British digital auto vertical Cazoo has announced its latest quarterly financial results which show revenue increased by 267% year-on-year to £174.4 million ($240.1 million U.S.) and a significant improvement on its retail gross profit per unit, up from a loss of £202 to £801.

However, though the company is growing steadily by most data sets, it has lowered its full year revenue forecast by about 10% from $1 billion in annual sales to $895 million.

Cazoo sold 13,074 vehicles in the three months to September 30, 2021, a 209% year-on-year increase. This represents a 22% increase on Q22021 when Cazoo sold 10,692 cars. Cazoo made a gross profit of £11.8 million, up by £12.5 million compared to Q32020’s loss of £0.7 million. Its gross margin was 6.8%, up 8.3% Year-on-Year, which Cazoo said was due to increased scale efficiencies.

The trend for the first three quarters of 2021 shows a steady growth in GPU and GPU margin, though retail sales growth fell slightly in Q32021 compared to Q22021.

Over a quarter of vehicles sold, 3,614, went to wholesale buyers. Retail sales reached 9,460. The revenue split for the quarter was £136.1 million for retail sales, £21.8 million for wholesale, up 848% year-on-year and £16.4 million in other revenue.

The rise in wholesale sales was driven by the launch of Cazoo’s direct buying channel in July with “uptake ahead of expectations,” according to Cazoo founder & CEO Alex Chesterman. He said that 6.761 vehicles were bought directly from consumers in Q3, up 552% year-on-year, resulting in a more diverse selection of vehicles and improved inventory acquisition costs. This came despite Cazoo acknowledging a “recent dip in inventory.”

“We expect this to significantly change our buying mix over time, helping to improve future retail margins and grow our wholesale business,” Chesterman said.

Cazoo reached 25,000 car sales on May 11, 2021, so by the end of September 2021, the total of vehicles sold would be approximately 45,000.

Strategic highlights

During the quarter, Cazoo completed its business combination with AJAX and listed on NYSE. The company raised a further $836 million net to grow further. It acquired SMH, a vehicle preparation, logistics and storage business to improve its in-house reconditioning and logistics capacity in the U.K. It also acquired data insights platform Cazana, which will help it optimize the buying and pricing of vehicles across U.K. and Europe.

The launch of its buying channel helped Cazoo lift the proportion of cars sourced from consumers to 10% in the period, up from 2% in Q32020 and 6% in Q22021. Combined retail sales and purchase transactions reached 16,221, a 261% increase from 4,492 in Q32020.

Outlook

Chesterman said he anticipated consumer demand to remain strong for the rest of this year. He admitted that Cazoo had “lower levels of vehicles available for sale than we consider optimal,” but that progress is being made on increasing reconditioning output following the acquisition of SMH.

Cazoo is forecasting total 2021 revenue of £650 million ($895 million U.S.), which would mean Q42021 growth of over 25% on Q42020 and over 200% growth year-on-year. Earlier in the year Cazoo forecast revenue of $1 billion, so the new forecast is down roughly 10% on that.

CEO comment

“We are very encouraged by our results,” said Chesterman.

“It is very clear that our proposition is resonating strongly with consumers and that the shift to online car buying is accelerating. The biggest constraint to growth remains our ability to recondition cars fast enough to meet demand.

“Bringing that process in-house has led to a recent dip in vehicles available for sale during the transition and we firmly believe that greater stock levels would have resulted in even higher retail sales over Q3.

Continuing to scale our reconditioning output remains a key priority and we expect to make further progress in growing our inventory levels through the remainder of the year.

“We have become less reliant on external sources of supply following the launch of our direct car buying channel, which we expect to provide a significant volume of vehicles.

“We are very excited about our upcoming launch into mainland Europe as we continue to develop our team and infrastructure in both France and Germany and we remain on track to launch in both markets later this quarter. We will continue to accelerate our investment and rollout plans where we believe it is right to do so.”

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