Hello, and good morning to our American participants. Welcome to the AUTO1 Group SE's Q4 and full year 2021 results presentation. I'm Philip Reicherstorfer, our Chief 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 question -and- answer. 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 tool at the bottom of the screen. We will then call you to ask your question directly at the end of the presentation. Before I hand it over, I must make you aware of the safe harbor provision at the beginning of the presentation. This will apply to any forward-looking statements made by management today. Now over to you, Christian.
Thank you, Philipp. Good afternoon, everyone from Berlin, and welcome to the AUTO1 Group Q4 and full year 2021 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 nine 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 a 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 market having been brutal for technology companies over the last couple of months, and certainly for AUTO1 Group shareholders, 2021 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 2021, 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 one 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 continues to be a profitable and cash flow generating segment for us, about which we will give more details later in this one-off disclosure.
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 2021, and then continue with our outlook on 2022, our goal, and our view of the current market environment. Please note that I share my thoughts on 2021, our history, our skill set, investment opportunities, 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 two factors add to a record level of EUR 129 million of total gross profit, growing 66% year over year. These 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 2021. 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 - EUR 431 million, which represents a 51% increase. We are proud of the excellent levels of growth we achieved in 2021 because we realized them in a market that shrunk in overall available units, confirming the advantage of our way of thinking and operating. On our path to the company we want to become, we are operating under two strategic goals, representing the cornerstone of our way of doing business. First, we aim to create outstanding customer experience. We believe that our competition undervalues the importance of customer happiness to 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 strengthen digital systems, we will be able to add significant amount of buyers and sellers over time. Growing momentum in our platform will allow us to expand our market leadership and automatic pricing and precision, reduce logistics costs across Europe, and leverage price differences across our markets better. We assume those factors can directly translate into higher future market shares and increased profitability. In 2021, 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 five elements, selection, price, effort, delivery time, and quality.
While we learned about 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 car sales for the same amount of customers. We aim to start pricing retail cars fully automatically in 2022, leading to less errors, enhancing our gross profit per car.
We are investing a significant amount of our technology resources to further development of our retail score, which we 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 a decentralized logistics infrastructure with the aim to reduce delivery time to our customers, in turn driving up conversion of units sold. Finally, we started to understand the relation between our refurbishment standards, our customers' quality expectations, and the associated refurbishment cost 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, and many of our core markets clearly below the unit volume in 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 continues 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 two strategic goals, we are operating under a set of three 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. 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 650,000 merchant units sold. Since the start of the war, the demand from dealers, especially in our Eastern European market, has reduced dramatically, 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, and 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. Units in our retail business have grown substantially throughout 2021, 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 got EUR 200 million of revenue for the quarter for the first time in Q4 of last year, indicating the strong demand for our offering, representing a 296% increase year-over-year. With respect to Q1 units, we are seeing the following trends. First, continued increases in used car prices as a certain segment of buyers delay their purchases. This especially affects buyer segments with lower income. Second, the ongoing spread of the Omicron variant and 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 improvements of our retail GPU, accelerating our track towards our midterm target of EUR 1,000 that we originally set out for 2023. 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 parts leave us confident in our full year unit guidance. Our Q4 retail GPU improved slightly on 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-EUR 245 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 requirements. 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 pockets of GPU expansion on our path towards EUR 2,000. Our in-house production plan continues to be on track, representing a key GPU driver of the future. In total, we signed four production centers with a capacity of 90,000 units at maximum utilization until now, and expect further announcements over the course of 2022. As of today, our centers in Hemau, Germany, and Warsaw, Poland, have commenced operation 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 suggest 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 as a 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 retention, 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 effects for our merchant partners on units that we initially marked for retail but deselect later. For the full year, we are expecting between EUR 470 million and EUR 580 million in total gross profit using the same corridor assumption 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 contributions in merchant for the first time in this one-off disclosure to showcase the financial strength of the business we have built. In full year, 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 we go into this in a little bit more detail. Our merchant business had a circa 3% EBITDA margin before headquarters costs of around EUR 73 million in total, despite ongoing growth investments in remarketing business generation. Merchant costs includes all B2B purchasing payroll and overhead costs, as well as B2B 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 further broke that EUR 73 million headquarters cost down as the majority relates to investments in the retail business. Around 80%-90% of our EUR 37 million in 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 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're providing this disclosure as a one-off as we ultimately want to manage towards overall profitable total EBITDA growth and not manage for pure merchant segment contribution as investments in our retail business turn increasingly profitable over the next few years. Looking back on our financial progress in 2021, we wanted to first 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 toward 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 GPU sustainably higher. 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 transitions into a sustainably higher gross margin as the significant growth of Autohero units and expansion of Autohero GPUs combined with higher merchant GPUs will enable the whole 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.
Our personnel and other expenses are ahead of our long-term guidance in merchant. Our investment 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 in retail into 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 that I previously called the warehouse facility in previous calls. This would of course bring us to an even higher liquidity position. Before going to 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 part 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 into Ukraine and 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 two 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 seven, 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 -EUR 6.8 billion with a gross profit of between EUR 470 -EUR 580 million on an Adjusted EBITDA margin of between -2% and -3%.
We expect total group units between 650-770 thousand this year, with 580-680 thousand in merchant and 70-90 thousand 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 concept. 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 hardworking 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. I now take Q&A.
Hi, everyone. I am Raphael, your Zoom operator. Before we get started, I would like to review a few technical items to make sure that you can interact with us today. At the bottom of your Zoom window, you will find three buttons: Audio settings, Q&A, and Chat. Audio settings. Clicking Audio settings will bring up the audio preferences for this webinar. Please make sure that the most appropriate audio device is selected here. As a viewer in this session, your microphone will remain muted, as will your video. Q&A. Please submit your questions via the Q&A icon. Click the Q&A icon and a window will appear where you may submit your question. Once received, Philipp will moderate the questions and ask the author to address management live. To that end, I will open the line for you.
Following which, you will need to unmute yourself before we will be able to speak. We will address as many questions as possible live during today's session, but may respond to some questions offline after the event.
Thank you, Raphael. We will start with Lisa Yang from Goldman. Lisa, given that you have quite a number of questions, maybe you can just take three or four questions and just ask them in sequence, so it's easier for Christian and Markus to answer and also for the listeners to hear your questions.
Yeah. Lisa Yang, your line is open.
Hi, thanks for taking my questions. The first one is obviously on the current trading environment. You talked about, you know, weaker consumer sentiment impacting some of your markets. Just wondering if you can give us more color on which market in particular you're seeing an impact. And what sort of magnitude we're talking about, if you can give us maybe a sort of conversion rate versus how it compares versus your February. And just a 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 for how that revenue per unit plays over the next few quarters? To what extent is that going to further contribute to your GPU improvement? The third question is on your retail GPU. I think that you said in Q1 you expect it to be really 600-700 EUR. In the press release, you also expect a quarterly improvement on the next few quarters. Is that 1,000 EUR much higher than expected? Where do you think it'll end up at the end of 2022 based on what you've seen today and your comments about ramping up profitability? These are all the questions. Thank you.
Yes, maybe I can start. To answer Lisa's questions. With respect to the situation in Eastern Europe, typically you can assume the closer the market is to the war location, the more impact we're seeing. We have seen, yeah, pretty much direct impact from the start of the war, from the first day, on those markets. This is how we project a slow recovery path right now. As we also outlined in the script, it's really hard to say how this will develop, because we also don't have a crystal ball. We think that the demand that is not served in those markets right now creates a pent-up level of demand, because consumers are just shifted overall.
With respect to the merchant business, we are selling into over 30 markets. Our platform character of business means that our network will adjust itself to that new situation. 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. What we try 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. 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 for the rest of the year. Markus, do you want to add anything to that?
No, I think that's 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 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.
Mm-hmm.
Broadly flat, perhaps slightly increasing with the Q4 retail ASP. We're of course working to make the cars as affordable as possible. We see that that will stay more or less in line, perhaps with 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, 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 GPUs. That is still something that we can expect to see the benefit of towards the H2 of this year as those production centers begin to ramp up. Perhaps, Christian, you can give a little more color on the retail GPU.
No, just maybe the why are we doing this now? Because, I mean, like the demand, the impact, and 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. This is why we started just more 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.
This, yeah, makes us super positive on the overall outlook for our retail GPU going forward, because there are effects like improved selection. How many Volts of 2012 do I need to have at that point in time, Wednesday, March 23rd, 2022? How many do we need to be in inventory given the current levels of traffic in the Netherlands, in Poland, and in Germany? These are 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 to you in my letter. 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. Something that we haven't talked a lot about is like improved delivery time. The faster we'll be able to transport with scale, with more units, more arterial trucks, and whether we tailor our delivery network to the existing logistics network that we have and whether this will become. But there is of course a lot to learn. This is what we always have to make clear again. Particularly as 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 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. We know that we are on the right track, but it now takes time to build out all of those facts that we're reaching over time on our route to a EUR 3,000 GPU.
Thanks. Could I just follow up on my first question about how much of your revenue is coming from Eastern Europe? Because I think I looked at a traffic breakdown. I think it was roughly 30%, but just give a sense of the magnitude of the opportunity.
We don't disclose. We don't break it down, but you could broadly assume it's less than that. It's closest around 20% from Eastern Europe. Don't forget that of course, the cars are bought on a Pan-European basis. 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. It puts a dampening on the overall pressure, but those cars will ultimately get bought in one way or another.
Thank you.
Catherine O'Neill from Citi. That she's on a minority conference, she asked me to read out that question on her behalf. At Q3, you were comfortable with the 90,000 units for Autohero this year. That is now the high end of the range. Is this caution affecting consumer demand you're seeing now? If so, why do you think that an online penetration is that low, and particularly factors that are not corroborated by structural headwinds of more people shifting online?
Yeah. Maybe I can start. I mean, it's not the only factor. I mean, it's one factor. One factor is higher used car price levels, as was just outlined, in the presentation. This means that, we have a lower demand for cars in the lower segments, so there's less offering there, and a higher demand for more expensive cars. Those more expensive cars, they have a slower turn, just by nature. That is the one effect. The other effect is that because of Omicron, we just haven't outputted, all the cars that we wanted to output. I would think that the effect is around about 2,000 cars for the whole quarter.
Thirdly, we've seen like, direct impact of demand overall, across Europe, since the start of the Ukraine war, as outlined. Those factors are contributing to our new unit guidance. Of course, you are right. We are very early in the game. If we're that small, why can't we outperform? Because we're running, like, a closed system. We have a given amount of traffic, and 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 at the start of this year to aim to realize conversion improvements.
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. The better our store will convert over time, the less traffic it needs for a given amount of cars to sell. As we haven't shown the direct, like, massive progress in this area over the first eight weeks, because as I outlined, we're learning a lot, we're understanding this business very, very counterparts. This is why any reaction of outside effects will also have a consequential effect on the total amount of units sold, given that these are factors that came without being planned for.
I think, yeah, I hope this explains a little bit how this new guidance is being put together.
Much shorter question. Why was the gross margin and margin lower in Q4?
I think the GPU was substantially higher. I'm not sure if
If there's also like a short answer, so ASP increased?
Yeah. The ASP increased faster than the growth and the margin, but the GPU was significantly higher.
Exactly.
Probably related to that, can you just talk through your guidance just after unit consensus, what makes you comfortable on pricing remaining strong?
What do you mean about pricing? Like, pricing remaining strong? Like ASP or-
Like ASP remaining high, because obviously like our revenue guidance is in line.
Yeah.
with consensus as well as unit guidance below consensus.
ASP will stay high because the environment is far from normal, like, for operating. There's even more constraints on new cars in the recent situation and start of the war, and impact on new car production volumes. The trends that have affected the used car industry last year might be even stronger this year with respect to the ASPs. We think that the ASPs being included in our guidance are actually quite conservative, given that there's also like a good chance ASPs could even rise further.
Thanks. Let's turn over to Andrew Pelton from HSBC.
Andrew, your line is now open.
Thank you, guys. A few from me. Could you just talk about the sort of revenue guidance for the full year? I mean, if you annualize Q4, your bottom end of the range is coming in below the annualized year. I mean, how just how conservative is that? And if you put the points that you gave in the 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 from that. Is that going to be a further drag 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 in the Autohero business, and you talked about Germany and then France. When we look at where you're building refurbishment capacity, it's more, you know, Germany, but then into Poland and then Spain. I'm just wondering why there's a difference there, is it down to, you know, by the way you're putting infrastructure down, where you're building brand awareness in France? Is there something that I'm missing there?
Yeah. Maybe I can start with that question, because the last one is, it's the easiest one to remember. No, you're not missing anything here. We are also, I would say, close to announcing a refurbishment center in France. That will just reach a little more. On the other hand, we're also building brand awareness in all of our other markets. They're a little bit smaller than the two that you see in the chart. Maybe we should just share that on the next call. I hope this answers your question, but yeah, there's no, like, disconnected growth. 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?
At least 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. I think clearly if we end up with on the low end, really wanting to make sure that we capture kind of all eventualities as a result of the war in Ukraine and how that will impact through the rest of the year. But it's conservative and it's meant to be conservative. We truly are aiming 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, but 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 you know, gaining that in a declining market, but we're doing so with inventory that will lead to sustainably higher margins. 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.
Viewing that sub-800 or not buying as many sub-800 is something that would lead to ultimately more profitability, a stronger and bigger business over time.
For this year, I would assume only a slight increase in that percentage share. Everything that Markus just mentioned is correct, and this is how we came here. It might be driven by like a little bit more units 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, than what you currently see.
Okay. Thank you. Because I was surprised you were selling less than EUR 800 vehicles at all really. I just sort of wonder whether you were trying to remove that from the business.
Yeah, it's, I mean, what we're trying to do is also, you know, like most importantly is that we're generating outstanding experience. There are customers that want to get rid of their cars and then in this segment, and they just want to sell it. A lot of those are also interesting for, especially our Eastern European markets. This is why we have to have a trade-off, yeah? Between the profitability of those units and, the customer experience that we want to generate for everybody in this market.
Thanks, guys.
Onto Andrew Ross from Barclays.
Andrew, your line is now open.
Good afternoon, everyone. I'd love to as well. I first want to follow up on Lisa's question on the GPU for Autohero for this year. Directionally, it sounds like it should improve or so on course as we go through the year. Could I just ask you to actually give a expectation for where you think the 2022 GPU may end up for Autohero? Obviously when this starts. The second one is to ask you for a guidance on merchant units for Q1. The third one is how you're kind of thinking about purchases of cars on Autohero as you go into Q2 and kind of cars that are already sat on the balance sheet.
It sounds like consumer demand is still a bit uncertain, so then maybe some of those factors around Omicron and some of the shift to higher value cars might start to play through. Just help us with the puts and takes on how Q2 units in Autohero, because you're purchasing cars already on the balance sheet. Thank you.
On the GPU for Autohero this year. I think we're on a good track with the levers that we expect for Q1. I think sort of after that, it's very hard to say because it depends on how good we are in really executing the levers that I have talked about. To ensure internal refurbishment and more tailored selection and all the other effects that we mentioned. I think it will be positive, but very hard to, you know, create an expectation for that for me. Markus, do you want to add anything here?
I think perhaps to add. I mean, I think first in terms of 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, you know, the inventory, a lot of broadening that. A lot of the things that he presented in the slides, and each one of those incrementally adds more demand for the same amount of marketing. Therefore, we feel very comfortable that those investments, even if there's an overall uncertainty in consumer demand because of the current geopolitical, and I'm using that as a catch-phrase to include war in Ukraine and petrol prices that are in place, and all these other things that are weighing on people's minds.
At the same time, when you play the long game as we're doing, and we continue to incrementally invest in better search functionality, all these kinds of things that that we've been talking about, that means that each one of those will add incremental 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 1,000 EUR per car. Although clearly being at 600-700 EUR in Q1 gives us a lot of comfort. And that's without internal refurbishment gives us a lot of comfort in getting to that 1,000 EUR per car by 2023.
With respect to merchant units, I think your second question, we're very comfortable with the unit consensus that's out there and that continues to grow well despite going into a more uncertain environment.
Just to clarify what your consensus is for Q1 merchant units.
According to my Visible Alpha chart that I have here, it's around 150-151 thousand units or so.
Okay. Thank you.
Consensus.
Consensus. That's exactly. Sorry, I'm reading from a publicly available
That's fine. Just, there's so many different sources of information, just want to make sure we're on the same page.
Yes.
Thank you.
Thanks, Andrew. Now over to William Packer from BNP.
Will, your line is now open.
I don't know if
That Will is not able to unmute.
Hi, guys. Can you hear me?
Yes.
Yes.
Sorry about that. There was an issue on my computer. Thanks a lot. I'll save my questions. 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. Then secondly, in the UK, some of the online dealer players have been acquiring traditional dealers, and they're kind of talking about 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 it's less applicable? Thanks.
Sure. On the competition, the short answer is no. We only see impact from what we're doing and traffic levels we're enjoying and that are going up and down depending on what happens with the world. We're very, very focused on our mission. We are and have executed very well so far, despite circumstances, and the competition has not been an impact. Even if, for instance, Cazoo acquires a company like brumbrum in Italy, that company was there before. Now just because it belongs to Cazoo doesn't change anything for us. And it's much more important that we continue to execute on our vision thoroughly. On the point of the offline dealerships, I'm always thinking, did Amazon acquire, like, a Barnes & Noble at where they are?
I cannot remember that they did this ever, not even in other markets where they haven't been present. You think, and there's also in my letter, which you linked in your email, thank you for that an online dealer will be able to serve all demand at all times if done rightly. This is the vision that we're executing towards to, where a lot of customers are able to shop 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 where we employ over 6,500 full-time employees across Europe, and our team is growing. We have the experience, we have the skill set and the data and the technology. We know what we need to do.
Therefore, we don't think it makes sense to acquire an offline dealership because the first day you are 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 offline business, right? 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, become an online dealer and not with an offline dealer. You would actually need to destroy that business after you have acquired it for probably some money, and it's not key to your strategy. You're saying, "Look, I'm not building an online dealer.
I'm building an offline dealer with an online extension." That's a completely different business model because now, like from our point of view, you will not be able to scale that, like, continuously. I think you are in the business of M&A, and you need to continue to buy offline dealerships, and maybe you are able to consolidate them. From what I've heard, it's not that easy to integrate offline dealerships because they all have different software running. 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. 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 system, it's live for all markets, because we're operating on the same platform. If I want to change something in our refurbish, like in our evaluation branch infrastructure processes, I can change it in the software. I can do that overnight if I want to. 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 brand? Do you throw away the brand? Then also the brand is capable because larger dealerships have maybe like a brand value. I mean, that doesn't make sense for us. That's our conclusion.
I suppose in terms of Carvana's acquisition of ADESA, you-
It's different.
Yeah. You're already kind of pretty well placed in that segment.
I think that 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 sell it that way, but I mean, that would be my guess. Of course, I don't know like specifics. I think that's different because it keeps creating. I mean, I think they just created a lot of the IRCs that they needed in the future, like at once. They still need to refurbish them and develop them, right? With over $1 billion of investment. I think it's also like a sourcing piece that is interesting.
Yes, I mean, they bought one of the largest B2B platforms out there, and we are the largest B2B platform in Europe. Yeah, if you look at it from that way, it's a confirmation of what we have done over the last decade.
Thanks, Christian.
James Meakin from Kelechi Research also asked me to read out this question. What is the thinking behind the EBITDA margin drop-off in 2022? Is this a worsening in performance or is this also your contribution becoming more material, dragging down the margin? I guess that's to you, Markus.
Yeah. We continue to invest significantly in Autohero. Specifically, one, we're investing in marketing and building up the brand. Secondly, also investing in operations and in particular in production. 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, in the Autohero retail business. We need to invest now to capture that EUR 3,000 per car GPU.
As Autohero continues to one, grow units significantly, and two, grow and expand its GPU over the course of the next few years, you're going to see the total GP, of course, and the total GPU grow over the next few 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 you know immediate returns, we think, in the next one to two years. So it's an investment in the future. We have liquidity right now to do it. That's the reason for that drop in EBITDA for this year.
We will close with a question from George Pilakoutas from EMSA. George?
George, your line is now open.
Great, thank you. Christian, two questions on Autohero. The first is updated thoughts on supply. I guess in particular with newer vehicles as a partnership with Allane SE We're just interested in whether you think there's more partnerships that are required or potential acquisitions. Second is just any updates in terms of kind of the local versus Pan-European strategy, and then whether there's proof points on unit economics that you can point to in some of your more mature regions. You mentioned that you're seeing elements of delivery efficiencies on, like, a local mile basis. Final quick one is just update on delivery. Is your price still high? Is that something that you might start charging for, or is that not in your plans for 2022?
Thank you for those questions. On the supply side, we think that C2C piece will specifically sourcing for Autohero will become more important but in the outer years. It's not something that we really need for this year. Of course, we continue to invest in Remarketing because if you follow the logic from Carvana now also owning one of the largest C2C options, we think that in order to create the best supply, you should be able to view any car that is out there. 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. That has been increasing via conversion rate improvements in the C2C business and 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, in the next couple of years. So there's lots of supply that we're seeing. There's strategic deals like the one that you mentioned with Allane, that we think are interesting also for our merchant partners to increase the inventory. So we want to push those, and they're part of the B2B marketing growth strategy. But, yeah, we think overall our focus right now is to choose the right vehicle, right? To really manage 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. We...
Yeah, we are 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. We need to advance our system much smarter, so we can get a lot more feedback from what is happening in the store, which cars are being valued, how do we adapt our demand forecast. Demand forecast on its own is the essential and key skill set of a retailer, and we're building that out as we speak. We're putting that together in a dynamic algorithmic way. This is how we see it. From the local versus Pan-European.
Yeah, we see obviously the largest market with Germany having some efficiency with logistics, but also here with very much with the car. 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 seven days. At the moment we're delivering at around 12-14 days. We want to deliver within seven, and we need to design the network in the right way. 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 higher than the group GPU.
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 offline has always been 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, Barnes & Noble, they undercut wholesale by 40%, like operating on only with 10% margin, but growing and growing and growing, and basically being able to spend much less marketing. We think it's not the time to do this now because we really want to build up the brand.
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 in those transactions are also, yeah, 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. This concludes our call for today.
Thank you.
Thank you, everyone, and have a great day. Bye-bye.