Carvana (CVNA) 27 Feb 202019 Q4 Earnings call transcript

Company Profile

Participants

Mike Levin	VP, IR
Ernie Garcia	President, CEO, and Chairman
Mark Jenkins	CFO
Zack Fadem	Wells Fargo
Andrew Boone	JMP Securities
Rajat Gupta	JPMorgan
Seth Basham	Wedbush Securities
Chris Bottiglieri	Wolfe Research
Rick Nelson	Stephens
Michael Montani	Evercore ISI
Nick Jones	Citi
Brian Nagel	Oppenheimer
Armintas Sinkevicius	Morgan Stanley
Nat Schindler	Bank of America Merrill Lynch
Brad Erickson	Needham and Company
Lee Krowl	B. Riley FBR

Call transcript

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Operator

Good day and welcome to the Carvana Fourth Quarter 2019 Earnings Conference Call. All participants will be in a listen-only. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Mike Levin, Vice President of Investor Relations. ahead. go Please

Mike Levin

call Good website for Sean. the full and and shareholder of also that gentlemen XXXX the is webcast Thank Relations letter investors.carvana.com. Investor us afternoon, website. The on IR you section this note Please joining conference company's and on be Carvana's thank simultaneously earnings on corporate you, the call. ladies will at fourth posted year quarter quarter fourth

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

materially before like risks found market actual differ But results Factors the Carvana's forward-looking to you the uncertainties and that discussed including, to of we cause Detailed the the here. laws, results involve be to, of within limited to opportunities contains section cause discussion Carvana's that and recent remind may but start, can I not securities material in federal future actual would that the financial statements statements Form from meaning those XX-K. that factors following results most Risk of forward-looking differ from discussion

no result The to them, otherwise. forward-looking in this assumes current expectations or conference update risks of a as new of statements developments whether and Carvana are as based revise today call and on obligation or

otherwise on comparisons Unless today's are all on call, noted, a year-over-year basis.

gross on basis. website. milestone results the by found limited will letter Our Please can copy call XXX,XXX measures, EBITDA metrics our measures on to on Relations ex-Gift mentioned to, Investor not for can profit, exclude Reconciliations non-GAAP today our that shareholder which non-GAAP commentary impact between but be metrics and reported include a the be gift today, today issued are including, GAAP ex-Gift our employees. SG&A the in of note financial an found that all and us our of

to said, I'd now that over like Ernie Garcia. turn Ernie? call And the with to

Ernie Garcia

appreciate with gains We metrics. lively else joining reading it. operational another Carvana financial that key the for factors. all of was Mike call. the broad-based risk thanks extremely in for for XXXX Thanks and Thanks and everyone year incredible

a when In and over our have consistency Please It's cohort we built The charts. tell of to is extreme of the key moment long look these take shareholder are published best period model the buying sustained story our only business a The graphs. selling that these growth time. a better over of or car. because experience we magnitude compelling. available delivers again letter, a metrics customer they once results possible and updated story a consistently

of a billion XXXX and was $X shy to sixth our of in customer delivered XXX,XXX over straight with year revenue. just triple-digit growth our revenue cars

we year, than During cars we combined. in our history delivered the prior to entire had more customers our

this means growth. noteworthy. that the organic it At another percentage just is we But this This the growth growth an that automotive isn't year any rate incremental ever we expect U.S. sold year in That XX,XXX most retailer of the is cars of growth market-leading scale, year.

sixth we was metric. increased year, of economics continue by we This Even to unit of up it seventh. GPU model remarkably, powerful in In XXXX, that expect The show in straight our inherent $XXX $XXX. to improvement our our notch more consistently. over year

march. to longer have XX from business and business view, we continue our Taking We very the year, to to buying achieving of We of also XX% improving years. managing long-term This cost simultaneously the nearly a levered our this way customers. points saw retail over our margin in another in now with in we last growth achieved X%, the unit year support growth model. expect XXX% lighting strong that leverage while EBITDA cars financial four

cut area of the was day, access our area of an dramatically that focus In unit from first improve and but one inventory to plans it our clearer We into Analyst important system, buying our would from for margin bringing we site. many hosted discussion of goals costs that XXXX, much knew our On long-term with Day. we our topics, November cars covered customers.

knew cars that foundation new which building All had would on We a love transaction as strong assets deliver love we're we to to a are much to build perform the assets the reverse as same customers believe we from the in very us. way, they of. top buying cars to customers whole necessary

know how significant only had how make customers cars many just from time, or customers. progress. from XX% sold didn't our cars the of was we the purchased could other At take it we to we What long us buy would been

numbers Looking the out space to quality the our of to in into and an best-in-class long-term execute, at put account in XX% our of and offering our own taking customers. the goal we our our ability of of sell cars belief XX% from companies we sourcing ambitious the

quarters four area the cars out, power goals we brand, the the customers. building. the any fundamental remarkable putting the sourced sold of our after of XX% In the from is This we in of It are any potentially year. we've the we the to quarter, in made those technology, just business most and infrastructure fourth progress speaks

years made us we've goals. simultaneously expanding current growth so And that costs just of are to in short years of We ago. while achieve long-term launched to and our building lot our to In there time, seven very Carvana well many foundations future. while quickly, sets a short-term making the the necessary growth made support that up and business significant with enable we've associated the progress it while investments it

to those our in and to what better together. constantly deliver working for for improving This Thanks so customers. solutions. believing for the their everything better people are experiences on so Thank you pour people. we do, and to all you building of Thanks that long-term our hard we Thank focus energy much progress the bring result customers, us helping to of we incredible build our caring. perspective and is the

for the we went is XX,XXX public others machine about distance. from Today, choose The ago. building from when markets X,XXX population expect from. a soon and up up we as U.S. have next-day markets one-fifth with three-quarters we is for see the three to easier This population to about be from years This end as XX of of XXX about and By cars QX to just customers our is serving year, we're delivery. of becoming the XXXX. in the

is supply that economic from or result with infrastructure in invested selection anywhere. technology powers car. built transaction a a and transparent buy we're our those buying or able and our customers investing Because transaction, in to and e-commerce selling be of integrated to and the time the This We've to what by first-party redouble chain we've everywhere nationwide best supply them the vertically the true. available chain culture available take also benefits and culture on the offering most a sell car their most a simplest and supporting to fun advantages the when fundamental a experience best

largest, on cars. to are profitable per to million-plus selling becoming buy X to changing retailer mission way the our We automotive people most well the of and achieve way cars our year

We we path believe company too we are high, While not far that. becoming do the yet, a a and far we're arbiters are standards of great early, too not is are on company. we the to ultimate believe our do great

powered path. we bumps convictions this companies to risks fight to day inevitably will point. on The to have build the stay few to are steadfast something great scrap chance many undoubtedly way, be And while along the and every the we in that will remain, this us chance there get and and

still We just the right have We're right motivated, and started. and getting Mark? we're plan ambitious, energized, the we're people. we're

Mark Jenkins

totaled thank was billion, of revenue. totaled today. an of to completed XX%. increase an our in Thanks revenue Retail $X.X triple-digit growth growth. units units billion unit sold increase and totaled sixth all We're XX,XXX and XXX% year an in QX, Ernie quarter retail joining QX, XX%. revenue an Revenue and In for strong you we of XX%. us of report XXX,XXX, sales XXXX, increase retail increase both of of in Total pleased sold $X.XX another consecutive

was XXXX in rapid by market cohorts. driven growth growth exceptional our Our in

cohorts grew existing Our by XX%.

oldest oldest XX%. cohorts, four years old, and more each by X of grew grew our cohort XX%, Our by than Atlanta

markets was key broad-based, Our many crossing growth cohort milestones. with

experiences were our Atlanta XX, As These inventory X.X%, age feedback trends customer a are markets faster demonstration ramping nationwide. selection surpassed seven, great positive of with in and penetration, XX% than driving national and and X%, at awareness, QX, powerful the IRC the and footprint, same two markets brand of gains and respectively. of X% expanded model our market

increased by to GPU $XXX Total $X,XXX. in XXXX

and an of Our in broad wholesale. $XX improvement GPU X.X%, negative and also X.X% based, in in both gains SG&A ancillary CPU in leverage. margin was EBITDA $XXX $XXX were reflecting reflecting XXXX, $XX products finance, gains increases in of in retail,

from the XXXX When acquired with buying XXXX, brought transacted The purchases, XXX,XXX in XXXX customers. customers customers, of customers, adjustments an standalone was with sold growth cars buying XXX%. combining we year. in XXX%. increase exponential units from In of from for vehicles we over exceptional an we total increase vehicle year an cars saw retail XXX,XXX many throughout

buying and customers increase volume. impacting the our retail last-mile adjustments network, the In approaches cars QX, staffing, In to unit from QX, by necessitated pricing, delivery our buying to cars outsized customers, in growth and on diversity rapid marketing, from brought bidding, to inventory in learning led points, pinch reconditioning.

of these to opportunity were costs compared led front the to the the of costs, While magnitude in change sell these way adjustments small some us enormous transitional cars. people to

selection guidance into also Buying by our cars. our of customer-sourced which have website. to the to in significant The customers increase XXXX. price to average vehicles, XX%, increased we cars net From revenue for the incorporated from nearly was of driven of impact reduction and benefit selling QX by the our increasing continue of expect QX, on available a this inventory diversity brought customers in diversity our cars

total opened we year-end to bringing new our XXXX, XXX. XX In markets,

and vending an year, new markets of we one markets XX machine total reach this far to So, a and machines. XXX have more additional opened vending XX

from of With the XXXX. now these population, XX% we XX% end new U.S. serve the at up of openings, market

XX% toward U.S. the and of long-term our continue in goal our the will to to expand We of on XXXX year way population, to XX% XX%. expect end serving

which we also Cleveland opened vehicle North center Nashville, progress and and our Carolina, construction inspection our production reconditioning centers eighth and near this made sixth and Charlotte, reconditioning added near significant week. scaling We XXXX, seventh In capacity. on inspected began our

with is to at full more production utilization. XXX,XXX capacity of units than XXXX goal end annual Our

healthy X units, and We plan to continue focused goal achieving on long-term squarely million-plus a IRCs our are to growth. to our of future maintain pipeline of we support

We was for gains. additional recognizing our further outstanding auto quarter XXXX securitization finance expanding in more our three base and successfully the first and an first securitizations, introduced executed platform. investor year loan our

finance full to compared the we GPU $XXX year $XXX XXXX, in to For $XXX XXXX. increased by

make to plan two continued in expect We in our XXXX. to and to single program about transition gains are from excited in a Beginning time. program securitization we finance XXXX, our progress over shelf a shelf

a that time. Our step liquidity, cost transition our valuable for over more will of believe to and greater we unlock investor forward securitization structures shelves funds base, program an is capital expanded lower efficient two

year in the with held of resources additional securities sheet. real balance an ended million estate our We $XXX million $XX liquidity committed on and and

the up an of loans held also prior two to of finance sell in the plan we with part transition As a shelf end new million incremental peer revolving capacity we and to securitizations. $X we to program, QX, at closed year loans of two billion that the $XXX to to facilities securitization

units year expect retail of As improved revenue, to significant increased and growth GPU we look another in forward margin. and we EBITDA XXXX,

for to units XXX,XXX XXX,XXX sold increase in for is the year, from outlook retail an Our XXX,XXX units XXXX.

from billion outlook increase an billion is total XXXX. $X.X $X.X to Our in $X.XX billion, revenue for

X,XXX X.X% GPU X,XXX, to and parts all leverage. across gains to We SG&A increase to margin expect minus reflecting to GPU and gains transaction; EBITDA minus of X.X%, reflecting improve the to to in

we of company by SG&A progress ago, reduced public made per aspects have more Since large and tremendous revenue nearly are expense more becoming than car per $X,XXX, customer increased progress times, and our by XX growing all business. exceptional offering across a building excited experiences goals of Since than sold have three the grown buying XXXX, we made toward profit years while We've rapidly significant gross by about cars a all from customers. XXXX. car financial $X,XXX, providing achieving sold and

Thank your questions. We'll take you time. for now

Operator

[Operator begin the session. will now Instructions] We question-and-answer

will Fadem question Zack with Fargo. come Our Wells first from

Zach Fadem

other in a through Hey broader in then guide? total more what if us unit detail the growth assumptions guys. of could And walk And the to sales and the explain bit you outpace growth you are expect wholesale unit growth? Curious in implications maybe XXXX? some for little why

Ernie Garcia

Sure.

that coming helpful growth decompose a out markets So, to today. from we're pleased with charts I again be the year, growth put is also themselves very we coming seeing the where this hold from as you we're obviously growth We which across think growing try the business and growing. in cohort

think good that's about our really, well-founded comfortable with. that assumptions feel those assumptions. I So, We being very driving we what's really feel

how to exactly customers. relates understand to definitely we in from we're leave We diversity it XX% really bit relative to by want the I we're as increase as from cars customers then trying who buy revenue that's We've of the think able to a that QX. And cars a grew significant from more and to migrate. diversity about seen going moving last -- ASP room QX in to that more to buy year, little

to as continues a of And anyway is way the since guide. inventory. widening prudent and want speaking, to economic bit there. little generally GPU, of room we for model thought of And our units we a kind major that leave we're to guiding a that's But was evolve, of that driver

Zach Fadem

there's explain Curious to Okay, a in QX a got I then impact letter, had units one to it. And units. that result? little as impact shift shelf. whether a the And model a detail? GPU to you an in on this in more that you two if to said shareholder believe from -- could XXXX be shelf the an also how going securitization

Ernie Garcia

Sure.

we premium would toward basically, is, that -- two would a loans, self-securitization impact we So, premium in It's we holding had transition in would believe year. revenue GPU, at over there. loans point believe, by where have clarify in revenue we was And comes from sold the our as GPU. Instead, we next impacted impacted earned I these will that have one XXXX. QX earn we --

impact enact from on And primary not transition and that retail GPU that sold. that's units the so I think would revenue

Zach Fadem

time Got it. Appreciate the guys.

Ernie Garcia

Thank you.

Operator

Securities. Our will Please go next Ron come ahead. question from with Josey JMP

Andrew Boone

on for for taking this questions. our Andrew Hi, Boone is Ron. Thanks

You as from? the in? is Is have Or talk sites much. you in cars secondarily, guys coming having highlighted as as then any well And as at all Can think the about benefits just XX% the challenges where from operational side? Thank in XX,XXX more trade that there is the you of selection. now And DSO? auction so just the site. that change you that greater of well I

Ernie Garcia

Sure.

on we So, do our have cars now website. XX,XXX

that's available that's all that think powered our about unique cars all chain of logistics pretty customers that I business our by model something network our supply are everywhere. of connects to is markets together those

major So, in that's a of positive feedback source the model.

continue to selection. larger more can inventories those justify we larger in market, markets we every and within customers give and add markets, grow more As and inventories

by the But a out car a that's the about size from in inventory, driven the us many think buying We driven is QX also cars that's the simultaneously. of also talk has trade-ins we diversity cars tremendous customer When then from both from model. by increase to development even more from right, of QX, XX% Those consumers. the grown. come importantly, which it's and buying do buying not most

us of there's step that just or different are trading mechanisms If the and stand you dealers the buying consumers there's many, playing are all transport a the consumers all sit cars. cars, one two And take just for in it's that trading that between finance what say trading whether consumers It's back entire companies, between and the companies, companies role, these this cars that all many market consumers another. with is companies about cars. kind

cost the can offering with valuable better system, our offering, simplified, transparent out we to can And give the more we value the a the the customers to of share becomes, them. that more more the platform we we can cut more more collapse, that's in can

evolution so we're of we that, with. extremely business think And that's huge huge, a that the happy

Andrew Boone

you. All right. Thank

Operator

Our from go with next will ahead. come Gupta Please question Rajat JPMorgan.

Rajat Gupta

Hey questions good here. my for evening. taking Thanks

leverage. could spend SG&A that shareholder of you spending on you? of about if sourcing, this question first sense the areas a more we incremental us my behind ask you investments support expect is to wanted give increased Or letter XXXX? in to $XX majority Just any million in should the now talked The that retail in

other Thanks. it bucket sourcing have retail -- again, initiative, a to follow-up. a be grow the to And relatedly, XXXX this it the by we that lever in And all. that cost of just continues will SG&A looks And within driven like is should line, beyond? but how part that expect likely I and

Mark Jenkins

Sure.

So, the from let with XXXX. incremental in buying start customers $XX SG&A million me in investment cars

advertising. well remainder to yielded think to majority obviously, The building we adding as executing the -- this That our that building for So, actually expenses technology, was people our those good invested related transactions. return. in the was of a as very expenses, business

growth We hit cars this substantial. of QX. been as excited very The retail of range has middle business the in for to were in total source long-term our units a percent customer

So, off. we are investments believe those paying

about forward to we run. to We for plan We the reflected long buying that, year, guidance certainly buying are a our it great is the the As in really related from the cars customers next believe in the to thing I think product, from think XXXX. continue that for to us look expenses customers. that's way advertising cars

appropriately yes, building then in to -- making that technology, needs the invest business. other we'll staffed other And we're of continue areas, and sure that

for all And that's XXXX. our incorporated guidance so in

Ernie Garcia

Yes. jump as then in I'll well. And

the other also call I think transitional letter, it's it shareholder worth -- costs. we

well quarter XXXX role and kind play in those well. likely the of you a outlining for it's a they think as role because worth as in I they played

changing time expenses any that spoke in to well. you I try quickly, just million. cost to quickly to through direct a the to think as finer ways flow have Mark those. put But $XX going a other that's point on other business there's So But this do be of

our this out there's cars they points because customers. think always so emerge in prioritization crowded teams, I from different there's costs, opportunity year, much there's bandwidth, sales investing management pinch tech of business that buying of this there's we're

supply I is adjustments another area learning the just chain. then throughout think And in

inspection item the about a indirectly. diversity; can't increase point what up that those they spoken we've means to drives that kind to cars inventory, way exactly So, show definitely haven't we optimize And It we line you But to of bidding through our cars expenses are. the other the we for that on that run it that seen before. have means we're have center.

don't through a need of experience being much Maybe have means those as of center. customers. we inspection sort we we price is of to marketing mix rebalancing. those cars a sell bit little cars It the there as also then And to

make do will think in XXXX, I we're is to our costs roll largely out despite sure it up guidance. we year, that SG&A in We to proud we and all of this reasonable all is want this did bought associated from point from scratch. -- XXX,XXX think leverage and building I here So, showed of it's with QX, then that customers this year. QX business, And absorbing I cars me, in I also think something of, show pretty into those

revenue. That's added. Those we that incremental they a much contribute to show much, don't up of very don't transactions lot transactions

by or either leverage So, can investments of largely dividing through be kinds of kind hidden of revenue, little by bit. retail a those dividing traditional metrics units

at pleased we're made we with, think I extremely it looks something we better first think year progress even this is so glance. like the than it's and And

Mark Jenkins

question I'll other SG&A. on then And

going about largely seeing, increase we SG&A by rest buying went We cars last more QX from year. to to that saw that growth just QX driven we're of from increase, The that transaction investment. seasonal this by half attribute QX. up of customers. other $XXX QX is sequentially about Roughly $XX an to So, rapid from

to other bucket, then in I headcount customers. We're and of corporate of there's discussed. expenses. cars cars in overhead think there's there's that all three our support transaction reasons from technology for including components investing Buying customers expanding technology, We're there's buying that impacts that expenses, SG&A those we've business. occupancy corporate from

that also expenses there's as go some well. with business along additional supporting then we're And -- that transaction

total expenses this on as have expected obviously, an progress was unit basis think expect very look building going benefits at out, Ernie first where offering retail we're that's to business per to time, you the I -- impact really the for that on significant a time. when we're those up in unit to space we laying our per business long deliver the excited lever over run. And to the in retail all about in numbers that this and

Rajat Gupta

Understood.

the come be XXX guidance, finance? could GPU from and possible the X,XXX increase that? retail of on Any it all. how to XXX out, versus to follow-up Is parse much pretty GPU a year-over-year. like will that Thanks. X,XXX to Just sense on That substantial

Mark Jenkins

Sure.

past to gains parts come years, transaction. similar all we to across So, the expect of

GPU of X,XXX transaction, in progress year in I products. pattern think been from to be is we've retail, across to We expect the XXXX up went that that's been the a that all March our the before today, public, X,XXX XXXX. parts making ancillary would case we again in finance, wholesale,

Rajat Gupta

luck. Got questions and good taking it, my great. for Thanks

Mark Jenkins

you. Thank

Operator

next Basham Our from ahead. go will Please with question come Wedbush. Seth

Seth Basham

lot I points from Thanks to want follow-up the just a buying on good around afternoon. customers. cars and

guys You this million $XX year. an in invest SG&A incremental

and in You selling buying XXX,XXX cars bought year. a the prior wholesale XX,XXX versus cars

customers. you're If how it's then earning less any can were incremental So, than it? bought don't ROI is those an either make I profit that incremental cars? XX,XXX on on What you about $XXX, from the cars see probably

Ernie Garcia

place the Well, outlined. a just very is that think start; to Sure. numbers I Mark a good using high level

hard $XX costs definitely spent smarter this think costs. about we're as. think, this we But cost trying indirect the about of to in said well. building million is costs probably business you as think so as how rolls do the if hard looking at I there's part I forward, And the business,

by of car. expense that $XXX XXX,XXX implies we cars If divide take that that and per bought, roughly you around

think you about it of can think that. I So, like kind

$XXX, a and we the at give look on you our sold year, a contribution customer take. at If unit bought that average around from made full or wholesale auction, we

of math a at you I can right all it now. where the so you high see level, there, kind think is do can And

kind does think a things variable those marketing. question positively expect the basically is, over pretty largest sum unit the expect time? go investments of And made of costs hard those lever move And to the well to The there's then were very, the where definitely quickly. lever really drop of all offering per we past One, that lot in we expenses them expenses we the future. side, would I The as to small, costs in very seen pretty quickly we've well. well on as to and of retail but we lever in remainder the are very consumers, This expect the room for those there.

side, out On a progress see of kind period, at progress units a zoom the margin if you wholesale look on multiyear of you'll steady made over our there. and we've march the

think steadily. up we to to that that expect continue march I

have of number reference. $X,XXX the best-in-class operators Some about a frame that around of as

then expect gains as units in we And obviously significant well.

the So, very, we results view we're the I think -- are of of across lot the proud year and there's this there. extremely We or that think them. potential very had board, we potential a exciting, being

that I to contribute in business are try obviously tough most largely gives fundamental expect business. it but positively think it's the source And very year, those diverse think an cars the benefit I expectation, access scalable, positively to deepest, us the consumers' grow most very we of it that time. inventory that hands. expectation of It over to exists, kind it enormous Xx from scratch contribute think, to and first to to have is in a to we the by build

the we're math out. and roughly And really excited so about that, that's how works

Seth Basham

corner you the do turn that Ernie, so to than from your from profit are less making expect incremental customers? expenses buying you're cars the

Ernie Garcia

the account I the for sum taking our business into guidance. in are results of think our

point much more asking. a would you're frame you And so realize I and that I question that's general the than there,

XX% think four I being stay outlined it's us a smart level long-term specificity at of ago, this quarters that XX%. to is our business for goal we because to that of

diversity increase And really gave then just in that other up inventory That in quarters, us a the quarters. to offered There's We seen lot jumped staff two from you how of is XX%. happened there. we fast. the in by to happening cars not last XX% learning bid four and we past, properly. seeing many we that those to have change of We're copies up we're really, consumers

should those If certain cars, right, you in you up you up don't and have places, you you lose others. margin won, bid conversion give give

got expenses show they different the system, As places, up. pull-through you've these all

would So, progress, of tough. rapidly, see we of leverage timing but I going you make we're that's we're continue learning to and to marketing, expect say, to to very trying when precise kind in give the

I the offering. We've strong. lot feel we've The very far to think momentum. our clear good feel are we we've long-term really so a very of seen about path a results We got like got model.

of relates we're we'll And to that. it business going the so the I And to bids. as think point entirety then to the to results, just point the for guidance

Seth Basham

Very you. exciting. Fair Thank and dynamic enough.

Ernie Garcia

Thank you.

Operator

Wolfe with ahead. Bottiglieri Chris Research. from Please come will go question next Our

Chris Bottiglieri

for taking the Hey question. Thanks guys.

pretty the maybe you impact costs? increased that you QX on First at unit would that commensurate XXXX, do were there retail whether expected ratio. would When QX, the on based similar Or you to have near-term the have have one -- mitigate you lower look upside in frame some like acquisition prolific GPU think versus the is your on expected? the wholesale in you trading the ratio retail some trade said GPU inefficiencies to of profit that gross road the that per or QX you

Ernie Garcia

can I one. hit Right, that

So, cars customers. very for we quarter certainly buying from a strong had

gross year-over-year. of nice bought strength cars year-over-year driver big incremental was profit cars than from XXXX. up $XXX was that from on more for I customers of QX $X,XXX had buying think QX. we're It increase and a A in at customers. We

from increased but also back customers the even just the growth cars rapid of in ratio And significantly, obviously, not year-over-year, total has the business. only quarter-over-quarter, given to sales

the GPU was in that driver certainly retail strength so key dynamics some And in QX. other a there's

units this year. Monday they smaller or past were a QX the year were last units promotion For in fraction year example, -- of total Cyber than past

periods, comparing that GPU retail so has being positive impact things on the And when other two a equal.

QX XXXX, in and the So, from was impact cars customers. strength buying in there GPU definitely some biggest

Chris Bottiglieri

Got you. That's related. And then some helpful.

done the willing seems good and a some -- that. from been, There's or obviously on to dealers site of by was it your other fulfilled selection willing partner job trade-ins extent to expanding you're guess, having website testing like on inventory the comment trade-ins. You've you're I those

does are Thank of this? like on and are the forward if dealers trade-offs of And experience? your puts and unit how the kind that level, terms what with to the High impact go website? the economics you. allowing then consumer in takes from trade-offs decide what Like, you it do

Ernie Garcia

Sure. that one. I'll try to answer

would So, what we any got to in pretty that we've things. And of probably have say, other working on different that, testing working time. at time, point at Carvana; that X kinds more got any we're teams at many point than in technology on we're I projects products big different all X we've

working I impact that been them on results So, big that has going kind our to the products date think, a they're we're to way are expect in speaking, generally reported. our dive we of policy we've unless results just going that a were or unless to not into material that to specific the going background, forward, in contributor

that, we out in those really And test things always seen out all well, work and working we on. many the year we those and the half there's things like like great. they think of a I Many over roll don't we've realize and of years. and investment end So going gains of up lot finance, last a

best that we for to they feel think with to important to And get what as this, And we're innovative warrants that going hard address think I so specifics stick ways we move stuck really a different that all a we've them. our in forward can to possibly coming make we the to just in and policy, I experience most always being certainly the that are in sure past. to them addressed like working the And have will know try we're products venue up to then. the we customers we're that general as constantly like

Chris Bottiglieri

Got you. Cool. Thank sense. you. makes That

Ernie Garcia

you. Thank

Operator

Rick with go Stephens. come Our will from next question ahead. Nelson Please

Rick Nelson

are What are targeting? you days Good Where to Thanks. dive I'd like the evening. now? sale. to into you

Mark Jenkins

Sure.

of also The days same days slightly for year, was is So the QX full year-over-year. XX two in year XX were that's year-over-year year-over-year. as we where up -- average by QX, were is up we QX of sale, full actually average the slightly sale. down days

right average our that expect relative inventory range. have thought we to We're at sale we sales of on of with comfortable stable I to stay a now days today. the level think it relatively is that process and reasonable very

our site, it's a is a obviously balance trade-off the of we're stronger We that thinking which great about think key really when is to making selection striking customers than we're balancing we're been which size. GPU, available cars and on between ever nice inventory

significant So, from opportunity we're comfortable levels. current sales we're very in meaningfully to operating of bring We that in a range do long-term average see today. the down days

of having we're of model sales available opportunity our us have able pools the centralized many, think very of an time. I that in nationwide, inventory days to gives to customers attractive many to fullness make markets average

Rick Nelson

higher from old, cars XXX,XXX rates coming if older your I'm more years so return that's I miles. I'm on initiatives? different? your on cars seeing those XX your curious sourcing are website, assume Hope cars

Ernie Garcia

our second brought our before, very But buying believe, We're ASP think think mileage I the from And was to is speaking, seen buy hit customers, expensive definitely customers customers. access we is cars. diverse to inventory generally part continue website. more cars more year-over-year, all more these that, also we driving that, I similar. as that higher choose We're and And dynamic overall, me from to that for older widening. that up. cars as on is I seeing seeing cars you definitely of first. by inventory said from a think, diverse as Let our do I we've

play want And mind where keep to going open how that's to exactly we an out. so

As it times -- relates across to we've very and return consistent reviews, very, rates rates across reviews cars. return and seen

for early to I years have been four that easiest we door. hypothesis buy or side going on ago, selling have think their one cars those were delivered be to consumers a because two-year-old on, cars were five would mostly to the and seeing and

surprise online. anywhere, been willing businesses consumers were higher mileage little that time as cars a think that's we bit to of that, there growing our a I And fast part even. found buy faster pleasant maybe And one, that's are a as are older definitely

those very as we've are built, we're well technology built, for in we that them from of then and chain rates built the transaction the we've the -- work that return And where that very high-quality two, customers, seeing processes rest supply reviews the well line with population. our

offering respect So cars, give a different of it's increase because the car. our given We've types exciting. was to really our car. price really to nothing TAM broad thought wide do any is experience. independent that trying to I and think, that selection of -- overall, has that as specifics great very, of customers And we view We're with always very with

to think of more the kind always case, more that I hope would continuing evidence we be that direction. see So, that in points we're and but

Operator

Montani Our Evercore next question with come ahead. from will Please Michael go ISI.

Michael Montani

one have Thanks. I one follow-up. Great. question, then

first The was retention about question customers. of

years there. at a look Atlanta, kind you that six, like of now market operation you're in getting seven So, five,

if retained are being buy of a to customers had and just curious with And Just you follow-up. percentage you could returning then that those share any again? actually

Mark Jenkins

Sure.

So I our years accounts five That said, six we you of signals we seeing sales. very older are nice from had small or back to positive go definitely markets. ago, Atlanta think if

car cross buy the where family we of also referrals. purchases of kind a buy member and of look other we where to want we the when at of family guidepost then sales, think really data family of we what to will see repeat I the members a we thin lot don't still out so we're seeing, giving a like, I is lot one But be yet. cars, And numerical enough just think see

coming quantify to company. it's a early seven-year feel given still a early strong, and the the by enough it's to think in feet for don't want again are back experience voting I way evidence with only us resonating will that history numerically company's for consumers in I know our but we and So, across is robust that their old that be consistent we confident time,

Michael Montani

GPU. then I sense. Makes if Okay. retail And could just follow-up on the

there just bit So, we on increase the based more a thought little alone. was mix than

like to shipping know? even that or I ask, reconditioning the should that supported of So, rates depreciation have we incrementally there would going was change or kind any that, to fees was

own on GPU but their X,XXX-plus that they note, just tend obviously, you have related front, then mentioned auctions competitors to a wholesale have And well. as on some the

So, to to see I'm to actions get you to potential if that? you actually just need do your wondering open that level if would or own

Ernie Garcia

Sure.

So, time. let's take one this

the strong I GPU. the to retail think some of of walked fourth Mark through kind quarter contributors

useful, that to I on the actually from on think year-over-year basis an well things point of is our One is especially very that operational would year, a approach I sideline this went perspective.

prepared are We very going in.

great extra job did that a volume. all team the handling think I

We quarter, were growth seen coming going kind of had coming of just be to year that some knew we into we third XXXX. in that and constraints in we're of another the big off

didn't And a dollars we chose well there lean as little approach positioning were we much to XXXX. take to heading we so that marketing as We careful ourselves really in in the make had into past. more with just sure

Monday fourth our a saw we the quarter the result, that sales of a percentage promotion smaller as in got so Cyber And discount.

also think contributor worth that's a so noting. And I probably something was of that

big bit, to, a but contributor pointed think that Monday. sure the think two were I I contributors around mixed The I from and you smaller moving were then little the -- they don't Cyber line items other effects

relates a retail from Many take and partners with great and we go to buy. them we're buying it work consumers. of also of what to to our I as would our not cars, say then auctions, number And got wholesale sell is, cars we've today

tackling well best-in-class will and always margin that build before work trying taken solutions be is the that scratch. portion our from well problem also aware. to instinct transaction, think something Our have and the point $X,XXX partners monetizing are which we're that's find operators of and to great us that the I going something out and generally another for But that

Operator

go Our will next Nick come Please with question Jones Citi. from ahead.

Nick Jones

I you do after percentage the if for you've offering? can you revisit higher you of do to kind the demand I think target? guess want first, how seen go a the of different much that have view sourced mean car

how valuable running if you you it remind that -- to I piggybacking a guess auctions, on to process us that you're hit do top that then of Carvana it the go some kind quicker? off cars of already do cars maybe not opportunity there an the Is you do could the when that's you have Or I are wholesale Are car And what guess that, running customer, indexing the a the seems like data through network? checklist? channel more through -- from those that, source last other through if maybe about than question through?

Ernie Garcia

Sure.

in So, be one jump one, that the is Mark first will going maybe to second me on helpful. take let and the then

So at what four think was how at half ago, guess, high can quarters at accomplished. arrived looking a operators we I this And long-term set take, go? now best-in-class our that XX%. I had give and XX% target, to target thoughtfully by or a

think, as chain the I we because target exactly we we've what we that is I is enables felt supply quickly And that on this happy like about. we to really the good felt we experience something got prepared extremely a that I that about at think want. fact said XX% customers least, are remarks, think, that in early built my customer

that your that whole the up money, clearly got very well. a our And resonate confident on can sources value car go data it it You were resonating can is use to our to over. we your and in can and of website, we different We think all pudding you've proof would go and that we the And then there, and the intelligently. was that house I pick can bid, transaction's you can we and something well. give is

there. So we're very, very pleased

buy. have cars and room smart well, addressing and still that we clearly unit. we'll something exactly an wood chop. question lots bidding over from We to about figuring cars we time. getting to the and have grow for room we per said, definitely have of a That's in being as Seth, us In talked lot attacking That those which want margin there. we pricing There's and those ones of there earlier that to be expense smarter about out

predict the speed progress going very, to pace, just this trying is continued to I then at of hard. we're make very just think And

that's that we this years And seven think accelerate how delivering exactly definitely from benefited accelerate last of But to a built quickly. here. think probably will quickly I customers. to know degree up brand to experiences hard helped over to that the I offering it from great that it's we've the so

We're going stick in long-term the have work those optimistic think it's think about but I to to across we we our I really very, to the as about we're with is we're But make excited, how deep said. it ranges progress very board. excited still very I our do, very, how valuable very So feel platform. We We're ranges. fundamentally entire like offering. very

Mark Jenkins

that it a after XXX-point Yes. car take through on a for and another customer, we And car one retail channel. on use into to the it's That we process, sure if car. any so take it a it site car, about just photograph quality and one would a your up question typically we wholesale we'll the a the sell that reconditioning we'll car, auctions. process is from through then inspection If it's of normal through the and of put making car in our major centers that We through reconditioned wholesale bought putting it post includes car it like standards. the inspection, our wholesale

Nick Jones

the Great. taking Thank questions. for you

Ernie Garcia

you. Thank

Operator

Brian Nagel ahead. go from come will question next Oppenheimer. with Our Please

Brian Nagel

good Thanks questions. my evening. for taking Hi,

picture, ask, wanted IRCs, your we're to working So your guess, about you now. I the talked in eight letter and continued rollout the think I but first of question on bigger I

we're development does so to say, that say, at the continued your we and or showing benefits, financials, backdrop rollout? think as how about growth, just of, So should IRC against the up? substantial the financials so of this Where -- sort the factoring looking of

Mark Jenkins

volume. is the number one in think up place I it shows So, that

to I of think capacity. the scale that production is do one marching X as most challenging units, frankly, most we million and, toward we're important have things

on our ramp our capacity IRC million on focused is for first and to scale so us And path foremost X units. volume the giving this

there's driving be think that may impacts potentially other you some at. I

sort to learning as getting learning IRC launch doing get a get people to up little the over at we time more time. of level up, So take individual bit initially, of an fully some well site to tends efficient capacity by and when staffed it better as and there's are as

retail these there impacts when to those be I transitory. short-term side But GPU. can as small been have so we're somewhat reconditioning of the And some impact historically mentioned, adding IRCs, transitory and,

Brian Nagel

to year, our some next Okay, the helpful. question, we buy the models, support in response growth of help talked, -- that's in is look just questions, cars this And $XX shorter in about effort the if million, to that $XX the the second term. to we'd from investment at Mark, year number what XXXX? customers. should how million think That we

Mark Jenkins

Sure.

So, that. we given guidance haven't on specific

into think guidance year I our it the -- for incorporated is the a whole. the full as for business

was of advertising. XXXX this year this in break of million, the intend was really advertising We offering first buying that basically continue $XX this to of customers. think advertising just quarter customers started earnest of the product. We to aware from of majority in one I certainly year. making down it

building part awareness our so be of this in plan of XXXX. going offering certainly And is to

continue well, So, we'll all technology, support And this as of to advertise. We'll to of those people incorporated invest guidance. to continue in areas add business. other some to continue our that's into

and with are said to Having progress grew to that, quickly year us -- have lever. incredibly over cost the the over certainly time. these expenses levering were all expectations do, side, We time, also we happy expect of year on one, this in very

Brian Nagel

much. Thank you very

Operator

will from with Armintas Morgan Our next go ahead. question Stanley. come Sinkevicius Please

Armintas Sinkevicius

look When XX is X.XX a growth tracking over the points here at Thank Atlanta for call. so ago, at quarters. the X.XX curves, cohort basis the versus you Great. year I last X taking

plateauing are The suggest Atlanta double the points basis some-XX rate. tracking trends some markets been of growing which been search to a that would almost We've Google other has bit.

of cohorts as Anything about a seen what at you customers? well be you the as else response talk of could years taking it there, dynamics Or after we and that Atlanta you rest we thinking around from about forward? share? cars is cohort, you of there? seen and that Maybe dynamic look the have the sourcing think should the competitive Have going as how

Ernie Garcia

you at the this, would When XXXX, excited I by full XXXX think over grew We're a that you grew that's very at mean, Atlanta zoomed couple I the a in. that point, data talking important look little we're of we're year that understanding we It a I slowed full across Sure. moment, then months. broader in market so couple give about. because that a And of a board, that seeing year it's trying looking say to But year-over-year. the pretty XX% about something think bit. when put we're I a three think single And to for reasons lot first quarter, I'll you quarters. bit. than to gains the fourth it in down the out faster I of look about broaden at of you're to perspective think that a due at talk a

there, Something the got all all time. are doing that If like we've maybe we that we to XXX internally for look about there's to try starts in around looking and obviously several markets. individual markets those something and that dig the to what's going been month-to-month years, do way we we time and say. how just understand I tracking understand we're see bouncing is noise, it's of on in would a not we're We've at a doing them, market

has shipping city. single a or of belief or yielded we I generally particular problems happening is do of a what's think where we where given time in something that delays city. When that can't staffing that in the driver macroeconomic competition yields think exercise a that

really So think we don't it's that.

to Atlanta was leaned we associated Monday customers. forms the think transition I QX: many costs promotion cars out slowed things And market probably sales, the real a those in same Cyber And the the thing the of that We some less. have impacted that in which from size buying things down, impacted Atlanta. took many think then so we Namely, business these with is by that did the entire crowding including into of

was to back Atlanta. pronounced in more promotion, Monday that I actually the circling Cyber also then And think

several is last years more be less have to our markets tend we and promotions. markets definitely responsive awareness, the we've over that older observed to Something

the because two think probably to that's purpose get kind I the great purposes. One deal. a is it consumers serves promotion of offers opportunity

as that is to Another our aware all. offering opportunity purpose of an serves at it become

markets higher is or levels think little where have muted. in more second levels of that And already a I we of think awareness awareness, value high I bit

years, seen fourth several sales Cyber associated share we've the the the Atlanta's So decreasing. over steadily last promotion pretty quarter with of in Monday

there that was as I think another contributor So, well.

one, we probably individual level. pretty again, two There noise, won't we're excited that So and in into the overall, on I market well our like would it. zoom three. do we growing understand faster say It very and We what's performed when but been at can I always it. And very in than feel then growth XX%, about that eyes. grew market understand steady, be QX, in going has Qs

Armintas Sinkevicius

third Any the versus thinking fourth and the quarter. when strong in to implies the in quarter the the happened quarter? traffic, I versus but What Okay. And K, third there? the it Obviously, at slowdown then what traffic a doing what look fourth are web should insights be about? drive traffic, we you in maybe still

Ernie Garcia

the saw to less. going And We -- bought Sure. in very sold I would promotion to third with we Monday leaning cars sales. quarter. that and, we would a growth start little from despite I the healthy bit quarter growth fourth the go cars happened that back customers healthy that from Cyber obviously, into to customers in

often in and kind when So, super differences that marketing correlating other is I variation of seeing think things. just channel you're can traffic not many sales, that tightly be with mix

I yes, too much So into read that. wouldn't

quality of can in be of I lot different think there traffic channels. a variability from

higher look visitor to of buy traffic low and sometimes, best is buy per traffic quickly. lot has to a the continued not sometimes you traffic And at. price at alone just grow said, you high-quality traffic at a That very, a very measure price per And necessarily visitor.

as And so that well. we're happy with

Armintas Sinkevicius

And one great. here. the last Okay,

of company the raising with the couple of how over the you capital, about next to regards structure do years? think capital Just

Mark Jenkins

Sure.

the on to asset-based So, is think which we be financing, best the way we capitalize to continue focused very business.

think main and to working this of I real the being fund talked types its automotive two before, utilizes retail investment estate. but inventory investment its in about capital and we've capital in other various investments,

expect to We financing great progress to over so do to have in made continue both in and of years future. the the able be those efficiently

and a so IRCs. there, point forward. Charlotte IRC intend $XXX continue that, into data one to we agreement going recently doing three our million we next sale As entered leaseback our finance that to After

most that And efficient in so our I pleased the use forward. to business, very think capitalize way with the the that best shareholders, we been that think the we've markets maximize on equity assets run, the doing fund we is have, the going that making way capital for and that continue we to we'll long return of

resources, over significant million In is everything consideration in gives positioned business today, we taking on $XXX the terms our into us way sheet, which we flexibility. believe liquidity of balance the have total

Armintas Sinkevicius

great. Appreciate and it Okay, Mark Ernie.

Ernie Garcia

Hey, have one. a good

Operator

with Our of ahead. Schindler Please Bank next will Lynch. from come Merrill go Nat question America

Nat Schindler

my for question. Thanks guys. taking Hi

down cohort going slow and It unit average at of suggesting that growth XXXX market given Just that compare saying seems that XXXX dive pretty the to wanted into to you're was to cohort that you're retail to kind that dramatically, projections conservative data. XX%. you're it the your

that's case, would to decelerate three-year way -- XXXX those in average even including the even way are huge shifting, kind of Nashville, if markets all -- Atlanta, below the one high-growth forgot cohort, oldest about, average And if the second in your you're number markets pretty you're you XXXX, acted how goes that your core, act be even down the going still that your in assume XXXX like XX And if talking what was a like of the will -- I to rate cohort? one for both that go XXXX. of of well in I markets that the and other

Ernie Garcia

that looking think at. we're I same Well, the you're Sure. at looking data

a we're just our think set growth would very top what's to growth We very only up incredible that way in we we buying units on think have informing the of cars I customers. both I year well have So, And again. retail that and did that's that think guidance. is another from add year

pops that trying roll that up one fast unexpectedly or you're take that going Whenever that total into make be And But in be need all to we there's transactions, ready sure for. growing things trying to that that to this I and realities account. sure forward think two always you're scale we're then we that would. that looking you'd take operational we of account just and into we growing make at we're data, the characterize same the way speed. cohort to And the same at

Nat Schindler

clarify, going XX% useless XX not to coverage to add obviously. same, just And looking same all to year, XX% somewhat numbers at this that range number go I because market -- markets Okay. to the are know But you're is to not that of markets in it year? to the you're roughly assume going the this is of you coming right kind in added if

Ernie Garcia

We think we'll add now. more markets

end the markets year. at approximately to year Yes. We [Indiscernible] XXX this expect

right? average given size we the of Those population not markets, to be will markets. we'll think markets add kind You serve. markets the of large expect that those can calculate super So, we more of amount

kind think country, across out to add the I gets easier easier easier for our fabric add it our as as us are markets. fabric But -- of markets logistics new getting continually to spreads and

And I XXX the XXs. so into be and XXs, believe, in that's now that XXs we'll number, add. we expect the year, is to approximately markets And the this

us. for easier getting definitely that's So

Nat Schindler

or that just that on misinterpreted last about page misread it. slide Sorry question. I XX

So obviously, Thank there. data was you. that

Ernie Garcia

Thank good. All you.

Operator

Needham from ahead. Our will come and Company. with Brad next Erickson go question Please

Brad Erickson

Hi.

fair of passing as the those talked tailwind GPU, -- some you nice of more given you along follow-ups. your savings customers, kind from is in least I one. your those about retail getting partially guess, continuing One, buy That's to the tailwind, cars assume price-wise? of the incorporate to it Just of or more first a couple of obviously, in customers, savings even to to of kind GP you're at form making prices, competitive these it

the in in the anything just your mix here in securitization one shift the to XXXX terms in talked to business going of related two-shelf contemplated read other investors your the financing through just there then the to of about, second versus you -- be into Ally that's And guidance?

Ernie Garcia

Sure.

two? competitiveness, terms other very competitors In the Mark, number past. of So, one you hit we've hit if you that don't the to the marketplace discounts got first XXXX, similar in had in price and, why I'll look relative we've through

have And pretty so I think our pricing been policies similar across time.

And kind think happened months. through getting and largely can XX of from more what least we're is GPU, from feeding cars those think flowing that buying last the that's you of at in customers so I benefits

then, And So, Mark, on in don't hopefully, that's helpful two? you why color. jump number

Mark Jenkins

we a securitization, that's evolution and in our think the that to up then program transition natural were to XXXX the to of success two-shelf saw Sure. we running program of for GPU. really program. we're terms on Yes. very number able from great the the in reach excited and investors finance And securitization on that and get Obviously, impact the

shelves is investors to It evolution base. the expands It long-term a natural move think to greater We investor model. gives as transition your we the that liquidity. two

things, efficient think more funds structures for enable and over opportunity there's of time. lower I cost those all capital

loans selling we In with step almost evolution of our that and continue two loans monetization. with right the as move And to -- have think think selling terms of think we still next the would to in is I to mix great which shelves, them; them. expect I Ally, Ally. unrelated just to relationship a finance to We're

Operator

question from Riley Lee will final Please ahead. Krowl come go FBR. with Our B.

Lee Krowl

Thanks guys. Great for Two sneaking here in questions. me last.

as last of to ancillary the fluctuates that's to wanted on First, how services sales. to and cars just attached from the other age and more Curious customers couple buying and, years? you're inventory focus diverse, especially the as you relative the guys becomes namely, GPU impacted

customers. volumes capacity strategy the is, higher question from we curious the my then changes second more And into tax, have you perspective on seasonally year, head as from stronger cars buying with place particularly to now in handle a year-over-year from that to

Mark Jenkins

a Ancillary So, GPU, take first place question, nice obviously I'll on. progress. we've that's made product that

some think I between can vehicle mix. product, ancillary there GPU be correlations and

it's be warranty, be attractive. of warranty, -- limited contract vehicle Whereas within manufacturer warranty, little little less service more is car manufacturer a attractive. a our if sorry, outside might example, the might if a For it extended

can And product or of think there ancillary rates. mix other I be factors the so correlations some attachment vehicle between

All incorporated into of will course, be those, of guidance. our

Ernie Garcia

heading I to on anything And XXXX, into don't there's call think and strategy tax point beyond in out. then the season material

how about diverse we I inventory a We're good very coming in really had. any we're really right that's big with diverse, positioned we've inventory feel than more now. think

size the always we that times. these we're the handle what see today think to trying move hopefully and we be flex high-volume handle see business to through to volume be is I quickly the able able do volume we appropriately to to as that

positioned. I We're think obviously we're well fast. growing really extremely

be -- the start in we eye to constrain places, past. we'll close like we So keeping reacting we'll in just on different have if then a be

So, I material except a in walking out in think operationally. nothing we're there, tax that call to good shape season

Lee Krowl

Thanks for taking my questions.

Ernie Garcia

Thank you.

Operator

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

Ernie Garcia

do on And everybody everyone, really do We -- recognize every it's appreciate and it. year. hard only it. thanks, all really because importantly much, but possible Well, work the This so for another of team Carvana. joining everyone day. call, incredible We thank you was single you of how

Have So, good a thank you so one. much.

Operator

concluded. has conference may disconnect. now you today's and The attending for now you Thank presentation

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