Greetings, welcome to the Cazoo first quarter 2023 earnings call. At this time, all participants are on a listen-only mode. A brief question -and -answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anna Gavrilova, Head of Investor Relations. Thank you. Please go ahead.
Good morning, everyone. Thank you for joining today's call and webcast to discuss our first quarter 2023 results. You will be able to find today's press release on our investor relations website at investors.cazoo.co.uk. We appreciate everyone joining us today. With me on the call is Alex Chesterman, Founder and Executive Chairman, Paul Whitehead, Chief Executive Officer, and Paul Woolf, Chief Financial Officer. Before we start, I would like to remind you of the company's safe harbor language, which I'm sure you're all familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, please see the filings of Cazoo Group Ltd with the SEC. Now, I will hand the call over to our Chief Executive Officer, Paul Whitehead.
Thanks, Anna. Good morning, everyone, and thank you for joining us today. I'm very pleased with our performance in the first quarter of 2023. We've achieved a lot in the last three months and outperformed our targets for Retail GPU in the first quarter. We continue to be laser-focused on profitability. Over the first quarter, we right-sized our operational footprint by consolidating our vehicle preparation and customer centers and have significantly reduced our headcounts and fixed cost base. Our focus on unit economics and the swift delivery of our restructuring are already resulting in a significant improvement in Retail GPU. The Retail GPU results in the first quarter, and especially in March, are ahead of our expectations and set another Cazoo record, a testament to the immense effort made by the team.
In the first quarter, Retail GPU at GBP 980 increased a further 64% quarter-on-quarter and was materially higher than in Q1 last year. In March this year, we achieved a Retail GPU of over GBP 1,200, which is our target average Retail GPU for the full year. The broader economic environment remains challenging, and we expect that to continue to be the case throughout 2023. However, we believe our fully digital proposition continues to resonate strongly with consumers, which is evident in our retail unit sales of over 13,000 cars in the first quarter, up 4% year-on-year as the selection, transparency, and convenience of using our platform continues to draw consumers. Retail revenue for the quarter was GBP 222 million.
In total, including wholesale, we sold close to 17,500 units in Q1 and generated total revenues of GBP 247 million, in line with our expectations. We remain focused on improving our unit economics, optimizing our fixed cost base, and maximizing our cash runway. We continue to target every area of the business to create further efficiencies and to enhance our data-driven capabilities using our proprietary data and algorithms to optimize our buying and selling and drive improved margins. We further enhanced our finance and ancillary product proposition to capture opportunities beyond the vehicle purchase. During the quarter, a record 52.5% of buyers arranged financing directly through our platform entirely online. We saw a higher number of applications with better customer quality and as a result, higher acceptance rates.
This was a further improvement on the 51.5% we delivered in the last quarter of 2022 and up from 47.4% a year ago. Overall, ancillary revenue per retail unit sold increased by 10% year-on-year to GBP 708. Reconditioning costs continued to reduce as we consolidated our vehicle preparation centers. The team is driving relentlessly for greater efficiency when it comes to reconditioning vehicles for sale. All our sites are now on the same operating system, developed by the Cazoo team specifically for retail reconditioning, which allows us to ensure improved cost control and greater visibility. Logistics efficiency is improving after we completed the optimization of the network between vehicle preparation centers and Cazoo customer centers. Our post-sale costs remain a focus for us to reduce in the coming quarters.
We are pushing for efficiencies and improved operating effectiveness in every area: purchasing, pricing, finance, and ancillary product attachment rates, logistics, and post sales. We expect to see further progress during the year. Our gross profit grew to GBP 14 million in Q1, up 367% year-on-year, with gross margin improving by 4.7 percentage points from a year ago to 5.8%, up from 1.1%. We finished the quarter with GBP 215 million of cash and cash equivalents and approximately GBP 60 million of self-financed inventory. Our cash flow in the quarter included about GBP 13 million of restructuring costs and about GBP 25 million inflow from working capital, mostly driven by the reduction in our inventory.
We expect the underlying cash flows to improve in the coming quarters as restructuring benefits start to flow through our financial results. We anticipate that savings and expenses will start coming through in the second and third quarters, and by the fourth quarter 2023, we expect to see a year-on-year reduction in SG&A run rate of over GBP 25 million per quarter, representing over GBP 100 million of annualized savings going into 2024. As we guided previously, the cash utilization rate is expected to reduce to approximately GBP 30 million per quarter by the end of the year, and we anticipate finishing the year with between GBP 110 million and GBP 130 million of cash and cash equivalents and between GBP 15 million and GBP 25 million of self-financed inventory. We reiterate our guidance for 2023 and remain fully focused on delivering profitable growth.
In summary, the team has accomplished an enormous amount over the past quarter and our near-term focus is on improving our unit economics, optimizing our fixed cost base, and extending our cash run rate. We have a market leading platform, brand, team and infrastructure. The U.K. used car market is huge, and the penetration of online car buying and selling is still well below other retail sectors, resulting in a massive opportunity for us to go after. I will now pass the call back to the operator who will open up the line for Q&A.
Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to register a question at this time. The first question is coming from Rajat Gupta of JP Morgan. Please go ahead.
Great. good morning, good afternoon, and thanks for taking my question. I had a first question just on, you know, the Retail GPU. Could you help us, you know, understand in a bit more detail, the improvement from the fourth quarter levels, you know, GBP 600 to, you know, GBP 1,200, in March? How much of that is driven by reconditioning, sourcing, you know, how much was pricing a factor, and any one-offs, that we should keep in mind? You know, if you could get a little more detail on that would be helpful. I have a follow-up. Thanks.
Morning, Rajat. This is Alex. Yes, there was a notable improvement from Q4 to Q1. As you saw, there were no specific one-off things responsible for that. It was continuous improvement in all areas, buying, reconditioning, pricing, attachment rate on ancillary products. It was spread across the board, that improvement as we focus more on, you saw that we reduced the volume of units that we sold to focus specifically on types of cars that would drive these higher margins and higher attachment rates on finance, which you saw, et cetera. It's a combination of all of those things resulting from the decisions that we've taken.
Got it. Well, just on SG&A, you know, the press release mentions that the savings are expected to flow through in the second and third quarters of the year. I'm just curious, you know, if you're able to provide us any color around how we should think about the cadence of EBITDA, you know, through the remaining of the year. Is it still safe to assume there was a sequential quarter-over-quarter improvement in EBITDA, excluding the restructuring costs here in the first quarter? Thanks.
I'll let Paul Woolf pick up more on that. I, you know, the reason we've said that Q2 onwards we'll start to see the majority of the improvement is that a lot of the actions that we took in early Q1, we didn't see the benefit of, for example, headcount reductions. Those headcounts remained on our books until the end of Q1. You'll start to see that benefit in Q2 and beyond. I'll pass to Paul on more detail then.
Thank you, Alex. I mean, we've obviously guided to a full year adjusted EBITDA of between GBP -100 million and GBP -120 million. We would expect the... I mean, the remaining three quarters will be relatively steady in terms of that delivery. I mean, there are. We're continuing to take costs out of the business. As Alex has described, Q1 was really a. Whilst the GPU improved, the operating costs were exactly the same as they have been throughout 2022. We really hadn't. The activities which were primarily 1,500 people were unfortunately had to leave the business.
As you're fully aware, we reduced our number of sites, materially, you know, 22 customer care centers down to seven and, yeah, similarly in the prep centers, seven down to three. We've done that. All of that happened sort of third week March. Actually the operating costs were still at the, you know, as I say, back at the 2022 level. Q-April and Q2 will be the beginning of our newer, lower run rate EBITDA, you know, negative EBITDA, so better EBITDA. We continue to take cost out all the way through the year. There's now a sort of more steady improvement through the year through to that GBP 100 million - GBP 110 million that we've guided to.
Understood. That's, that's helpful color, and I'll jump back in queue. Thank you.
Thank you. The next question is coming from Catherine O'Neill of Citi. Please go ahead.
Great. Thank you. I just had a question actually back on the Retail GPU. I just wondered if you're at GBP 1,200 already in March, why you haven't sort of increased your guidance for the year if it looks like you're increasing at such a rapid rate, or do you expect it to then sort of stall at that level for the balance of the year? How should we think about that?
Hi, Catherine. Thank you. No, you know, we're, we are being sensible and cautious on guidance. We're delighted to have hit the GBP 1,200 level in March already, but for the full quarter, as you saw, we were at GBP 980, so not at the GBP 1,200. We need to maintain that and improve that throughout the rest of the year, which we are confident that we can do, but we are, you know, maintaining our guidance. As you saw, we, you know, volumes in Q1 are traditionally seasonally strong. You know, we expect to continue to see improvement on that GBP 980 quarterly number throughout the year.
You know, as I said, we're very happy we hit that number of the GBP 1,200 already in March and expect to continue to grow from there.
Great. Thank you. I just wanted to ask about just the broader market dynamics you're seeing in terms of supply and demand, and whether you've seen any sort of macro changes, in the, you know, in the quarter and then as we go into April.
I think that Paul Whitehead is best placed to comment on that.
Yeah, thanks, Catherine. Look, the market itself is relatively stable. There are some green shoots coming in terms of new car supply, but it tends to be OEM by OEM from that perspective. Supply in the used car sector still remains relatively constrained because it takes a while for the new car supply to then to have the knock on impact on the used car supply and hence why we continue to be focused on growing the percentage of cars that we source directly from consumers, where we continue to see good progress, which is more in our control than being in the broader market.
Okay, thank you.
Thank you. At this time, I'd like to turn the floor back over to management for any closing comments.
Thank you all for joining us today. If you would like to follow up, then, you know, please do so directly with any one of us. Appreciate the time today. Thank you.
Thank you. This concludes today's event. You may disconnect your lines at this time and enjoy the rest of your day.