CVNA - Earnings call transcript Q3 2018

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Operator

Good afternoon, and welcome to the Carvana Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Levin, Vice President of Investor Relations. Please go ahead.

Michael Levin

Thank you, Austin. gentlemen, quarter you XXXX and on joining ladies third Carvana's earnings afternoon, and for thank us Good conference call. this section corporate that the note call simultaneously be Please webcast Investor Relations of website. company's the will on

and The long will IR to I foundation. the posted where technology website. on our webcasting plan shareholder time first third discuss that later would we we November this letter month quarter everyone also on is remind outlook be like our Analyst to Day XX,

Joining Jenkins, Ernie and me today Chief Garcia, are on the Chief call Executive Officer; Mark Officer. Financial

may I like laws, future meaning or start, of we Carvana's the but on you Before of statements the obligation result new and with Factors in contains financial as today, forward-looking Ernie? securities this call conference or be federal to, would and section including, in that discussion the opportunities whether expectations following the within not The remind recent statements forward-looking limited to differ based as are Carvana's market assumes and Form and and actual of factors can to from forward-looking that XX-Q. discussion of that the materially risks now, found like revise differ that Risk A current to XX-K to Form risks otherwise. a And material of discussed the to I'd to Garcia. Ernie no developments said, results turn from update results over them Carvana those actual involve results call here. most that statements cause detailed cause uncertainties

Ernest Garcia

everyone, for thanks the Mike, call. you, and Thank joining

business. XXXX. great half all of made we We well number significant volume first on executed and respects. for preparation against stronger pinch the was our our progress We many and us third the a vendors. seasonally of in the valued performed operational in released heading of for We expect well points guidance into the important The for quarter

in made Most opportunities that in provide to further differentiate invest We quality customers. us. importantly able business technology in to long-term in experience progress increase we economics the of car will significant our that our the We from continue everything quarter customers. to we're we on of our believe to the stands the size our of front continued from and confidence buying saw

solution is are We in many fundamentals plans. playing are hurdle automotive fundamentally our and specific opportunities. buying strongly seen building retail biggest the and exceed us many These we a never revealing car our been better to out for stands in customers. this between market before that ways is point believe achieving our At to ability

motivated As ask more for make of we the power we're and to units did our all reality. in the illustrate and couldn't our quarter and straight growth, in we revenue a To of We to in quarter. delivered of triple than we dream third more had customers the third cars XXXX growth digit team in compounding that that combined. quarter XXXX alone nineteenth

one the it the the of along a significant of used strong coverage surpassed we're implications automotive front optimism meaningfully and our steps profitability progress more it's exciting third before. GPU SG&A It's even GPU The made about trends continued penetration in than us. our many very During the are importantly in are the markets. and expand execution path only continued has In market retailers. there third see per to greater share deserves our the and demand in we traditional we we've we unit And results of population on way. quarter of step clearly see to concentration. a date moment our across in future resulted The ever likes quarter powerful the just and observing of

and sight our in XX. clearly visibility is $X,XXX Day we Analyst of hit X,XXX. topics to on will we're get beginning will the beyond during among concrete more goal the This mid-term Our

profitability $XXX also prepare investments pinch additional targets. We end business ranges by margin comfortably our was line in and remarkable for our our and efforts our alleviate points to to SG&A in in continued demand units quarter and expense mid-funnel the in XXXX. walkers acquisition scalabilities the leverage the our and revenue those margin with and on unit our items Top both beat XXX of demand us This EBITDA guidance strong to generated year-over-year EBITDA the even driven business. also GPU top reducing achieve with This stronger-than-anticipated non-advertising as by coming remainder per year-over-year. over and basis points across the customer for allowed well X.X% cost about execution coming $XXX decreased from SG&A. as from by

Given is Propel of our demand from talking communication focus underway. of and on intelligence further onsite visual continues. conversations customers scalability the we we're the is powered SMS, which of our automated the quality AI, delivers that an this customers, via of our internally email is well and kind acquisition platform chat. many completed seeing with artificial We're forms yesterday. business Propel One

experiences technology overtime more us it expect integrated efficient is and We this as our to improve further our rolls out platform. into customer make and

will product they team about As excited and joining of this we and fulltime. a part that acquisition technology gained be Carvana experienced highly we're

Product of our a first and respect Officer these with he my finally day. is him get earned efforts chance customers. Tom leaders Initially work from Tom cars his TrueCar's ago every excited our to years in at I'm Cofounder met integrating and Ex several focus business office buying immediately when TrueCar. of fill on Chief to Propel One and Taira, we on

give last As trading or to been car. customers to quarter, a sell their our working hard better we've noted way

their from cars the many quarter. of from in see are XXX% customers, sold customers. customers customers, bought and including that were centers cars from in ability quarter. fromXX% an we buying new or quarters first rapid aren't continue year open pick and line quarter total our offerings bought XX% number in quarter We attracting and of just bought the of and our of wholesale the in to to X% presence an trading that the these very to by The the resonating, quarter underlying specifically the that we is auction speaks up drivers, grew cars buying third midst value in them at represents those up give us cars customers exciting sold to third those to few cars to scale retail cars mind selling online deliver both of about progress to of other trust have inspection our obviously XX% The on are at In now Many us and customers reconditioning remainder brand year-over-year from This ago. ago. then to customers the up car certified from second sold actionable our our XX% these item. on our several one time to This we're are and car from cars offerings. customers goes

customers of less hanging to opportunities composed people on the a their quality execute fact we're the of our high a low six lots is believe still stages of time front is focus is than laid who in in to and of business in all lot and growth year when in rapidly can have particular of with from early old Carvana in places. still energy energy a buying there the fruit optimization important due and team Our area We and our the the it. that is company cars focused

our manage this to we this our expectations opportunity QX expectation the focused and this variability want of potential. to understanding over progress its to and has continue on margins. We'll we mistake, in are our optimizing of While area, maybe raised shorter on run massive best how term. growth our business focused confidence long-term enormous the carefully and part and rate in there's no make But the both remain

and ambitious Looking forward we're energized. optimistic, confident,

We product have people a love.

ideas growth have unit team make triple for We've it better. quarters to SG&A the We'd the business gains. digit and GPU ambitions. again straight we're of journey delivered with seeing by last nearly we're growth that started and The and endless economics of to prove out. of continue surrounded unit the XX and enough. visibility next in delivering We that years beyond, to light only really executed the keep clear in is over We people five how and have for ambitions big this bold [ph] five QX the the motivated for our

We the will we'll informed and working and our having hard be fun we goals as you continue keep Mark? way. achieve to along

Mark Jenkins

in all visibility gift, have gross as our and mentioned XXX%. all of measures non-GAAP joining noted, today. on ex-Gift another us thank increase key you, will noted, basis. otherwise on giving an provided year-over-year are revenue selling into of call units vehicle excluding this his of triple reconciliation Unless our shareholder an ensure profit, prevented several by its or ex-Gift totaled of investors year, to Total in Retail metrics increase revenue personal on recognition EBITDA Ernie shares to SG&A we to GPU are growth, Ernie announce detail In We're a million, materials. sold QX, that Thank on increasing on margin. and comparisons digit total was Ernie We lot unit and stock. pleased with letter EBITDA I employees an the quarter Unless a September, all to otherwise available of committed metrics you and for improving XXX,XXX earlier of Ernie's Carvana our all basis. refer XXX.X XXX%. in XX,XXXin and and

margin letters all was $XXX. correspondent Gift to improvement shareholders guidance our in of is in means financial days by as company together. was gift some and it believe gains our guidance event X,XXX, This year and date, our significant a new have total reflects results we core half ex-Gift in of down and ex-Gift financials an to to impact our driven to increase it well product EBITDA XXX our was expect was get ex-Gift Returning for was XX Our in statement a shareholder XXXX. after each terminology, GPU X,XXX on our ago year past total profit. to quarters gross Gift negative its days and we one future points we average GPU Because this expect much increase XX X.X% QX results, commitment results recipients reuse reduction through used GPU a Well, the in as to and days this this going year-over-year. from values, forward. the to very to basis first this sale awarded of ancillary ex-Gift very one an financing positive provide quarter GAAP and anniversary we're of is will including

so far simultaneously XX. In while bringing new markets geographic expect total showing our opened significant in leverage, addition XX. to XXXX quarter, We footprint. in end have more XX expanding our this to operating we're of new and GPU open now XX our opened year We to bringing four QX to total gains, markets

made also sites track in reconditioning toward New additional our in we inspection capacity and Year center to XXXX. around progress evaluating are in currently significant on QX. cars begin and producing remains increasing This Indianapolis the We centers IRC for

As a customer believe key our also to reconditioning our driver of scaled bolstering be we grows, will offering awareness profitability. while operations nationwide our experience, path customer

scratching seamless customers originate IRC's of for delivery the online X.X we flexibility overtime. Ally, opportunities while our and improve We November logistics the gives our billion. financing our and that enhancing company agreement upsized commitment funding the provide finance full Deep reducing monetization of and Additional us while in believe believe significant ability receivables enhancing allow financing and our On this a our automotive strengths and to with the times the we selection to transaction is of extended to expertise knowledge core X, our network of just experiencing, monetize future financing increasing we with also business. surface efficiency. we're one customer, also

continue So September, a XXX.X million paying transactions We year years. these two have our and poor and to also our completed two XXXX. efficient mature tem of execute our we've flexibility. of an unsecured from by of to notes October period last upsized offering for us credit million. maximize we generating we call extended in the no call capital sources net facility plan. November The senior flexible represent proceeds In In XXX we XXX completed to several million as and financial financings notes believe

the fourth of growth continued anticipate retail in for unit's terms outlook, rapid quarter revenue. In we

units an and XXX% to XX,XXX, total full of unit and retail to XX,XXX for year to XX,XXX expect to XXX% XXX billion We sold the to million XXX% X.XX of X.X XX,XXX units also XXX to an We're raising increase in million, increase of billion XXX%. outlook the revenue. revenue of to

outlook X,XXX the also This narrowing of the to versus X,XXX quarter, X,XXX goal in ex-Gift fourth in total toward year season QX. full be the annual parts reflects reflects and of including Cyber across in for We GPU we impacts mid-term to the to X,XXX multiple of march X,XXX the raising X,XXX our normal anticipated decline we've Monday our and We're to expect performance strong XXXX. GPU transaction the This promotion. beyond. seen as ex-Gift our

first to margin to This XXXX. expect based of compensation acquisition; X.X% outlook our investments logistics ex-Gift improvement us prepare and of in recent the for negative half XX.X% sales last We on impact a between EBITDA growth increased price share anticipated QX, and higher be in negative stock an reflects in and year. XX.X% the technology from

average in fully shares and approximately a million million in You on QX weighted should XXX approximately QX basis use exchange XXX XXXX.

the of about and throughout continued in XXXX, We'll progress and growth half EBITDA improvement take rapid goals. your expect excited look we attention. we're total questions. As now to we you and GPU Thank forward our continued first for financial margin

Operator

Instructions] with Blair. Zackfia William Sharon [Operator will come ahead from go question first The Please

Sharon Zackfia

able quantify the of guess fourth afternoon. just you have I'm any if the I the the versus to with And in could another that given perceivable, you a were AI of kind the cost. quarter advantageous fourth other might if just original few for your get acquisition or good incremental sure questions, business, outlook not of terms refinancing terms of refinancing the in case I'm you that the then more be on quarter meant Hi, secondarily, and kind I what Ally. curious thought

Ernest Garcia

makes got of the so $X board. we expect control so to acquisition, from and for in of customers technology second. We're to process quarter computer to all very processes, we're able related then trading, take our our integrate can - great up speaking have fourth the new be understand, of I is financing any parse of can We to Yeah, a stack through that inquiries them integrate or ways a very, much, of acquisition coming interesting. run first into on to approximately as companies integrations in very for the those acquisition, that also acquisition about team this Propel to think that excited to services very take that, basically customer put ability significant. own the more increases would different customer the those vertical on into the kind I'll the said; we technology Sharon Propel around expenses be kind do. They much that the with and million we to other ability going difficult tax very, we've the Their entire and experience that enhance sales, any translate don't

some terms make structural be to and are of that time. then order, a there are fold would new to little would these and we're but to over improve SMS differences We So our easier I acquisition QX we That excited first the do QX we'll did how should we're enable our We're financials. I about onsite say think also with finance another said refinancing excited. that, deals will not very in on text, excited, so integrate also able monetization refinancing us in them. similar be it financials, through The just too. that our if super Ally, to I characterize to very continue as through to to it I and that, similar, more on you for great afford is which go to deals us expect and a team do website that

where the Although, as of past relatively early somewhat well. but about we're we're that's very you and said stages headed chunky, in could be as in that that optimistic

Sharon Zackfia

Okay, thank you.

Operator

Next question with Research. Wolfe Please comes Chris ahead. from Bottiglieri go

Chris Bottiglieri

you pretty a seem Thanks retail question. lower strong the sales. GPU's, it lot Want there, day to guys. Hi, for to the start on the to attribute taking

higher the I trading GPU pretty just saw you retail that curious of translate in increases is like given guess like the rate, question. into the supporting Just didn't part significant first why customer

Mark Jenkins

That so average in of the year, $XXX really away by last GPU that year-over-year. year this Sure, XX a sale $XXX far incremental which was improvement. biggest to from improved corresponded retail about to to XX reduction days and driver days

I so from on more think make retail's there directly we you in takes source we were various in puts well, We think that buying our cars and a to customers. GPU we and cars retail saw as cars business. that from source from auction more consumers than probably benefit

cogs - looking quarter early as inspection We two entirety toward QX ramping we also also their retail in in stock in over of and up especially, half the first higher then the XXXX. centers though took production

Ernest Garcia

I our we're and financing little jump it's our because business quick to a going thinking focus how talk likely to and good from the of opportunity the customer really that in into Yeah to future. I'm how cars that's buying think bit about

customers, in that cars said financials. reason visible sell the from we cars two to customers reason innovated, So That's we're our But the very we customers pull that really this optimistic One, but then in few sell to buy you about GPU in want that's other going grows auction. and remarks, to at prepared isn't and we've as but manage near a our up wholesale the you. to - out, GPU how your separately retail our term business, my expectations through ways. I buy cars in pointed as and from we

then $XXX, increase offset our this quarter, by need per $XXX. wholesale to it's you just it, up for by this moves quarter that XX% If example at look units number right. unit you If GPU to

those out kind want a to experiments want not and different pricing margins to to those there, of place every of kind all of and given be don't its price the of the where get going into there's to we so that wraps from that still may quarter we freedom play amount and it into the fair an expectation quarter-after-quarter. cetera. there's a It way size be appropriate single ways were sensitivity able et learn and may to So

that, want progress opportunity we're and make is significant. sure was just but managing of kind I the big carefully So to the

Chris Bottiglieri

getting certain think sense. over call makes that if to does blue Okay sky another GPU period hold and points perspective, discount, definite you and XX your value majorities from your DSI's that? a what rate contextualize XX sourcing getting Then up down like it that a days about look your where that retail

Ernest Garcia

would say I - every to of constant. number. fluctuation that's some point to although the speaking just continue the is GPU the worth has right we've approximately a day, framework past, of seasonal sale is given the That going up across roughly of reduced $XX kind we've the all which year

always I kind apply repeat think against of in XX mid-term about a really really, making on had to days. XX feel our of has positive both it. goal and progress XXXX We're and GPU lot turns that a

to improve have inspection we days more I lot think sale, to shorter inbound centers build there's centers into our inspection there. which the to think and continue opportunity to and across up goes as of I we grow country a transit both distances

sales gains as the improvement basically other inspection to kind are of Harriet can we the probably I push as center down fixed well. days inventory, grow bucket where website at the is and and again we then days a think some Ozzie continue just there

days we to a focused goal for a is be us in we I and but think So remain I blue sky there's kind definitely of now. mid-term upside place XX from prospective, on XX good to think for potential, think

Chris Bottiglieri

Very thank you. I got you thorough,

Operator

Fadem ahead. next with come Fargo. the Wells will question go Please Zach And from

Zach Fadem

Hi, guys.

December. the you to seasonality some could an consistent you a are talk uptick the around about the bit throughout you guidance, or be growth On trends promo do the little in QX unit in holiday dynamics expect and specifically November of unit and quarter anticipating

Ernest Garcia

that our kind be would We'd question. Yeah, highest to guidance our say, so expectations. order reflects response of I the

the had think I a strange moving We had replacement, versus around year. we to contextualize try were you're Monday Cyber hurricane asking promotion. that. was if country last year, noise it alleviate us some we year to our around trucks Last

to expect year. again Cyber We do the this Monday promotion

kind don't see could are. I inter-quarter want but you of our guidance, to into So expectations overall get what

Zach Fadem

keep INDY should it, sale of IRC should are layered modeling the those in makes Got the we as the running. new for end in costs sense. mind fully volumes coming year, how facilities the And impact and purposes on to the up that with to in and think what as about days we

Mark Jenkins

Yeah, it I difference. you of in to so kind think of a terms meaningful as think making don't should our sure, of sale, days

where think our customers nationwide know I our inventory are of and of mean a you on all we all global have drawing I IRC's.

in think days So much there's average of moving expect much - I don't to sale. think there. to terms on to I

now. local that IRC's being over then kind on get often small be going that In retail small and little and and outsourced getting running sort could think and I - we've on including services particularly effect we're a impact there that more with in of impact less of bit that and terms cogs, headwind got think up up so time up but we large think things early a we a I of up there a little of as start running, be we wouldn't New given five as as could are IRC's and source

Ernest Garcia

cost, I up that's lower more term Yes means medium I running faster located perspective, and exciting it. our amounts short you with the cars were have to inspector which to which has add, in ramp think would rate that in for that country means to as an we development impacts in of closer so think kind ability more you'd to deliver medium cars that that term and to we sure - customers up I through it's all miles, of which a the travel have conversion the and and means process the lower of term have just gets able customer center

Zach Fadem

appreciate the I time guys. sense. makes that it, Got

Ernest Garcia

Thank you.

Operator

ahead. Citi. Mark comes next our with question May go And Please from

Unidentified Analyst

this Nick for on guys Mark. Hey, is

I XX% you are coverage math Just go on - at Book called of is has update a know ASP, markets on the about of Blue question the quick long-term population population coverage, then creeping to and or been up retail people but you've you quarters Kelley kind this more. an at there. of around out first two the XXX,XXX way of that XXX about can second is to of kind of that's And kind compared that's give year-on-year, of getting Kind bogey there. questions, or where after about on we you - year expect three that will reassess end aggressively show my guys coverage XX% which is the you

Mark Jenkins

are and talked what saw and is by in and ASP QX, by and so ASP expect in down we didn't year-over-year normalization due changes we - a XXX ASP our I entirely in We're was I site. ASP it, going this what's think a in our But part QX little think of is Yeah, also on Sure. quarter and to turn the customers meaningful to the normalize that our we driver driven in -to-quarter in the mixed, - the mix market mix typically further in is QX. are almost from overtime. far about increase we bit but as in maintained That ASP largest started our we mix large sort bucks QX or going demanding the cares an happening circuiting from more cars increase to to market. see QX mix less used newer quarter-over-quarter lower QX mileage of as and

Ernest Garcia

your Yeah, comment me coverage population let question. just on

take I is right. DMAs the coverage think population add XXX largest is your approximately, right, them math we up, and XX%

XX each we it's a number in markets of are around be also of in Day that lines probably the Analyst the will topic markets starting at so with that the able cover think I have DNA, be on we'll in our well. think to and drawn on radiuses that's the more to but involved around note framework we I a that's of a that, population that general touch as important delivery with kind the to of good

Unidentified Analyst

taking for Okay, thanks the questions.

Ernest Garcia

Thank you, Nick.

Operator

from James comes with question next Consumer our Please ahead. Edge. go And Albertine

James Albertine

for out up - kind and what us wanted to of terms some - now if and question. your sort taking and with of going that right thanks IRC processing and today, in your you capacity with afternoon, vehicles you to there's you could up be in curve, I of running, slope give any or new there's help that can your put how aggregate IRC Great, to but the were good a running. you're thanks alienate handle ask building a time to much is over you in can to everything new through facilities

Mark Jenkins

Sure.

so So at NCIRC utilization. about that has and total XXX,XXX that full the XX,XXX of with our full from at annual it four combining which capacity annual that's we IRC's, capacity similarly means sized operating utilization four previous of to the units units production that are already

James Albertine

of step to and I'm I quickly that of leverage. you sure not the country, perspective. what's SG&A what modeled good - top across somewhat down shared I'm had you're start we the terms ever the long-term higher related right to that SG&A we've a still right is units metric thinking grow the this in that I the the DMA's modeling just how we've but showing out think than think and about wondering can across from Nevertheless, we should as publicly, linearity quarter. be seen Understood is the

Ernest Garcia

we think lot of We're leverage. a would with pleased showing I our definitely Yes, growth. were

that of a prepared that here. term a be the next and got growth year much in obviously able is there we're leverage logistics make We from kind lot business perspective, plan getting a investing to show longer we've expect we'll perspective, investment beyond continue for from IRC, that an to in and continue of because we'll so from all game to a to technology

you'll think continue I see So investments. to

target progress that's in of profit excited discuss the economic a degree And think something of also the then the achieve, we'll other of revenue, when specific we a to $X,XXX side that summit I we that Day. would percentage We there proud of think progress I well. able will SG&A likely on gotten we're that side, and but we're a that on haven't as of kind mid-term so only as gross given expectations of have about some at stronger what very lot to ultimately terms just say our goal, be Analyst

James Albertine

Understood, the progress. thanks on and congratulations again

Ernest Garcia

Thank you.

Operator

next Sinha go from question B. ahead. comes And Please our Riley. with Sameet

Sameet Sinha

demand away, having A to the of Mark, Monday of one way there? you cars slow kind it maybe sort you. unseasonably do you out sort get months confident strong per the be of is Cyber this of below first, like a some for stockpiling expectations, couple some at hand on that you're sell thank just of a moving probably CapEx - given strong of of is to seems sale. vehicles. one increased or period slightly to considering - that planning seasonally as a sell question - second And for do there those been has efficiency kind push to this industry questions, considering strong some or strategy is have What's seems to still three that two that for you're Yes, seems value data, the used

Ernest Garcia

on comment start and you CapEx. Cyber can I'll So Monday Mark

- work, to term managing growth spread for over so if Monday think think customers are there. into We think GPU that XX there. six sure I smart lots your expecting see our cars the months. have I I right, of to for make want or now So that's our on 'XX want heading next we framework We is We're right. we're Cyber about optimizing towards to to [indiscernible]

where our a value the Monday think we of in it's per kind the that I year promotion do we onetime cements that is find can brand. that Cyber

outside careful because we that been associated minds promotion. be transparent than from heavily in of an with through in bang away our so able think tell over transactions where drum like that to less the time really this and to and event this promotions consumers' very automotive feel promotions simple general able we're we have we about we I think one kind stay we're that we're to retailer story and of online

it. quarters. do in to - is of as going of think would I couple the something a out time to and going That's so of to building accordingly And effort next period longer it we're a we're playing brand continue

Mark Jenkins

On changed. CapEx CapEx expectations not for our have

I think quarter-to-quarter. be some there can fluctuations

QX had CapEx but overall and of - things initial some expectations can the changed. like has IRC INDY For for outlay example, not our we cause purchase in large for so a fluctuations, our that

Sameet Sinha

If markets adopt market can continue staying of sneak you're the in you that in the plan to that to to target? you a question, so open one XXX staying close new head level, shareholder I existing markets indicating footprint, of that you towards to even is as the strategy you're kind if close

Mark Jenkins

of think continue So markets, it will I expansion markets launch markets. we network be I a network think mix as density to and

of few network after couple I markets think coast-to-coast a forward now lot and markets toward major markets overtime. be expansion large marching look left. expanded as there largely so a are density still as we continued have will we're expansion market a But network we of there openings network

Sameet Sinha

you. Great, thank

Operator

ahead. go with W. Sebastian our Baird. Robert question Please from comes And next Collin

Unidentified Analyst

it's on Colin. Hi, Ben for

before. same that you average - there First, I the or the markets And follow the update performing up rolled it say penetration markets would rates across vintage provided are that have have that. be the to know at guys out accurate same out XXXX. to you in markets stage in XXXX rolled of then provide there at any I'll better Is after

Mark Jenkins

consistent shareholder by between, see consistent prepared haven't the we way and patterns that the data what but in unfolding. to just fourth sourced and we we quarter filed those after letters, in remarks that said we are continue in uptick Yeah, curves we've

those markets called older faster ramping nothing markets of newer and than past we significantly patterns different there. the are in One that out generally

Unidentified Analyst

been headwinds with scaling scaling the and last expect Go of from kind then you on end the that of then and over the quarter some on high couple that that of and commenting or range Philadelphia lumped the GPU Indy guys in more is be the call facilities. as fourth have secondly it impact GPU, mentioned quarter you potential of that we Should a Dallas to the well?

Mark Jenkins

way talked discussed. are move to There to back and still that's I we those think facilities it be the start thinking as are going some running about and last that degree up potential as is we half a it as impact in two into we getting about a we're we're call where production very of headwind first there but that the selection toward into up on be be there. ramp 'XX increase retails these IRC's, we the making we're feeling way good half overall are our looking guidance, prepared GPU and built about sure to scaling to we're and need we

Unidentified Analyst

guys. Thanks it. Got

Operator

Please from ahead. Our Bank with Nat Merrill go Schindler [Operator comes of Instructions] next that Lynch. question America

Nat Schindler

it help or on look has on - using me that Fico you've your since as Ally trended now to guys. loan since of of your question. call to are for as of well Ally. and Can my based on of calculations. the Hi, people buyers who type taking IPO out than you than and my others can loans Also taking you're site your what massively if average that more Thanks - is it doubled. so selling you selling score doubled what's financing you now Yeah. you other longer Are like actually - all doesn't and how

Ernest Garcia

Yeah.

So Fico first of out all question there.

Our like lot broader market. Fico to look a car the used continues

many been call our to transaction. nothing time financial they're then changes registration if say and Ally So refinancing would providing the markets buying I leading structural we'll it very of works kind retailers of car probably to able the in of develop other also buyers buyers of over concept out more a in to and those are is some is and very somewhat retailers continue to to the time, several similar people or is long that's that loans refinance of but to quarters next our way. be look with stable just buying about a other we're we over in, Fico and more been we've there. biggest financing that to talking we any Ally those of will the by continue similar that back you partner we've at got you bring used remains believe across sales general, distribution kind and

Nat Schindler

you Great, thank

Ernest Garcia

you. Thank

Operator

Gary with Barrington question Prestopino And go Please Research. from comes the next ahead.

Gary Prestopino

Hi, good from the that that. evening. that to car profile something Hey, retailing mileage could be you consumers. maybe they just talk like you're I a things like about tend and little older mean, the of cars, bit

Mark Jenkins

cars that that we're of from retail. we acquiring then terms customers In

Gary Prestopino

Right, yes.

Mark Jenkins

through tend industry. little understanding over our Then bit cars a and think Yeah, do - auction that's least mileage. source be I And so higher they little our in a to average that typical main at the bit fairly channel. fairly on we is that's

Ernest Garcia

Yeah auction another GPU to more way would and give it's a to us and touch I for just for experience, to the enormous them customers get that's that I think our obviously of car, to kind one average that for weak it's so –what in than sell growth sight another buy faster we these on are inventory on total on relative our the they to this unique and are more customers of inventory example from benefit business. opportunity, opportunity of kind fairly it's us add way resource an do our hidden cars think so in great also rest but we think that's access a of because of

Gary Prestopino

Thank you. Okay.

Operator

today last ahead. Josey with Ron Please go from question And comes JMP Securities.

Ron Josey

it's here, then Propel us just some give given campaign Ernie, understand understandable could that's I or can but automating are quick talk manual question. you interesting. I'm us and on hitting more you the days the that to real a the you to relatively a early internet and already, you still last you. days, the quarter taking still early but talked understand we are where very and about you this you're automation? just the of sure more maybe content that's Thank a lot if had doing trying wanted about but of just and about progress for really I apologize processes business, give if to thanks think what through Great, in the can something lot talked little

Ernest Garcia

hard would I question, Sure. very a early say. That's

framework always been which about expenses. as of leverage three think to of financial the experience then kind we customer the and is has prioritization kind basically leverage part goals, GPU unit and one operating past operating for think I of unique first our I then operating our

quarters So I of the many last financial. other of kind been is We started it several think always the parts and attention has area that investment think our that not lowest over and invest has motivation I so as as gotten of to there partially much more priority business. there

I think percentage in than it's than big units look the that absolute terms at is we looking and to just be kind about more getting in as growth it more scalable terms of more forward. business

really break think are be helps going Disney's say I what the I that be we're obviously very organize inning in that that could solutions about that and more company automate so I fits theme. excited a we're more about present to that associated into fun. a lot with is we wait want internet is, very and us say general data to would them there in in our because enormous collaboration to are have with the to that can't is don't onsite, watching doing my excited is a very great to and that interesting quantify also to it our kids itself it that's up show excited I I it, and ways roguish movie ways so also early would help Propel of but So would things self-service and customers I that on technology

we're is doing hopefully a again idea our future. that something and and to for want closely that marketing whatsoever in just movement need not also of a first be to it have We'll but this this pretty excited foray a do watching big to we're that more into where general more it We potentially broader people we in so way watch in marketing think fanatic expect. there's and that what we content is kind very about built and no be us into

Ron Josey

it, thank you. Got

Ernest Garcia

you. Thank

Operator

from actually final have Please Basham do Seth And we go - ahead. question today Securities. Wedbush one

Seth Basham

your cost guidance? negative here much. guidance acquisition EBITDA issue implied negative the presume ITDA decline changing cost; is driving $X are that extra quarter, lot call in that buckets the cost the million is the other what million a question I you My biggest Thanks - to afternoon. the in us million midpoint for for what other fourth a went your large $XXX you not for GPU's is around with the the good and elaborate EB if from could $XX costs XXXX at

Mark Jenkins

Seth. Sure,

there's think of number to call things a there. I out

previous That down and that of had also and about boils in the EBITDA $X that a and then we difference $X up Propel, expense million from So of kind stock previous million based $X EBITDA guidance $XX stock to and that our engineering smattering we're was Ernie network million expense about technology in also versus I a of for increased versus run we on things things. $X at a mentioned previous million other had million another compensation think the expectations price, range of handful range. basically midpoint was building current about so our and versus hiring

And our obviously the major things doing those things since looking we out I XXXX. so be were intelligent looking last call. think And feel I obviously think toward call to forward all those like things to are

markets, about year-over-year I XXX think of we've basis this overall EBITDA to improvement. think EBITDA higher doubling progress guidance losses for we're and and the to from looking I had we obviously And good looking investing next of and long-term XXXX meaningfully XXXX that's the think we're made the we we're I see improvement EBITDA amount the to year progress levering showing as substantial feel all so 'XX really while points that. our SG&A declining about about feeling to XXXX still doing great leverage the all we're while we of improvement think going year feeling great year and midpoint really in I actually margin 'XX about for technology at making than from of continued the

Ernest Garcia

we three softer coming of that, look would we all had we your investing QX implied the generally we're last have we that years. we depreciation that and lever promotion. all year. was useful next sure higher year and for that a previous years one our the and it's de-levered this because these in from in of only in want period to GPU, a across back of year it's bit see previous to to Generally context We think year, we again factors speaking rates and that add if Cyber preparation guidance that for I little half last We've the I'll did to next year. two in make QX sales in preparing seasonal industry, first levered Monday the you while

as saw little headed that scale happen and with how a how year make the and we difficult the that weird drove then prepare to of for millions of some through going scale not to the bit vision given a we quarter and think course like choices made we this impacted into compensation handful we to about next to acquisition decision then what so based felt stock I and that a and dollars we next change that's was and we there in year expect have guide.

Seth Basham

then from Got it, follow quarter as fee also second that the the gains the flat up other was second refinancing factors other quarter? $X GPU impacting other the per helpful penetration earned million my with you this and context than any rate on is other and unit in financing or What's year-over-year this that going more change on well. GPU $XXX extra quarter quarter, GPU limited there

Mark Jenkins

finance the and undertaken modernization initiatives other the small bit interest premium has started puts and in those quarter. to the that we've or be actually positive made fee a will flat finance believe of think impact that gains of vehicle I of roughly force service kind I gains then was of rates some third see some some to you And after there, going contracts forward. adjusting in some the attachment we've an there's for and of Yeah, sequentially on takes which GPU little said a continue rise

Ernest Garcia

on I I again, make it's point And make to is, last I Seth, want I prepared to is heard. but said jump do that sure here that to important The remarks, in I'm going apologize. top think my

quarter data being this automotive above scales I many a think interesting retailers our used is GPU really point. of SG&A the

our run traditional GPU long that that to lots and is current be believe we of believe over lower meaningfully and still obviously going a retailers. implications think carries automotive we the there's cost that structure lot to our of upside I than other

volumes and thing think a we're great different items. we going So we we path can get to staff that and on to for line are that's

Seth Basham

appreciate, I thank much. very you

Operator

question-and-answer to And for to I turn session. conference management the our will back would this like remarks. conclude closing any

Ernest Garcia

be Thank Analyst did in us. at front last should speaking investors look Day. you analysts quarter. much. very have still Thank great very and of a probably this you of a everyone quarter We Carvana, to job lot team great we much. It We fun day. at a to a team you and work Thanks forward then

Operator

today's now presentation. concluded. The conference for is attending you Thank

disconnect. You now may

Carvana (CVNA) 8 Nov 182018 Q3 Earnings call transcript