an increase of 51% year-over-year.
While our strong growth in total units sold certainly contributed to this result, also the absolute level of GPU realized is substantially higher than we anticipated at our IPO. While we guided to EUR 650 for our merchant GPU back then, we now expect it to be between EUR 675 and EUR 800 going forward even as we increase in remarketing units further.
We believe that these heightened levels of merchant GPU are primarily a result of our improved ability to price retail cars, which creates spillover effect for our merchant partners on units that we initially marked for retail that deselect later.
For the full year, we are expecting between EUR 470 million and EUR 580 million of total gross profit using the same corridor assumptions as explained for merchant units. A key element on our route to group breakeven is the profitability of our merchant business. We added EUR 1.5 billion of revenue last year to this segment, representing 51% annual growth, and increased gross profit by EUR 133 million, representing a growth of 47%. We have decided to report our segment contribution in merchant for the first time in this one-off disclosure to showcase the financial strength of the business we have built. In total, our merchant segment contributed EUR 125 million to our group results before headquarter costs. The majority of our headquarter costs represent resources that we invest into the future growth and profitability of our retail business.
I would now like to hand over to Markus, who will give you more details around segment profitability.
Thank you, Christian. Perhaps to go into this in a little bit more detail. Our merchant business had a circa 3% EBITDA margin before headquarter costs of around EUR 73 million in total, despite ongoing growth investments in remarketing business generation.
Merchant costs include all C2B purchasing payroll and overhead costs as well as C2B marketing costs related to merchant units, all B2B sourcing costs related to merchant units as well as merchant sales payroll costs and overhead as well as internal merchant logistics.
We've further broken that EUR 73 million headquarter cost down, as the majority of it relates to investments in the retail business. Around 80% to 90% of our EUR 37 million of tech spending, and a similar percentage in HR relates to investments into retail as we build that business up.
A significant portion of the EUR 23 million in other relates to management, legal and finance, which, of course, also has a substantial retail focus. We believe that the minus EUR 159 million segment contribution of retail is a valuable investment to capture the significant higher GPU and profit pool in that business, and most notably reflects investments in marketing but also investments into customer service, logistics and, of course, production of retail vehicles.
We are providing this disclosure as a one-off as we ultimately want to manage those overall profitable total EBITDA growth and not manage for pure merchant segment contribution as the investments in our retail business turn increasingly profitable over the next few years.
Looking back on our financial progress in 2021, we wanted to further reflect on how this relates to the long-term profitability goals we set out at IPO. By investing in our retail business and the development in merchant GPUs, we continue to make progress to our long-term mid- to high teens gross margin guidance. As Christian already mentioned, our technology investments in sell from home and retail have made our merchant GPUs sustainably higher. While on a percentage basis, however, the massive growth of Autohero at a much lower GPU has in 2021 led to a dilution in our margins.
We expect that 2022 and 2023 will be transitioned into a sustainably higher gross margin as a significant growth of Autohero units and expansion of Autohero GPUs combined with higher merchant GPUs will enable the full business to increase the overall gross margin on a consolidated basis.
At the same time, we already have best-in-class operating margins in our merchant business, even though we continue to invest significantly in growing the remarketing business in particular. While our personnel and other expenses are ahead of our long-term guidance in merchant, our investments in retail production and operations brings our overall cost as a percentage of revenue up. Likewise, in marketing, we are in line with our long-term guidance in merchant, but are investing in building our brand, which will continue.
Lastly, we are ahead on our long-term logistics guidance in the merchant business and believe that we will grow out of the current inefficiencies of retail internal logistics as we gain greater scale and a denser network. We continue to plan to be profitable on an adjusted EBITDA basis by Q4 2023.
We benefit from a very strong balance sheet with notably no corporate debt. We ended 2021 with circa EUR 721 million in cash and liquid investments as well as EUR 586 million inventory and almost EUR 50 million in receivables from our burgeoning consumer finance business.
With respect to the inventory, we recently increased our inventory ABS from a EUR 435 million to a EUR 1 billion program. Together with the available headroom on this facility, we end the year with over EUR 900 million of available liquidity.
We continue to be on track to sign a consumer financing ABS this quarter; have previously called the warehouse facility in previous calls. This would, of course, bring us to an even higher liquidity position. Before going through our guidance, I'd like to briefly highlight our recently announced EUR 1 billion inventory financing program.
This is an increase and extension of our rated pan-European asset-backed securitization inventory financing program which provides scalable non-recourse financing on our cars at a total cost of capital of below 2%. We fully consolidate the assets and liabilities in our financial statements, even though it is non-recourse to us.
There is no doubt that today's macro climate creates a lot of uncertainty around the market for 2022. On the one hand, the ongoing lack of new cars which is likely to be exacerbated with supply constraints from Russia and the Ukraine and the resulting high price levels for used cars means that our unique sourcing platform continues to be in high demand.
On the other hand, FX volatility in our Eastern European markets, high petrol prices, overall consumer concerns over geopolitical issues and the increase in used car prices over the last few years is clearly having an impact on consumer and dealer demand. The low end of our forecast assumes that the current demand situation, which we've seen post invasion in week 7 continues through the rest of the year, whereas at the high end assumes an improving demand situation in the coming weeks back to pre-war levels as well as a market environment that is comparable to 2021 in terms of absolute units sold in our markets, relative price level and overall demand for used cars. We therefore expect group revenues of between EUR 5.7 billion and EUR 6.8 billion with a gross profit of between EUR 470 million to EUR 580 million, and an adjusted EBITDA margin of between minus 2% and minus 3%. We expect total group units between 650,000 and 770,000 this year with 580,000 to 680,000 in merchant and 70,000 to 90,000 in Autohero.
Overall, we are on track to execute our vision to digitize the massive European used car market at a high pace.
AUTO1 Group is a unique asset. While the current environment brings its challenges in the short term, all critical ingredients for our long-term success remain intact. Our team is incredibly talented and hard working to execute on our path towards market leadership and the outsized profits that e-commerce leaders enjoy. We have the data, the systems, the brand, the customer relationships, the fulfillment network, the financial strength, the experience and the dedication to realize our vision to make AUTO1 a profitable market leader.
This concludes our presentation and now to the Q&A.
[Operator Instructions]
Thank you, Rafael. We will start with Lisa Yang from Goldman Sachs. Lisa, given that you have quite a number of questions, maybe we can just take your top 3 or 4 questions. And if you ask them in sequence so it's easier for Christian and Markus to answer them and also for the listeners to hear your questions.
The first one is obviously on the current trading environment. You talked about weaker consumer sentiment [indiscernible] some of your markets. So I'm just wondering if you can give us more color on which markets, in particular, you're seeing an impact. And what sort of magnitude we're talking about. So if you can give us maybe a sort of March run rate versus how it compared versus January, February? And related to that question, if you can give us an idea in terms of what revenue -- how much of your revenue is coming from Eastern Europe, for instance, that would be really helpful.
The second question is on the revenue per unit, which obviously increased very strongly in 2021. What is your sort of base case assumption in terms of how that revenue per unit is going to evolve over the next few quarters? And to what extent that is going to further contribute to your GPU improvement?
And the third question is on your retail GPU. I think you said in Q1, you expect to reach already EUR 600 to EUR 700. In the press release, you also expect a quarterly improvement over the next few quarters. So could we get to that EUR 1,000 much earlier than expected? So where do you think you're going to end up at the end of 2022 based on what you're seeing today and your comments about ramping up the profitability? These are the questions.
Yes, maybe I can start. So thank you, Lisa, for those questions. With respect to the situation in Eastern Europe, basically, you can assume the closer the market is to the war location, the more impact we're seeing. We have seen a pretty much direct impact from the start of the war from the first day in those markets. And -- this is on how we judge a slow recovery path right now. But as we also outlined in the script, it's really hard to say how this will develop because we also don't have a [ fast fall ]. We think that the amount that is not served in those markets right now creates a pent-up level of demand because those purchases are just shifted overall.
With respect to the merchant business, we are selling into over 30 markets. So our platform character of the business means that our network will adjust itself to that new situation. So certain cars will become cheaper. Certain cars will take different flows and will take a couple of weeks for the system to adapt to that. And what we tried to do, also how we outlined it in the script, is take those effects that we're seeing already into the corridor for our guidance. So the low end of our corridor assumes to the best of our knowledge the impact that we see right now compounded for the full year, while we think that it is unlikely that the demand situation will stay unchanged throughout the rest of the year.
Markus, do you want to add anything to that?
No, I think that's -- I think, a good description. Perhaps going to the second and third question. I think the second question was around assumptions on revenue per unit, I think particularly in the retail area and then on -- I'll start on the retail GPU.
With respect to revenue per unit, our assumption is that on the consumer side, it will be above the full year average, but broadly flat, perhaps slightly increasing with the Q4 retail ASP.
We're, of course, working to make the cars as affordable as possible. And so to see that will stay more or less in line, perhaps just a slight increase.
On the merchant side, I would say a similar dynamic, assuming perhaps a little bit more of an increase relative to Q4 merchant ASPs for the full year.
I think with respect to the retail GPUs -- and maybe I start and Christian can follow up.
I think as you said, we're seeing already in Q1 a significant expansion of the retail GPUs. I think that's really been driven by having much more data on the retail cars that we're buying, really putting much more cost control around the refurbishment and the refurbishment process on the cars. Internal refurbishment or internal production is, at the moment, still a fairly small proportion of our overall GPU. So that is still something that we can expect to see the benefit of towards the second half of this year as those internal -- as those production centers begin to ramp up.
Perhaps, Christian, if you can give a little more color on the retail GPU?
No, just maybe why are we doing this now? Because I mean, the demand impact that we're seeing is not something that we can directly change because they're not under our control.
Of course, any increase of conversion rate in our shop will mean that we can sell more cars for a little bit lower amount of traffic that we're currently seeing. But this is why we thought it's just smart to focus on retail GPU and to understand that much better and to push some of the initiatives that we have on that faster.
Going forward, there is a number of factors that we haven't worked on yet or only to a very small degree. And this, yes, makes us positive on the overall outlook for retail GPU going forward because there are effects like improved selection. So how many goals of 2012 do I need to have at that point in time, Wednesday, March 23rd of 2022. So how many do need to be in inventory given the current levels of traffic in the Netherlands, in Poland and in Germany?
So this is algorithms that we're building for that, and there's a lot of upside potential once we start tailoring the selection better. Automatic pricing, as I told you, and I also described this very detailed in my letter, but there is not yet any automatic pricing in retail because the scale and the data that we need for this to work is something that is currently filling up.
Markus was commenting on the internal refurbishment that's showing good progress, but not yet any effect in the retail GPU that you're seeing. The thing that we haven't talked a lot about is like the improved delivery time. So the faster we'll be able to transport with scale with more units, more auto trucks and the better we tailor our delivery network to the existing logistics network that we have, the better this will become.
But there is, of course, a lot to learn. I think this is what we always have to make clear again. So Autohero is a young business. This is why we're investing a lot into it. We are convinced that the dominant way of transaction will be online in the future because it's just a so much better experience, and we can now prove this in the data with the NPS data that we have and with the survey that I also mentioned in the letter.
So we know that we are on the right track, but it now takes time to build out all of those effects that will kick in over time on our route towards EUR 3,000 GPU.
Can I just follow up on my first question about, basically, how much of your revenue is coming from Eastern Europe. Because I think if I look at the traffic [ broad ], I think it's roughly 30%. But just to get a sense what's the magnitude of the impact you're seeing and...
So we don't disclose -- we don't break it down, but you could broadly assume it's less than that. So it's closer to around 20% from Eastern Europe.
Don't forget that, of course, the cars are bought on a pan-European basis. So those -- it has a dampening of demand. But it doesn't mean that those cars don't get bought. Ultimately, they will still get bought, just that the incremental buyer won't necessarily come from the market who is facing the external shock of a war on their borders. So that it puts a dampening on the overall pressure, but those cars will ultimately get bought in one way or another.
Catherine O'Neill from Citi. Unfortunately but she is in a noisy conference so she asked me to read out the questions on her behalf.
So at Q3, you are comfortable with the 90,000 units for Autohero this year. That is not the high end of the range. Is this caution reflecting consumer demand you're seeing now? If so, why do you think that when online penetration is that low, that cyclical factors are not outraged by structural headwinds of more people shifting online.
Yes. So maybe I can start here. I mean it's not the only factor. I mean it's one factor. So one factor is higher used car price levels, which was also just outlined in the presentation. So this means that we have a lower demand for cars in the lower segment. So there's less offering there than the higher demand for more expensive cars. And those more expensive cars, they have a slower turn just by nature. So that is the one effect.
The other one is -- the other effect is that because of Omicron, we just haven't outputted all the cars that we wanted to output. So I would think that the effect is around about 2,000 cars for the full quarter. And then thirdly, we have seen like a direct impact of demand overall across Europe since the start of the Ukraine war as outlined. And those factors are contributing to our new unit guidance.
Of course, you are right. We are very, very early in the game. So if we're that small, why can't we outperform? Because we're running like a closed system so we haven't given amount of traffic. If that traffic lowers because of demand, then we will be able to sell less cars. If that traffic increases, we will be able to sell more cars.
Now what I also outlined in the letter to shareholders is we are putting a lot of resources since the start of this year to aim to realize conversion improvements. So over time and to lead this business to breakeven, we are investing a lot of teams and effort and time and energy to make sure that our store converts better over time. So the better our store will convert over time, the less traffic it needs for a given amount of cars to sell.
And as we haven't shown direct -- like massive progress in this area over the first 8 weeks because as I outlined, we're learning a lot, we're understanding this business very, very down to its heart -- this is why any reaction of outside effects will have also an -- will also have a consequence or an effect on the total amount of units sold, given that this is factors that came -- without being planned for. And I think, I hope this explains a little bit how this new guidance is being put together.
Much shorter question. Why was the gross margin in merchant lower in Q4?
I think that the GPU was substantially higher -- and I'm not sure of...
Is there also like a short answer, so ASP increased? Or...
Yes, the ASP increased faster than the growth in the margin. But the GPU was obviously significantly higher.
Exactly.
And then probably related to that, you're guiding to softer units than consensus, but what makes you comfortable on pricing remaining strong?
What do you mean about pricing -- like pricing remaining strong? Like do you...
I guess ASP is remaining high because, obviously, like our revenue guidance is in line with consensus below -- unit guidance below consensus.
ASPs will stay high because the environment is far from normal that we're operating in. So there is even more constraints on new cars given the recent like situation and start of the war and impact on new car production volumes. So the trends that have affected the used car industry last year will be even -- might be even stronger this year with respect to the ASPs, and we think that the ASPs that we included in our guidance are actually quite conservative given that there's also like a good chance ASPs could even rise further.
Thanks. So let's then turn over to Andrew Porteous from HSBC.
A few from me. Can you just talk about the sort of the revenue guidance for the full year? I mean, if you annualize Q4, your bottom end of the range is coming in below that Q4 annualized rate. I mean just how conservative is that? And would you be disappointed if you came in at that bottom end of the range? It feels pretty light to me. Second question, you talked about taking down purchases below EUR 800. I'm just wondering what we can expect on that. Is that going to be a further drag into this year on overall unit volumes? And I know you're trying to eradicate purchases below that EUR 800.
And then I guess a last question, you talked about building brand awareness for the Autohero business, and you talked about Germany and then you talked about France. And when we look about where you're building refurbishment capacity, it's more Germany, but then into Poland and then Spain. I'm just wondering why there's a difference there. Is it down to -- why are you putting infrastructure down when you're building brand awareness in France? Is there something that I'm missing there?
Yes. Maybe I can start with that question because the last one is the easiest one to remember. No, you're not missing anything here. So we are also, I would say, closely before announcing a refurbishment center in France. So that will just pinch a little more. And on the other hand, we're also building substantial brand awareness in all of our other markets. So they're a little bit smaller than the 2 that you see in the chart, but maybe we should just share that in the next call. I hope this answers your question. But yes, there's no like -- there's no disconnected growth. So we're growing all of our markets and especially the key ones with Germany, Italy, Spain and France, which are the largest.
Revenue per unit outlook, Markus, do you want to comment on this?
So I think on the revenue guidance, I think it is conservative, but at the same time, we don't know exactly where we will ultimately end up. I think more relevant is really if we look and where we're looking at is also the GP and ensuring that we continue to grow on the GP side.
And so I think clearly, if we end up with -- on the low end, really want to make sure that we capture kind of all eventualities as a result of the war in the Ukraine and how that will impact through the rest of the year, but it's conservative and is meant to be conservative. We clearly are aiming much, much higher than that.
I think one point to your second question on the sub-EUR 800, if you take a step back and think about what a sub-EUR 800 car actually is, it's a pretty cheap car, and it's one which ultimately is a less profitable car unless you purchase it at the right price. I think what we wanted to show is not only have we gained market share significantly over the past year and gaining that in a declining market, but we're doing so with inventory that will lead to sustainably higher margins. And in a sense, regardless of what happens in terms of the macro picture, the systems and the processes that we put into place that enable that are far better than they were a year ago.
And so viewing that sub-EUR 800 or not buying any sub-EUR 800 is something that would lead to ultimately more profitability and a stronger and better business over time.
Yes. So for this year, I would assume only a slight increase in that percentage share. I mean everything that Markus just mentioned is fully correct. And this is how we came here. The -- it might be driven so like a little bit more units in share of those that are worth more than EUR 800 higher share there might be coming because of overall increased ASPs, but I think it will not go substantially higher than this level that you currently see.
Okay. I guess I was surprised you were selling less than EUR 800 vehicles at all really. So I just sort of wondered whether you were trying to remove that from the business.
Yes, it's -- I mean what we're trying to do is also like most importantly is that we're generating outstanding experiences. And there are customers that want to get rid of their cars and then in this segment, and they just want to sell it. And a lot of those are also interesting for especially our Eastern European markets. And this is why we have set a trade-off between the profitability of those units and the customer experience that we want to generate for everybody in this market.
And then on to Andrew Ross from Barclays.
I've got a few as well. I just wanted to follow up on Lisa's question on the GPU for Autohero for this year. Directionally, it really sounds like it should improve quarter-on-quarter as we go through the year. But could I press you to actually give an expectation for why you think that '22 you may end [indiscernible]?
The second one is to ask you for guidance on merchant units for Q1. And then the third one is how you're kind of thinking about purchases of cars and Autohero as you go into Q2 and on kind of cars that are already set on the balance sheet. It sounds like consumer demand is still a bit uncertain than maybe some of those factors around Omicron and some of the shift to higher value cars might start to phase through. So just help us with the puts and takes and on how to think about Q2 units on Autohero with your purchasing of cars already on the balance sheet.
Yes, on the GPU for Autohero this year, so I think we're on a good track with the levels that we expect for Q1. I think progress after that, it's very hard to say because it depends on how good we are in really executing the leverage that I have talked about. So a growing share of internal refurbishment and more tailored selection and all the other effects that we mentioned. So I think it will be positive, but it's very hard to now create an expectation for that. All from me.
Markus, do you want to add anything here?
I think perhaps to add, I mean, I think first, in terms of the Autohero units and GPU over the course of this year. I think it's really important to note that, as Christian said earlier, we're investing significantly on a huge amount of conversion improvements, conversion blocker reductions, expanding the inventory, a lot of broadening that, a lot of the things that you presented in the slides. And each one of those incrementally adds more demand for the same amount of marketing. And so therefore, we feel very comfortable that those investments, even if there's an overall uncertainty in consumer demand because of the current geopolitical -- I'm using that as a catch phrase to include more of the Ukraine and petrol prices and inflation and all these other things that are weighing on people's minds.
But at the same time, when you're playing the long game as we're doing, and we continue to incrementally invest in better search functionality, all these kinds of things that we've been talking about, that means that each one of those will add incrementally to the demand, which we think, therefore, offsets as well as we grow inventory and leads clearly to better growth.
We're not giving specific guidance as to Autohero GPU for this year. We gave it for 2023, which is EUR 1,000 per car, although clearly being at EUR 600 to EUR 700 in Q1 gives us a lot of comfort. And that's without internal refurbishment, gives us a lot of comfort in getting to that EUR 1,000 per car by 2023.
With respect to merchant units, I think your second quarter -- your second question, we're very comfortable with the unit consensus that's out there, and that continues to go well despite going into a more uncertain environment.
Can you just clarify what you think consensus is for Q1 merchant units?
According to my visible alpha chart that I have here, it's around 150,000 or 151,000 units or so.
Consensus?
Consensus, that's exactly -- sorry, that is -- I'm reading from a publicly available...
[indiscernible] on the same page.
Yes.
Thanks, Andrew. And now over to Will Packer from BNP.
It seems that Will is not able to unmute.
Can you hear me?
Yes.
Sorry about that, it was an issue on my computer. Firstly, on industry-wide competitive developments in Europe, we've seen some headlines from Cazoo around sponsoring teams and launching shortly. We've seen Constellation do deals as well. Are you seeing any impact on the ground from their moves, first question. And then secondly, in the U.K., some of the online dealer players have been acquiring traditional dealers and they're kind of talking to various benefits of doing that. Could you talk through whether that's a strategic option for you? Or is that -- your kind of reconditioning focus yourself means that's less applicable?
Sure. So on the competition, the short answer is no. So we only see impact from what we are doing and kind of traffic levels that we're enjoying that are going up and down depending on what happens with the world. So we are very, very focused on our mission. We are -- we have executed very well so far despite the circumstances and the competition has not been an impact.
So even if, for instance, Cazoo acquires a company like brumbrum in Italy, that company was there before. So now just because it belongs to Cazoo doesn't like change anything for us. And I think it's much more important that we continue to execute on our vision thoroughly.
On the point of the offline dealerships, so I'm always thinking did Amazon acquire like Barnes & Noble to get where they are, and I cannot remember that they did it ever, not even in other markets where they haven't been present. So we think -- and this is also in my letter, which you linked in your e-mail, thank you for that -- that an online dealer will be able to serve all demand at all times if done rightly.
And this is the vision that we're executing to work to. There are a lot of customers who are able to check out completely on their own, 24/7. While some of our competitors might need to acquire physical infrastructure, we have that infrastructure. We have the teams, we employ over 6,500 full-time employees across Europe. And our team is growing, and we have the experience and we have the skill set and the data and the technology. We know what we need to do. And therefore, we don't think it makes sense to acquire an offline dealership because the first day you're acquiring an offline dealership, what would you need to do?
You would -- like to be consistent with your equity story, you would need to shut that, reduce that off-line business, right? Like you would need to start shutting those cars down and you would stop welcoming customers physically to your branch because otherwise you're creating an offline, which is not what we want because the advantages like also long-term and profitability and everything, they come with an online dealer and not with an offline dealer.
So you would actually need to destroy that business after you have acquired it for probably some money. And this cannot be your strategy. Or you're saying, look, I'm not building an online dealer, I'm building an offline dealer with an online extension. But that's a completely different business model because like in our point of view, you will not be able to scale that, like continuously. Then I think you are in the business of M&A, and you need to continue to buy offline dealership and maybe you're able to consolidate them. But from what I've heard, it's not that easy to integrate offline dealerships because they all have different software running.
So this is our view, and this is why we believe so much in the unity of one platform. We have the same software installed across all the departments that we're operating in. So if we want to change something in our process, which is absolutely key to pull the levers that I outlined in terms of GPU and overall throughput and so on, if we're changing something in our systems, it's live for all markets, because we're operating on the same platform. If I want to change something in our refurbishing in our relation branch infrastructure processes and to change it in the software, and I can do that overnight, if I want to. And I think this is the real strength -- of course, you can generate unit volume and revenue. But I mean, what do you do with the branch? You throw away the brand? And then also the brand that you paid for because larger dealerships have maybe like a brand value. I mean, it doesn't make sense for us, to come to a conclusion.
And I suppose in terms of Carvana's acquisition of Adesa.
That's different. It's different.
And you're already kind of pretty well-placed in that segment?
That, I think, is a smart acquisition. I mean, I think it's not only an IRC acquisition, but it's also a sourcing acquisition. I know that Ernie didn't like -- let's sell it that way.
But I mean, that will be my gut. Of course, I don't know, like the specifics. But I think that's different because it's like you're creating like -- I mean, I think they just created a lot of the IRCs that they needed in the future like at once, but they still need to refurbish them and develop them, right, with over $1 billion of investment.
But I think it's also like a sourcing piece that is interesting. But yes, I mean, they bought one of the largest B2B options out there, and we are the largest B2B option in Europe.
So -- yes, if you look at it from that way, it's a confirmation of what we have done over the last decade.
James Musker from Davy Research also asked me to read out his question. What is the thinking behind the EBITDA margin drop-off in 2022? Is this a worsening in performance? Or is this Autohero's contribution becoming more material dragging down the margin? I guess that's to you, Markus.
Yes. So we continue to invest significantly in Autohero. Specifically, one, we're investing on marketing and building up the brand. And secondly, also investing in operations, and in particular, on production. And so it's a combination of on the one hand, while we clearly see the gross profit continuing to increase over the course of 2022, the investments that we're making this year in particular are ones that will offset that for this year.
As I talked about, I think in the slides, we see that as a current evolution for us to really build and get the benefit of the much higher GPUs that you see in the consumer business and the Autohero retail business, we need to invest now to capture that EUR 3,000 per car GPU. And as Autohero continues to, one, grow units significantly; and two, grow and expand its GPU over the course of the next 2 years, you can see the total GPU, of course, and the total GPU grow over the next 2 years so that we end up with a total higher percentage gross margin while at the same time, of course, the investments we're making in brand and OpEx will lead to very immediate returns, we think, in the next 1 to 2 years.
So it's an investment in the future. We have liquidity right now to do it, and that's the reason for that drop in EBITDA for this year.
And then we will close with questions from Georgios Pilakoutas from Numis for today.
Great. Christian, 2 questions on Autohero. The first is updated thoughts on supply. And I guess in particular, with newer vehicles, there was a partnership with Allane Mobility, but just interested in whether you think there's more partnerships that are required or potential acquisitions?
Second is just any updated thoughts on kind of the local versus pan-European strategy and whether there's -- you mentioned that you're seeing elements of delivery efficiencies on like a local mile basis. If there's any kind of proof points on unit economics that you can point to in some of your more mature regions?
And then final quick one is just update on delivery. Is the uptake so high? Is that something that you might start charging for? Or is that not in your plan for 2022?
Thank you for those questions. So on the supply side, so we think that the B2B piece will -- so B2B sourcing for Autohero will become more important in the outer years. So it's not something that we really need for this year. But of course, we continue to invest in remarketing because if you follow the logic from Carvana, now also owning one of the largest B2B options, we think that in order to create the best supply, you should be able to view any car that is out there. And that includes consumers that want to sell their car. We're seeing like a massive amount of consumer evaluations and cars offered to us every week. And that has been increasing via conversion rate improvement in the C2B business and on the further development of sell from home.
There is also like a vision here for getting to 100% or 95% auto pricing, as I mentioned, within the next couple of years. So there's a lot of supply that we're seeing. There are strategic deals like the one that you mentioned, with Allane, that we think are interesting, but also for our merchant partners, so interesting inventory. So we want to push those and they are part of the remarketing growth strategy. But yes, we think overall, our focus right now is to choose the right vehicles, right? To really manage the micro -- on the micro level, the selection of cars offered in the different Autohero stores or in the global Autohero store that we offer for Europe.
So this is a key focus for us. So we -- yes, we were able to buy a lot of cars, and this would not be a constraint in any way. We just need to choose the right ones. And we need to advance our system much smarter, so that they get a lot more feedback from what is happening in the store, which cars are being browsed, how do we adapt our demand forecast. And demand forecast on its own is an essential and key skill set of a retailer, and we're building that out as we speak. So we're putting that together in a dynamic or an algorithmic way. This is how we think.
So on the local versus pan-European, so yes, we see obviously the largest market with Germany having some efficiencies with logistics, but also here, we're very much at the start. So we are in Germany, reaching a scale where we can think much better, how do we need to place our delivery hubs versus the network of branches that we have to be able to deliver within 7 days. At the moment, we're delivering at around 12 to 14 days. And we want to deliver within 7 and we need to design the network in the right way. And we're seeing this in the big markets, and we're seeing upside there. So you can assume that the German GPU is also higher, like substantially -- like higher than the group GPU.
And on the delivery, like charging delivery, I think it's something that we would need to experiment with. I think the way that we are marketing our brand and the way that penetration in online is increasing faster and taking away share from off-line has always been, yes, making sure that the good is less expensive and is coming with -- it's coming with a lot more comfort.
If you refer back to Amazon with the books, they undercut wholesale by 40%, like operating only with 10% margin, but growing and growing and growing and -- in this way, being able to spend much less marketing. So we think it's not the time to do this now because we really want to build up the brand. But of course, this is also an option and probably also a plan in the coming years for customers that are living further away to make sure that the unit economics and those transactions are also showing in the right direction of our long-term target that we make continuous progress towards.
Thank you, Christian. Thank you, Markus. Thank you, everybody, for participating. And that concludes our call for today.
Thank you.
Thank you, everyone. Have a great day. Bye-bye.