Aramis : Capital Markets Day (November 27, 2024) Transcript

2024 full year results

• Capital Markets Day transcript

Wednesday, November 27, 2024

Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

2024 Full Year Results

Guillaume Paoli: So good morning, everybody. Sorry, it's going to be English, but I'm sure everybody will understand me. Thank you for joining us for today's presentation. So we'll first cover the full year 2024 results, and then we'll go to the Capital Markets Day.

I'm Guillaume Paoli, the co-founder and co-CEO of the Group. The other co-founder and co- CEO, Nicolas, is standing right there. He will not speak for this very short presentation on the full year results, but don't worry, you'll have a chance to hear him out just afterwards for the Capital Markets Day.

As I said, we'll be short. We'll do also a short Q&A after this session. And please, the questions, please reserve them just for the fiscal year 2024 results. I'm with Fabien Geerolf, that most of you know, probably, who is the Group CFO.

So in 2024, Aramis Group has again delivered on its profitable growth strategy, continuing to outperform the market with record figures. We have delivered over 110,000 cars to private customers. We have grown the adjusted EBITDA fivefold to €50 million. We have generated over €20 million in cash. And this is sustainable growth because we have continued to satisfy our customers with record levels of customer satisfaction.

I would like to thank our teams, some of them are in the room or watching us, for this incredible performance.

As you know, our market is absolutely huge, and we want to grow more and more profitably. So we'll continue to improve our business model, our operating system by converging on the operating system between the geographies, by leveraging our European scale, and by raising the bar to improve this model.

We have a very large ambition. We will need the massive customer demand for affordable, reliable cars with our customer value proposition, with our refurbished cars, with our pre- registered cars. And we'll detail our ambitions in the Capital Markets Day.

And as a first step, next year 2025, we'll deliver double-digit refurbished cars growth, resulting in high single-digit growth of B2C volumes. We will achieve at least €65 million of EBITDA whilst continuously improving our operational working capital in terms of days of revenue.

Let's take a look at where we stand now in 2024. In a nutshell, we are stronger than ever and ready to take on the market and seize the opportunities. Aramis is a European group operating in six different countries, delivering an exceptional experience to our customers with industrially refurbished cars, which are the best deal out there. They are cheaper than new cars. They are more reliable than used cars. And also the pre-registered cars.

So we are the market leaders, both in terms of sales and turnover and also in terms of customer satisfaction, thanks to our incredible team.

To reach our ambition and deliver profitable, sustainable growth on the long-term, we have a two-pillar strategy. First, you know it, we have a European platform. This European platform, we have an operating system. And as you know, we grew by M&A in five different countries. Well, we are converging Europe-wide on this very performant operating system. And this

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

European platform, we're going to leverage it, gather unique benefits for our customers and create value. And we'll continue to develop it opportunistically.

The second pillar is that this great model, we are going to improve it. We're going to raise the bar in all its dimensions. As you have seen, you have some books, title of an excellent book, you can fetch a copy afterwards. So these are the two pillars of our strategy.

And now I will say a few words about the market. I'll be very synthetic. If we take a quick look, we can see that the automotive retail market has stabilized to a new normal. Over the fiscal year, both for the new car market and the below eight years used car market, there has been a moderate growth. And the market has resumed its normal functioning.

We call it new normal because it has resumed the normal functioning, as I was saying. But there are four underlying powerful trends that are all very big opportunities for Aramis that we will detail later on today. These four trends, you know them. It's: one, the rise of electric cars; two, the fact that purchasing power/price is more and more important; three, the arrival of Chinese OEMs; and finally, the necessary transition of the automotive industry.

One of the reasons why the market is normalizing is that the used car prices are stabilizing at slightly above pre-crisis level. And for our business, it's preferable, of course, to have lower prices as it helps people change their car. And we are totally immune in terms of gross profit per unit to the variation of the market price.

So a record year, record in terms of sales and turnover but also for customer satisfaction and team engagement. We have a unique and powerful model. It's a combination of a vertical integration throughout the value chain from buying to selling, Aramis operating system on all the verticals of the chain, and the Aramis performance engine, Nicolas will detail it later on, operating at the enterprise level, at the team level and at the people level. More on that later on.

So you know it. This is a huge market. We have a €270 billion opportunity for cars below eight years. Well, our customer value proposition is very, very attractive. Again, affordable, reliable cars, enabling Europeans to ensure their mobility.

And our business model enables us to outgrow the market. As you can see on the left-hand side, we have again outgrown the market in 2024, as we have done every year since, I think, the beginning. And even in the difficult years for us of '22 and '23 because there was a scarcity of pre-registered cars, we were able to outgrow the market because we grew strongly on the refurbished car sales. The result is that we're gaining market share year-after-year, and you'll see there is much more to come.

I'll give you a few examples now of advancements regarding our strategic pillar. I remind you, first pillar, the European platform, converging and leveraging our scale. Second pillar, it's about improving the model. So this is the first example. In Spain, in 2024, after years of growth, we have put the focus on profitability.

Spanish teams have worked to converge on the operating system in several dimensions, in particular regarding sourcing and regarding refurbishing. Regarding sourcing, we have been very much more selective and accurate in choosing our cars, empowered by new data tools. We have also developed new sourcing channels. This led to faster sales and a reduced need for pricing adjustment.

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

In terms of refurbishing, the productivity of Villaverde, near Madrid, factory, has improved by one-third, thanks to a re-engineered refurbishing flow. We implemented the pull flow approach of our Group operating system and also the enhanced calibration system that we have to process used cars. And as a result, the gross profit per unit has increased very strongly, you see the numbers, and it's reaching almost the Group average in terms of GPU.

Also, in our first pillar, it's about leveraging our scale. We leverage our scale. It brings unique benefits to our customers, and we create value internally. This is just an example, and we'll get in much more detail later on. It's our internal marketplace. We are among the only ones or maybe the only one to be able to share inventory between countries, which offers our customers more opportunities to buy cars and also helps us to turn our stock faster. Again, we'll talk about this later on.

To give you now an example of raising the bar, i.e. of improving and enriching our business model. As you know, since day one, we have been developing an optichannel model, okay? Optichannel is like omnichannel, except that you are optimizing the different channels that are available to put the customer in a unified brand experience and to optimize the business.

Well, just as an example, we have widened our optichannel coverage in 2024, opening customer centers, asset light customer centers, in Spain, Italy and Austria. Hence improving our conversion rate and improving our satisfaction rate of our customers.

I will now hand it over to Fabien, the Group CFO, for more details on the financials.

Fabien Geerolf: Thank you, Guillaume. So let's now review the key financials for fiscal year 2024. Overall, we delivered a very solid financial performance with a significant improvement versus last year.

We achieved 22% B2C volume growth, over €50 million in adjusted EBITDA, of which €16 million in H1 and €34 million in H2 versus €10 million last year. We substantially improved our operating working capital from 31 days to 26 days. As a result, we generated €21 million positive free cash flow in the fiscal year. We will review these results in detail in the coming slides.

So let's start with revenues by segment first.

The growth was driven by both B2C segments. On refurbished cars, we achieved, in fiscal year '24, 12% volume growth with an acceleration in H2. On pre-registered, we increased our volumes by 81%, thanks to a rapid recovery to more normalized levels, as Guillaume explained earlier.

B2B revenues declined by 27%, which reflects a shift in the mix of our outsourcing, with an increasing share of cars sourced directly from professionals.

Services increased by 12%, slightly below the B2C volume growth due to the adverse conditions on financing and increased interest rates.

So let's now take a look at the revenues by country.

Overall, we achieved a very solid double-digit volume growth in nearly all our geographies. If we detail country by country, in France and in Belgium, volumes grew, respectively, by 26% and 15%. The two countries were able to leverage the full potential of their strong brands, their

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

strong footprint of customer centers and their unique international network of suppliers in a more normalized market.

In Spain, we deliberately prioritize profitability, as Guillaume detailed earlier, after several years of hyper growth. We now have solid foundations for future growth.

In the UK, in a particularly difficult market, we achieved 20% volume growth, resulting in substantial market share gain.

Finally, significant growth was achieved in our last two acquisitions, Italy and Austria, respectively, 82% and 57%.

Some more insights on our GPU now. We have substantially improved our GPU in 2024, with clear progress made between H1 and H2, as you see on the right side. On one side, we faced adverse market conditions on the margins generated by services due to higher interest rates impacting our financing margins. But on the other side, we have been able to generate higher margins on the cars themselves, that's what we call the metal component, driven by two major components.

One, we have improved the selection of the cars. And here, we have been able to leverage our know-how, our technology, to buy the best cars. You have seen one example with Spain, but it has been something that we have seen in different countries.

Two, we have decreased our refurbishing costs. Once again, we had the example of Spain. We had it elsewhere, thanks to increased productivity, lower cost and better absorption of fixed cost. More insight will be shared later on these levers during the CMD presentation.

So in addition to increasing our margins, we have continued to optimize our SG&A structure in euro per unit. Half of the improvement came from a better fixed cost absorption, thanks to the 22% growth achieved. The other half came from two factors: one, improved productivities, thanks to convergence on our operating model and technologies; and second, lower cost of customer acquisition. Here, we have increased our long-term brand investments and decreased acquisition costs through further optimization in lead generation and lead conversion. Once again, we will come back on this topic in more details during the CMD.

So as a result of this strong growth, improved unit margins and reduced SG&A per unit, the EBITDA significantly increased from €10 million to €50 million this year. And during fiscal year '24, our EBITDA margin improved from 1.5% in H1 to 3% in H2, which gives us high confidence to achieve 5% EBITDA in 2027.

We have generated €21 million free cash flow in fiscal year '24. In addition to improving our profitability, we have accelerated the reduction in operating working capital in days of revenues from 31 days to 26 days. Our CAPEX stood at 0.6% of revenues. We continued to invest in our technologies, with an increasing share invested at the Group level, allowing these investments to be shared between several countries.

As a result, our financial leverage continues to decrease with a financial net debt now standing at €61 million and an EBITDA of €50 million, resulting in a leverage ratio of 1.25. As a reminder, we still need to cash out the earn-out for the acquisition of Onlinecars in 2025 and for CarSupermarket in 2026.

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

And we have available credit lines for a total amount of €300 million approximately, of which less than a third are drawn today.

And with that, I'll hand it over to Guillaume.

Guillaume Paoli: Thank you, Fabien. As we have the opportunity to highlight just afterwards, we are a very ambitious and entrepreneurial team. We believe we can build a huge and very profitable company because we have just a huge market, and we have the business model for it. So the two elements enable us to be very ambitious.

To go step by step, here are our financial targets for next year, for 2025. So we'll deliver double- digit organic growth on refurbished volumes, resulting in high single-digit organic growth for total B2C volumes, delivering at least €65 million of adjusted EBITDA and continuously improving our working capital in days of revenue.

So this is it for this short presentation. And now we can have a short Q&A session before taking another short break.

I don't know if there are questions in the room?

Questions and Answers

Mourad Lahmidi (Exane BNP Paribas): So I have a question on the GPU. When you look at the bridge that you showed between metal and services. Can you give us the main component of the services decline? And also a more broader question on services: when you think about this component five years down the road, what would be the main drivers, financing, spare parts or other stuff?

Fabien Geerolf: Okay. So the main component is really the financing penetration. It went down from 46% to 43%. And the main reason for that is the higher interest rates. Okay? And we have explained it earlier. We can detail that.

Regarding the services going forward, there is a detailed slide prepared by Alejandro here, who will present it during the CMD. There are several things that we can develop, where we can converge on this aspect. We can increase the penetration of the current services, or we can launch new services, services that are offered in some countries, but not in others. So these are the two levers, and we will illustrate that with precise examples during the CMD presentation.

Alexandre Raverdy (Kepler Cheuvreux): Thank you. Good morning. Alexandre Raverdy from Kepler Cheuvreux. I have two questions related to the 2025 guidance, please. The first one on the volume guidance. I think it implies the pre-reg business to be flattish or even slightly down. I think we are not yet back to the historical level. So is it a deliberate measure from you, or are you being cautious here? That would be the first question.

And the second one, on profitable growth. So it's nice to see the EBITDA per unit growing again in 2025. The question I have is what are the key building blocks beyond that? Is it even higher GPU metal services? Is it even further cost actions on the marketing side? I just wanted to understand what would be the main drivers for that?

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

Guillaume Paoli: Okay. I'll take the first one. Maybe you can take the second one, even if it's a bit to what we're going to tell just afterwards.

Regarding the guidance, so thank you for the question. We were expecting it. So I mean, we sell used cars. We sell cars to serve our customer needs. There are some variations in the market. We have always said that the strategic axis was refurbished cars. We operate on a market of 12 million units, cars below eight years. The pre-registered market is a much smaller market, it's 400,000. And yeah, it's not totally clear where it would land, but we are confident in being able to grow it. And as a whole, we will deliver high single-digit growth. Okay? But there is a question of a little bit of mix between the two. If there is a surge on one, it impacts a little bit, the other one.

But in the end, the important part is that we're going to serve more customers with high single- digit growth. For the second part?

Fabien Geerolf: And on the big blocks to explain the gap in profitability, we will detail it, of course, during the CMD presentation again. But to make it simple, it will be both. So it will come from the margins, from margin on services and margin on metal, we can grow both these margins, and we will explain how. And it will also come from a further reduction in SG&A in euro per unit. We will absorb more fixed cost. We think that there is some levers on productivity as well around technology. And we will give some very concrete examples on how we intend to achieve that. So to answer your question, yes, there are several levers, not only one.

Guillaume Paoli: Do we have some other questions in the room? Yes, there's one.

Dominique Descours (CIC): Hello. I just have one question on the fiscal year '24. You have a tax credit in the P&L and a tax outflow in the cash flow. Can you elaborate a little bit on that? Thank you.

Guillaume Paoli: Thank you. That's for you Fabien.

Fabien Geerolf: Yeah. So indeed, thank you. We have a tax credit in the P&L. In fact, it's explained by the fact that we have generated in the past some losses. And as long as you have not proven that you were delivering profit, you cannot recognize the tax loss carryforward in your books. So when you start delivering more profit, as a mechanical impact, you recognize the tax loss carryforward in your books. So it's a pure mechanical accounting impact.

Guillaume Paoli: Do we have other questions in the room? I think we have no questions on the phone and no questions from the web for the moment. So last chance. Okay. Thank you very much for your attention. We'll do a short break and come back for 10:00 a.m. for the full Capital Markets Day.

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

Capital Markets Day

Guillaume Paoli: Hello everyone and welcome to Aramis Group's 2024 Capital Markets Day. I'm Guillaume Paoli, co-founder and co-CEO of the Group. And it's our pleasure with Nicolas and the team to welcome you here today at Musée de La Poste in Paris.

Three years after the IPO, and after a once in a lifetime event on the automotive retail market, it felt like a good time to update you on our strategy, our outlook and explain why our business model, our operations are stronger than ever, and we are ready to seize all the opportunities going forward.

First, I would like to thank our 112,000 customers last year, and also the 700,000 that has bought a car from us since 2001. Also like to thank our 2,400 people in the Aramis team. There are some great people out there, including in this room. Thank you for your hard work and commitment. And I would like to thank our investors, there are few number in the room. You have invested in a company that is revolutionizing car buying since 23 years. And as you see today with the team, there's much more to come.

So let's take a look at today's meeting, what we're going to talk about. Point one on the agenda, Nicolas and I will talk about our journey, our journey from zero to 100,000-plus customers to revolutionize car buying. Point number two, we'll switch to the market to update you, things have changed. We are getting back to a new normal and why we believe this is the most exciting B2C market out there.

Then on point number three, we will explain how we became the leaders on this market and why we will continue to be the leaders with very strong competitive advantage at our service. This includes a contribution by Philippe de Rovira of Stellantis, who is also an Aramis Group Board member. And as you know, Stellantis is our partner.

Then we'll do a short break for questions. Number four, we'll move on to strategy to explain how we will deliver strong profitable growth in the future. Then in part five, one of the parts you are most excited about, Fabien Geerolf, our Group CFO, will get into the details of the number, explaining in particular, how we will reach 5% adjusted EBITDA, rather sooner than later and more. And finally, we'll reach the conclusion before a Q&A session.

So these are the speakers today. Our team will present themselves along the way. I won't do it for them. Just for you to know, it's just a sample of the great people we have. We had a hard time to choose between all our people. But you'll get a queue of the kind of people we have. And of course, you can also talk with them for those that are in the room after the break.

Now we're going to run a short video to get into the spirit of today's discussion. And afterwards, I'll hand it over to Nicolas right after.

[VIDEO BROADCASTING]

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Aramis 2024 Full Year Results & CMD	Wednesday, November 27, 2024

Nicolas Chartier: Good morning. I'm Nicolas Chartier. I'm co-founder and co-CEO of Aramis Group. Aramis started in 2001 when Guillaume and I realized the big problem on this huge market. Customer experience was very poor. Mobility is essential for Europeans. But to buy their car, they were left with the only choice of traditional incumbent offering poor experience.

So we decided to create a new offer. This was a team of two, and we are still there. And we are now surrounded by a team of 2,400 people. From day one, we are a lean company, driven by a passion for customer satisfaction. From day one, we are digital. We started by saying that we are going to sell cars on the internet. In 2001, nobody trusted us. And today, we are even selling cars with AI. From day one, we are an entrepreneurial company, and we still are.

We launched Aramis with the purpose of offering an affordable, sustainable, individual mobility to all European and with the ambition of becoming the preferred platform for European to buy the car.

Our ambition is also big because it's a huge market and European needs have no limit. We are over €2 billion turnover today, and we target over €10 billion which represent a 5% market share in Europe. We are on front runner. From day one, we wanted to build a big company, a leader, and we wanted to transform our sector. The market permits it. The model we have created permits it.

Our model delivers a better customer experience. We will discuss that more in-depth during this presentation. But you will see that we have crafted our model. We are vertically integrated. We have developed our unique operating system, and we have crafted our performance engine for operational excellence. To do so, we had to learn a lot. We had to learn how to buy the best car, we had to learn how to refurbish it, how to sell it.

In purchasing, refurbishing or selling, we have learned thousands of details that make the difference and that only experience can bring. This is how we have created a unique model creating value for customers, employees and investors.

And now I leave the floor to Guillaume.

Guillaume Paoli: Thank you, Nicolas. So now here is a snapshot of Aramis in 2024. So I won't go into all the figures. But in a nutshell, we are a European group operating in six countries, delivering an exceptional customer experience to over 110,000 customers.

With industry refurbished cars, which are the best option out there. They are affordable, they're reliable, they're safe, they have limited impact, and also pre-registered cars that now represent 20% of our business. This makes us a leader both in terms of sales, but also in terms of customer satisfaction. Thanks to an incredible team, as Nicolas has just mentioned, that are super knowledgeable and locally have a very big field expertise.

We're also leading the pack in terms of financials, as Fabien will explain later. We delivered the highest gross profit per unit of listed company in Europe. We have the lowest operational working capital in Europe, and we will continuously improve that, and Nicolas will explain later on how our unique model enables us to do that.

So this morning, we will explain. Number one, we have a vast market, full of opportunities. It's really the most exciting B2C market out there. Number two, Nicolas will dive into how we became the leaders. He said it's a combination of vertical integration, our clear operating

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Aramis 2024 Full Year Results & CMDWednesday, November 27, 2024

system and the Aramis performance engine, which gives us very difficult to replicate competitive advantages.

And third, we'll get into our strategy for sustainable, profitable growth. We'll tell more afterwards. And then afterwards, Fabien, our CFO, will get deeper in the numbers to explain how we will deliver profitable growth and cash-generative growth.

So we have a clear powerful model, with a clear strategy. This leads us to our financial objectives.

As Nicolas said, we are entrepreneurs. Okay? We believe we can build a huge and very profitable company in our field. When we started working with Stellantis in - well, PSA at the time, in 2016, we were doing €360 million turnover. Now we are doing €2,238 million, okay? So we are very ambitious. And as Nicolas said, the market enables us, and our model enables us.

So to go step by step, because we are patient people. And so are you, I'm sure. Here are our financial targets for next year. 2025, we are going to deliver double-digit growth on refurbished car sales, resulting in high single-digit growth B2C, at least €65 million of adjusted EBITDA. As a second step, in 2027, we will continue to deliver a CAGR double-digit growth on refurbished car sales resulting in high single-digit B2C volumes and achieve around 5% EBITDA by then. And we'll continuously improve our operational working capital in days of revenue.

And going forward, in our mind, Nicolas and mine and the team, the sky is the limit on this market.

Now let's talk about the market. Well, in reality, I believe I have the easy part of the presentation because this market is so exciting. Nicolas told you, Europeans need their car. Two-thirds of European go to work every day in their car. And if you get out of the big cities, usually, it's 80%. And what are the cars they use? Well, around four out of five cars sold to private are sold used. This explains the size of the market. This explains the resilience of the market. It's just because people cannot do without it.

You will see that traditional incumbents generally deliver a disappointing experience. Digital is contributing to change this experience which is a big opportunity for us because we are digital first. So in a nutshell this market is an absolute opportunity for us.

And now I get into the details, starting with the numbers. We have a total value of used car market of €420 billion, 34 million units. In comparison, the new car market is 12 billion. Within the 12 million, around half are sold to private customers, okay? In this big market of used cars, our core market is cars below eight years, which is essentially what we do, €270 billion. This market is expected to grow in the coming years. Grow slowly, but it's sheer size means that we have several lifetimes of growth possible in front of us. It's not about the growth of the market, it's about the sheer size and the fragmentation.

Also not illustrated here, cars are vectors for services, financing, maintenance. Alejandro will tell us a few words about that later on. Smaller numbers, but very profitable.

This big European market, it's composed of specific markets. Each one of them is sizable. As you know, we operate in six markets on the screen. We have added Germany and other countries. The fact, by the way, that the UK is the number one market is counterintuitive. And the reason is that the British people change their car much more often than other ones.

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