Carvana (CVNA) 6 Aug 212021 Q2 Earnings call transcript

Company Profile

Participants

Mike Levin	Vice President-Investor Relations
Ernie Garcia	Chief Executive Officer
Mark Jenkins	Chief Financial Officer
Zach Fadem	Wells Fargo
Sharon Zackfia	William Blair
Ron Josey	JMP securities
Brian Nagel	Oppenheimer
Rajat Gupta	JPMorgan
Michael Montani	Evercore ISI
Nick Jones	Citi
Chris Bottiglieri	Exane BNP Paribas
Edward Yruma	KeyBanc Capital Markets
Mike Baker	D.A. Davidson
Naved Khan	Truist Securities
Seth Basham	Wedbush
John Colantuoni	Jefferies

Call transcript

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Operator

Good afternoon, and welcome to the Carvana Second Quarter 2021 Earnings Conference Call. All participants are in a listen-only mode. [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.

Mike Levin

much. so Thanks and on ladies thank for you Good second gentlemen quarter us Carvana's call. XXXX joining afternoon, and earnings conference that be will Relations company's this on website note corporate Investor the section simultaneously investors.carvana.com. at the of Please webcast call

letter second on the also IR The is posted website. shareholder quarter

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

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

Ernie I'd shareholder turn found can Investor our with between call non-GAAP which said, like metrics and on in our GAAP issued for copy will Ernie? to Reconciliations results the And Our Relations measures. today reported can financial to now found over commentary be non-GAAP include today, that Garcia. be our website. of letter a

Ernie Garcia

joining everyone the thanks And call. Mike. for Thanks

full quarter It we GPU. the that $X,XXX It play over it hit delivered landmark over of net $X quarter first XXX,XXX first sold Five was XXX quarter quarter step it was and now put companies to first Those Facebook. Carvana some It four it in central list EBITDA in positive we to will all cars top quarter cars great a ago, our first list. demand was and quarter quarter, was Fortune was And the the first total was of just Google in was back made years we organically in ago, sold pretty years a to the a role revenue. over second for times a It $XXX the quarter our five story. the XX,XXX went the earnings. billion year we're minute year. make five with on one It that our for off, single and take headlines. ever our our a total achieved $X,XXX. we public, GPU of to Amazon, The million first delivered, context. We quarter was also customers. fastest always many we we the before On a a we along that the were one

Five revenue $X.XX made. ago, every for $X,XXX. lost was $X it of quarter This we years we

When time. makes of too in to that first progress and lot the That's amount This in is far for we quarter a what this a tendency all zoom we we money sometimes short time. a have made really possible. of all progress, evaluate it

were kids ambitious we of want the we I our a to of bunch learn. with story to version simplest When to ago, started X.X tell shocking amount a years I So that try can.

evolving. knew into, and that we of were less the a a no had We did were for getting we idea We couple now for We customers. things. With believe could customer car what technology buying we We hindsight than way knew we them traditional benefit preferences the of do know our We it we but plan. better were a have. knew is had of knew had was changed should working clear changing. we

a simple great better. have to knew how the We in could knew knew people of fun. we make and lot. knew We team. to today. we out doing. spot rest also to day. Along We We each us had way important along the that we've the We to how We we other. could us figure get were to best believe know. what to knew how out didn't were pretty things a good today's quit. learned And a way, know how we Those got the That knowledge

One important everything hard. of the lessons is worth doing is that

and over we at knew I we is out it. will hard keep And change mistake we keep will. the and might the preferences hope hope And doing here, that believe that never we evolve. and lessons are things beginning complacent. I our at doing. means I fighting. don't we things we days worth the do the the hope easy new From ones. people they're I like that make time. still hope get always classic worthwhile hard days future learning. I The we keep I crowd things often doing things Customer true It will hope we were today. If on we beginning. seems all let always technology that So be that hope more avoid bright. that I take the true

the chasing as Mark? be always opportunity, and We'll there keep open never march it. it. the nowhere result reveals wide saw beginning the time. enough, a The potential all keep opportunity. our long continues. realizing itself as will that we potential the eyes We're we'll additional we near And As catch from

Mark Jenkins

thank focus you quarter the unit during of GPU company gross quarter. you, I faced long-term metrics $X,XXX highest Total year-over-year over progress in increase our my said per revenue many XXX,XXX, increased across QX And and increase was impacted made significant constraints despite a will units increase and $X,XXX level We Retail an our was operational on totaled XXXX in It remaining we Thank company and toward records Total history. QX, of Carvana. changes. was sold billion, of for strong key commentary XXX,XXX first the everyone was record QX quarter XX%. financial today. an goals. Retail $X.X sequential QX us for units joining Ernie. profit This sequentially. by $XXXX, Since $XXX. XXX%. in X,XXX growth came COVID-XX. was an

experienced higher inventory was available was which execution growth factors. the came four, industry-wide cars positive inventory environment, retail pricing driven and positive One, and mix of million Our On volume by income. partially the improvement Two, total buying and prices. pricing goals. wholesale vehicle of on by plan X.X% our $XXX, an Other our customers. quarter QX. higher size Wholesale to in by EBITDA our capacity flexibility positive increased from July strong from and from margin market and execute our And profit costs quarter another team. of offset buying increase This wholesale a and growth $X driven four billion, to gross strong acquisition GPU of was first and primarily plan. record production was in wholesale of impact net we ever us industry-wide period. an to volume. match increase Record facility unit Three, was customers. unit and $XXX. $X.XX unit per giving driven was transitory retail in by liquidity majority billion cars GPU prior related optimizing COVID-XX profit X.X% quarter second in and sold the up-sized vehicle by positive pricing appreciating beyond per we We X, bringing wholesale our our resources to unit of floor achieved our was $X,XXX finance by moving from record gross significant $XXX QX of wholesale GPU prices EBITDA was by increased average sequential primarily nearly wholesale increase loan $XXX. negative X,XXX, of This driven an sold

executing well are our and focused and increasing on We production meet building our to network demand. capacity remain

near XXth efforts on to annual Ohio. that track capacity was at our focused both staffing of to eight open sequentially. driven cars approximately and This operational and also average we our IRCs opening at in XXX,XXX production alleviating. retail end of but increase total throughout customers XXXX, remain weekly Across Cleveland, by X.XX growth total our capacity units these units. chain, IRC additional by XX additional these rapid significant to we the progress full we over grew IRCs, is on the production QX, XX% million quarter, are strains led vehicle units fronts, In by full buying This on our from utilization. demonstrated utilization our bringing We

on Looking EBITDA at retail complete margin we revenue, record a expect units, and GPU total XXXX. year forward, in to

unit second the governed capacity. half, expect closely to be growth. growth unit by retail operational with aligned expect continue be growth revenue more In our retail primarily to we We to

Expect As over GPU comparison the at mid of beyond were substantial periods total X,XXX the year our outlook XX. eighth that of gains. year significantly for the we and X,XXX full exceeding move prior beginning our marking consecutive year year by most COVID

XXXX the a seeing, the retail with business, and to to catch the the close in unit Leading typical for continue in given up prepare are both demand EBITDA per half beyond. in break second growth we invest year. to Finally, to and SG&A pattern plan margin we to even in seasonal for current to and sold demand full

leave several quarters, results delivering model X profitable units progress than we've company us becoming managing out navigating the of about ever our million you a environment operational COVID-XX the pandemic made Zooming extremely constraints. last are your unique We per for Thank through the the industry, rapid relative of more path to attention. retailer. while more the most as long-term and our all largest the over proud and growth toward and year auto delivering optimistic and goal than and retail our

questions. We will take now

Operator

comes [Operator ahead. Instructions] go question Zach Fargo. of Our first Please from Wells Fadem

Zach Fadem

progress. and the afternoon congrats good guys, on Hey,

structurally curious margin. plus So ways half be X% gave initially now particularly ancillary you could how X,XXX it's marketplace since higher they the long-term to than would long-term assume for fair in the and you and And to to extent, your been it's all about the what offering, you've added GPU two guideposts scale, progress XXXX. higher, thought services, to years a GPU about business. today, you frame EBITDA target maybe with you X,XXX plus that then the all profitability today, take made, impressive And and XX% think think now if you a

Ernie Garcia

are lot of all that model understand, out different were work and so in normalized automotive did yes, it's on inside what I built what Well, a And and I able to different the foundational. to put me let retail. groups think across structural forces achieve. deep margins deep of we was trying start kind XXXX think products with, Sure. that late pretty that We

And so good model. we really feel that about

there. start me let so And

of ton a made undoubtedly progress. we've think I

single XXXX, had I your if we lot a went plus. GPU. We I every full progress across continued we've happened items, made one the we're $X,XXX of to as We're X,XXX it's in you that's just expense think progress public. obviously look while items. of the for at of as progress and the some We simultaneously year of make lot there growing. the mean, We've expecting line well year. X,XXX before had line a also

that, been target. look do that gross we inside first feel think that good margin we've this long-term model, the things So update a like early there, long-term is bit really it's the given the to I quarter

stick So we've we're but with I to that think the that made progress we obviously model, extremely far. so with want

Zach Fadem

where top of for environment, pricing if think or color growth and unit. can both if year obviously to likely half in the profit Got wholesale a you we terms if big about the pricing softening the environment some it. the the retail just there. the expect outlook look what second then us talk usually today you to top of profit all, as headed, gross were sales market, would pricing could you to soften? tailwind We talk per and line and through the the in of is And appreciate anticipate But and on line, first and curious, then

Ernie Garcia

Sure.

seen characterize what the me wholesale let to the environment. career. have appreciation it's think both anything retail trying the my market at I've characterize you So, ever environment that unlike price I very is this and rapid market. vehicle And least by in start do

dramatic I we've seen think appreciation. So very price

both stable. Now the markets fairly price between implications and or dramatic down, normalized that huge tandem of and Generally markets differences. up wholesale in speaking, are margin. levels doesn't have a gap see retail don't as move in for super you And environment move kind

vehicles think perform different change now I what's quickly. for the had also so differently. unique And is happened sources think acquisition I many

that margin. example, cars many So lease, look franchise dealers, trade if in, in for seen buying many dramatic buying have increases are at, or pretty many you cars off off

If you margin on generally market, environment, price up. than just because price prices retail heavily seeing deterioration reliant the moved at auction wholesale that are the faster some up increasing moved look in you're despite independents a have

So this environment the have then played I the of think what's across differently And out different unique moved. way channels. is things vehicle in acquisition speed that which has

performed that the of buying on valuable think we're a cars from period auction For We've high-quality us we've buying over that the long channel cars profits that buying cars where very collapsed making continual much. cars built has channel this and us for of number of we the we're from both this made in progress customers well time. was customers. – especially spreads so to But relative retail we're sales environment kind in bought I

these a do that think kind precisely that there, is I that think movements of now. moves the difficult, now experienced the are that ASP think kind financial aside remainder because there and it overall that I interesting implications our we're to tailwind do of of with just performance. abnormal something is another of has also of we also kind seeing difficult So that for associating But impact was led precisely I the year that right

there customers, in we on was interested willing what so in were buying customers. in prices at we this terms appreciating quickly, many their that increases that that environment in or relative and their customers than car so were that because that And environments. to And selling were record were number way any from were led other vehicle absolute cars feet to sell car cars in selling of to to more the

of those constraints also able a up that would on lot expense. were we then SG&A led margins more cars. the So realize to there bit by little some the in that than we experienced. probably was did we than business a That saw offset volume drive that otherwise to showed higher across And which have expense

that able a a to tried fashion. kind expensive levers the demand we've than lot kind we're levers As seeing, in a you pull pull move that catch incremental it, that of are those little you the to if more are up orderly to of more times because of you

environment feel moving. like So that are those I think are unique things in this all the we are

our unfold that to the way it think the of I account taken estimates are difficult we the the is best precisely call back half we'll all into but outlook year, unwind in provided.

Operator

Thank you.

from Our of go William Sharon next question Zackfia is Blair. Please ahead.

Sharon Zackfia

good on And consumers day. a question morning. how on good Hi, the dealing afternoon. congratulations pricing been I it's a with And Good guess are mean, environment. I long morning, profitability. seeing? change there at increased average adjust of any to mix having your inventory that any kind seeing you all? bulk are Are prices? And is at in you the you're credit

Ernie Garcia

trying alleviate in made So have and that we're constraints on think differences we've faster pockets. to adjustments focused different and to trying grow inventory by driven the general, than that been been more be been to seeing they've demand they've subtle, I in relatively able

like think satisfy than all demand in I pockets. we've we general, got to across we've demand feel been more able

too So dramatic. we've more cars changes other to than subtle we're nothing, the we made inventory some that try faster, scale that get of mix that so centers them quickly. can of through nothing in kind the to But reconditioning buying

performance. across loans The credit same, the do we've On there's quality been loans the those front, originate, sell but industry, off. seen high the I think we we credit that

not through the of so direct financial the our something sale impact moment flows after that of is And that statements.

Operator

you. Thank

Securities. ahead. is question Josey of from go next JMP Please Ron Our

Ron Josey

of the markets. of with ask, launched It's XX% Carvana for Ernie, reach, I benefits the words, and now Pacific new I guys. Thanks it we're that launching markets. these in wanted think and talk population XX%, terms just launch as to into markets In just great quarter, of just the now easier comes other to about awareness Northwest the newer quarter you question taking Great. newer is easier? what is

Northwest, You're that new more you be single how that'd us the to whole launch. Thank brand has talk open Pacific helpful. corridor, when the market reacted you there, a like you. seeing every that But about new up

Ernie Garcia

the I Sure. mean, What out. building think, brand I we're continually

you up look and XX% very a significantly quarter-over-quarter traffic, if a than example, even our think improved year-over-year. year-over-year, more I at website for XXX%

least reasonable building that's we're think I that kind So relatively that probably at a innings remain brand of measure of think that the And of I brand. we building. still in early

time the you understanding generating three that's different generating is two this was roughly generating but the XXX,XXX we in way step like we've building market what discussed relative to making of dimensions, in national still think, year And as brand in headway Step a market think all And a cars. trust. even to the old those I company step we think, a positive eight you quarter, do. that one X% is and past, awareness. very half about fast. that is is share. that all of we're size still I And look of that growing an at we're just over last When sold you

So newer does faster seen in cohorts progress I time our early still the where us. But that ran cohorts. think than seeing these undoubtedly, it's trends building days. We've older brands across help very we're

across cohorts, growth cohorts market our that all rapid We All to we share see. the We're other seeing. seeing we've the we're continue are of that. across see increases continue trends that seen obviously very supporting to

to faster customers grow shows by positive for up to customers. is model growth important deal. we've have big a U.S. able last of Pacific the the that then average most think, as available connecting that times more the was up the the for do we weren't to of And big and I chunk to to that And adding through delivery inventory we've across got our So I keep being that and just continuing connected scaling. now feedback what's then Northwest getting filling from now just got and think here kind

Ron Josey

Great. Thank you, Ernie.

Ernie Garcia

you. Thank

Operator

you. Thank

from Please Our of next Oppenheimer. go Nagel ahead. question comes Brian

Brian Nagel

quarter. afternoon. good Great Hi, Congratulations.

Ernie Garcia

Thank you.

Brian Nagel

mean, by So held again, I right. the to the were spikes, you quarter have strength talk just noted which other degree that despite question back I the still sales the – in some the

against running did running So quarter? guess you're have as is quarter, are question your progress you’re I supplier I So the well it how through demand? there exited the the how that against the you

Ernie Garcia

retail think And part I the the we driver through call, what the customers. saw constrained. of think that I bought that cars led XX% customers. of from really most in prepared we in increasing progressively which we kind offering quarter, So we in is that we and of for very And much growth but we more growth discussed quickly. quarter, units for buying grew that what We from probably, hard degree the of is to weren't earlier cars quarter-over so that of dramatically is foresee that constraints by grew number the our to was

that's those what business. up and increase constraints can to of led So constraints in kind I show the across think

picking mean they're got advocates doesn't by They're the in Carson customers only buying car a going involved Just driven logistics and to that's calling because are have selling talking customers gets to they're ops we've impact market cars, us. that. network those they there's the up with and out when their

of across business. rest business, of in the the constraints part we as see the So generates it growth any

that is we difficult to made relatively this think ton excited we're alleviate do I but also of about. I a we've that extremely those constraints environment constraints, up. saw think a So headway show

weekly of we versus hiring in average proud extremely of increased We're So for move that what The our class average that. July, is speed perspective QX. the we XX% saw and tough about of back job, The of to just by kind And tremendous strong. it's get do and, action environment a team's a leaping front really it. in trying to this. I think of to done been in

are Carvana. offer to applicants I think quality come looking to the opportunity that's that of a testament to that we to

time to built ramping it's very testament over testament that's quickly. think that a and and a up that team the career I the path to we've been

well here. was we've progress. a of But and working This benefits led of at of degree, as customers lot inventory, to a inventory in massive to now for we those. saw then well like got places. been buying get making We're there in hard we're lot kind that way. think quarter, Carson alleviating our think that to And to on focused we kind constraints talking the grow other of I grew the more growth last the of work would it to which I extremely constraints about the that. we we we're exciting, constraint from been a as we've alleviate year, So alleviating to last And

Brian Nagel

an is appreciate show the pulls [indiscernible] a I it. of helpful. time situation market and some if out capturing, struggled less extraordinary with space you models the the on share seeing very economy not to further COVID, question The that, of result crisis? increased Carvana as are obviously for My the second opportunities, having That's some fluid them remodeled, now. maybe starts or retailers query efficient

Ernie Garcia

Sure.

may there very result from just what level that think, company. I that impacts think a But and high So macro persistent some crisis do on have the I as we that's opportunity. the like trends to can secondary some very be

is, half been sales useful flat of think the the volumes are way year, I to first about industry so moving of how things have the XXXX. across a speaking to far of roughly think, kind roughly

they're So of and little that and a or leveled In obviously of just XX%. coverage kind in come of take increased are, where by But sense kind time, now we've X.Xx. our they've you about sales gives that right to back more population we by we've a increased XXXX they XXXX than dropped bit. give

now oldest most are spoke up in the X% and trends very earlier our The including of there. markets we've mature look If or cohorts, we penetration, over at bit individual I nicely. some cohorts. continue ramp markets We those taking are that seen market of So our a significant we're clearly very market share. place that about markets. a have to handful

now. in that's really constrained that's the think heavily and I So exciting us of happening context right all being all

as I like opportunity executing to So delivering customer really large. our primary going long really, the that's We and driver think great of growth. growing is the keep as we feel be and experiences

And of own direction but experiences customer kind some pointed you mostly we factors it's a deliver push we of the also our execution. to the in bit, macro our think may about

Operator

question Our from JPMorgan. Gupta ahead. next Rajat is of go Please

Rajat Gupta

Great. taking on Thanks quarter. for the the question. strong Congrats

the Just years. GPU than the is any that is And And seen to and transaction number not at fixed a you how one model? of fixed talked and retail there bit may comp temporary just you way those that improvements that of XXXX. the like the like I'm do couple business buckets, other This of in $X,XXX over how second is through of into Thanks. on versus that number, like structural have units lot can in some the year unpack when sustain cost the of leverage, much I would and have grown in sourcing. the might transaction terms just little that's next the look you last in see [ph] handholding customer the that you going the that cause liked. more to that's cost half, grow feel how just the beyond. at leverage the start SG&A SG&A of, really like we that during progress coming there But terms follow-up the over curious more you're – in then, questions to incremental having looking if you but do a you a and more buckets you like, benefits are like the leverage, just about of of to seem is have might

long for Sorry question. the

Mark Jenkins

Great. Yes.

the by taking question. SG&A then me Retail GPU question, move the to on Let start we'll

retail We've our before. retail on close quarter a So times GPU. GPU, couple come first we had XXXX over

is done we've before but for XXXX XXXX, record XXXX us. think also in adjustments not a including and XXXX the I

driver QX, think was drivers think talked sense certainly sequentially to but ratios I I for an a we from performance the biggest customers. buying Ernie it, about record retail the cars in it's from think little there units. from we both great a absolute the if customers, think cars through as through volume and bit buying helpful to quarter had maybe that,

several net environment. a There GPU, include tailwind when that certainly a so offset by QX, big, from rising that was the But think was compare we a to was partially there big retail factors were as other you drove And that wholesale appreciating driver. retail rapidly that was those prices.

we those as there to, some as well But really of And the or in. share we auction think, inventory, rely off so heavily when dealers as trade do quite alluded higher auction seen a I haven't look have industry – lot across out on we who as that lease are impact we buying think a off and cars of there. do was Ernie

could more get things like buy cars think In centers reconditioning quickly. through that addition, we optimizations the trying made some vehicle pricing we doing to mix and

finally did For costs and majority of the example we transitory the move transitory and that then QX. finally, we costs, – in experienced beyond QX the

particularly those think in costs I and when COVID-XX so And QX. the to being later waves related

really So about cars something our the about improvement progress. great going continue to we're I feel retail GPU to Buying progress. driver we all look continues our think you put forward. when obviously that the be customers going from strong excited think within do together, of business. And I to It's a to

on retail there stop I'll GPU. So

to on SG&A. your question Moving

So, SG&A. of I investment our think there's several in drivers

take we I'd point to. There's things is view few a into So a QX. narrow

cars significantly in associated prior And with quarter. we QX in from The there more did that bought first that. that the is customers are expenses we

also there's associated that. expenses obviously that big well. So selection with and as GPU with associated it benefits There's

we're business the making customers looking that capture unit at so, SG&A per well. investment of doesn't as And from drive buying retail necessarily cars basis the to

forms. for that's That one. investment is absolutely point takes couple two a of we are different So the Point investing future.

large preparing fast amounts you infrastructure able plan scale. a that And rates. extremely very into be to have that's at that already have place to what ensure large for the at means is satisfy of XXXX, necessary growing we're First, large put business demand to ahead to

And long for we're already and a investing say term. finally, component I so it. that's we're And for also would investing the of XXXX then

of So I think efficient. the offering, alluded some making in and business by as Ernie to the we everywhere see to, the improve opportunities remarks, opportunities customer GPU his in prepared business, more drive to additional revenue opportunities

there think, going opportunities. to the where we we're right long-term over horizon, thing to places our I it's see multi-year many, and invest the a very business those shareholders. think opportunities and are significant do We in for for many

three the points And so be those would I on that SG&A. would make

Operator

of from ISI. Michael go next ahead. Montani Please Evercore is Our question

Michael Montani

sort good maybe for question. do it the up sequentially Congrats you same I up taking XQ. Hey, was quarter. of stepped to evening. way XXX, And one on thanks like wanted on at, if $X,XXX increase. the be about step versus kind XXXX, XX% XQ a come of then which the math to ask And improvement versus a front, GPU would the XX% just

So does think it? appreciation relate basically kind market? the in about way to fair price to the the incremental XX% that Is a of

Ernie Garcia

it I it. thinking thinking a to about instead in better way of percentage margin, think about of First terms dollars when probably all, you're is about probably think

they across kind generally in do more of percentage terms think speaking the than margins dollars I industry. in move

there. start would I So

that best different have think, from some number there. increase some try has of Mark too think that would of kind year a he there's I then I point this what of to line might been. a get and through, But items biggest I on customers. GPU customers I long provided, our think in correct. historically, the think helpful just can high the that think and from and of look moved those is long, everything We outlined and is to the massive to different, be massive, by do want have cars but impacts can customers. watermarks lot to XXXX. And the been is be repetitive way answer think of those I we just of that not is some you I the careful the And be of what think buying that's of size But a saw how also buying I that cars flowed that of back and thing just sense buying a probably I to have that kind that we're I with in is profitability cars the

Michael Montani

for the be that, to the maybe the half And like second seems half. back outlook implied the I it then to on X,XXX in in of X,XXX guess, follow-up GPU, terms

I other guess of normal And sort say to be is just so that maybe of mindful some to what'd I need understand factors seasonality, versus we of? of how you just is wanted much that kind

Ernie Garcia

Sure.

normalization extremely paired outlook, something to we with those account us in moved factors think, and quarter excited in in is high of you then obviously our sense over drivers which and raise normal a to we're for here, some seasonality, the I some into basically for that's trying level from for year move things quarter. So about. taken I that a what think be is some total we're the GPU the mid-XXXXs from of making we how of then a huge $X,XXX of expect the at we to which are provide think, And unique

Operator

go Jones Citi. next Please question from is ahead. Our of Nick

Nick Jones

is from normalize Maybe kind kind as taking points, then can where that just would to and of has this network. over of how of it one, for normalizing, in of Thanks you choke kind next here are two, kind of demand how are thinking inventory is any Because go year, thinking positioned inventory going availability Thanks. into are next and I the been of you other of normalize does points be times spurts past in the the the feel questions. couple levels quarters great. you about guess, on well choke Great. about thoughts kind been particularly some there really logistical be you'll has logistics Do markets? in new like there things you when the normalizing your meet

Ernie Garcia

Sure.

So let that me to try break maybe piece. into

that on probably new issues. in is car going of key think that that price of kind the led what's manufacturing think both at by level the used. industry driven specifically is driver kind likely has appreciation and I vehicle a And to OEM most I new

figure is think I difficult out a very will trying to that when normalize question.

but just so over model wouldn't been everybody seems kind the and has kind is generally show wrong. driver think that to have But and make last that's price in least those I that other of that constraints world, maybe that paying thinking we're now. estimate when up to global supply cause. supply well. different And complicated normalize that's driven to through think chains, of has tried the at chains. include of work about behavior that's parts do for of to far I close as to, seen as the we appreciation. supply the years, that COVID which that think move chains market we probably that obviously likely of of That waves different many parts attention And includes use underlying the simplified number vehicle want And the specific through seeing that's I OEMs their we've like a probably microchips was kind seen supply we've of would one unique their right in the how

the in our to we understanding size think is And have got more of think, We we're we've relationships handle. inventory, to and what good I want simple between relates right demand it we more. like able a a As pretty where we than conversion. inventory that we're now feel significantly place

got to additional X.XX hard to centers. incredibly have year. inspection And next more end working lines so of we would of million have inventory. to addition the centers significantly adding the love We've capacity a by plan at through We're production inspection

capacity So and our we're to ramp also production quickly more really as possibly hard we up working to as can. build up

to to retail but more units by able there. us allowed were progress great production inventory. we which quarter, than build seen capacity XX% grew we've think last by that, grow We I

to of to as we as going there that quickly keep inventory constraints fast just trying we're relates So as and other it And to moving build can the to as as we then can. production them business, is to once relative and definitely behind and emerged got very of the sales, while once front get to process. think, that to build because complicated just hardest that stickiest face now kind I catch obviously across the you sales. of to flat then you've inventory. constraints a up And long do And there, you're to to up, get you've you're back to That's then your holding operational a of work it's in still undertaking. you're kind it doing you're also inventory got shrinking we can inventory. resolve And catch the work

COVID we've So one light of that keep on made We'll been we've the I one. especially working seen. in work plus. waves hard we've on for think tremendous at year last And the progress, several that that

have associated they the necessarily On generally to not least resolve complicated, we've don't They historically, necessarily Those those faster. and other constraints, at generally them. timelines to physical as have been facilities related zoning don't them. construction much able with are

generally, the than other operational can groups. move So faster we

As I retail QX. into in saw we're right We of progress said from did pretty a get so in both we QX But earlier, heading growth I much cars progress buying lot we've and of early made behind a lot is making think customers. now.

that the think you by move that of just likely be which goal alleviate can our as when volume is also as on we one, sales is think possibly half constraints. And look to we we those So back at speed to the year at this think driven quickly I that we can.

So, it attention. has our full

Operator

Chris Our Paribas. from BNP Exane next Bottiglieri go question of ahead. Please is

Chris Bottiglieri

actually, question. I guys, got a Hey

a about that are have question. business third-party like seeing from anyway, model? recently. your really to seems you have kind of learnings terms business So this model lot behavior, follow-up business? of to listing adapt was your you to yes, third-party your hoping I could the I their But Like, early grown what talk a partners this third in change Are party more

Ernie Garcia

a answer we're in with little think bit going but to I apologize there. our I advance, Well, you probably disappoint

We're there. make different that's that But at think it. we continued I testing add have seeing we've time. the additional things. results interested this test continue we're to progress So anything by don't and we to We're to why

So I on do apologize better there and your follow-up. can hopefully we

Chris Bottiglieri

you. Got

I'll to was going a do follow-up I different Okay. that, so to angle here. pivot and

So the instead let's is go This then. financing. to

data kind answer is frame if like structural seems kind like the of expectations spreads a get returns of or It on this much is buyers. a your COVID of to like want it gotten your lower, losses, rating cumulative weird rates just we're improvements sense, I'm to that much like paying there's beyond like much of at lower these and of in sees credit swap the latest risk losses. kind the of speaking you loss recent product versus how that way just lower how to than just just bubble environment, this I like that? kind can of looking So, you the deals, residual lower sticks that how versus seems the of are have

Ernie Garcia

Sure.

item. think that made I other GPU think period Over things. time by driven we've progress continual of long I in many a line our that's do

finance better that our of pricing kind both and description team the then great team operational for finance and kind think I structuring, has credit team, optimizes job, finance that scoring, a of lack our the of done finance, a deals. the executes

the unbelievable solid financial also have is a a I an pretty driven market. think I ton those both progress. done job and of market teams think obviously

that seen think about think and those easier we've then I I that of ASP probably all as of in some earn a we generally on the think result And it. to this increases then loan And in premiums percentage does loans the helpful. average increases to environment, is sizes. are lead So constant way speaking, that that's premiums the kind

there's scaling goes prices. probably some so with And that increasing

I constant that toward our positive model. step I items of lot from think line if long-term the really this drivers there's we item line a other a multi-year take is further back progression financial GPU there, think And all there. long-term with a along

trying exactly taken drivers different letter. into the do are quarters, simple we that's to in in how the not causing the in that I outlook that provided I think, term, in the is again, two account But it think will around. all shareholder to the of evolve forecast immediate to over that light move next

Operator

Our next Please Edward is Capital from of question ahead. go Markets. Yruma KeyBanc

Edward Yruma

ever I've related. painless Hey, experience week, thanks the car you most a with I the to ask the for other it and the was had sold taking before anything, question I guys with question, car actually

So off you. hats to my

Ernie Garcia

you. Thank

Edward Yruma

of, just lot and a understand staffing the staff technical and guess those know in perspective processing it productivity a think, you of end centers to more of difficult Thank From importantly maybe I thinking staff a expertise bit, get is to you. before little IRCs I know-how are there's guys I XXXX. more existing back I How eight required. the higher.

Ernie Garcia

Sure.

think I everything opened up call hard. is is, So worth with this you doing

up opportunities we've able easy. know, advantage functions. the training also this do that we've at business strong taken model of Don't that really built you want of nothing's strong time. really think that really think helps our to a are I be sound to to built all, offer really it interesting So functions, to I job. people We've structure over but there for team a I make And us recruiting think, easy looking a new out strong

show the the got these need that across figuring put take of building on the to car. single the scale we about in retail so break I down knowledge when you've of and We've is mean all that kind do inside technicians, with kind we What's what that you inspection the car it at lift that a requires process, at inspecting of different career the kind very and assembly inspection is car with so that parts the you by might big kind they the all options the problem process. car. nice up. that of a know is are features of associated little it's about can have everything that facility. car they car that merchandise And steps any facilities. And have reconditioning really any many it. it skilled pieces, nice into In work that have large what tasks our photographing deep centers to they centers generally And or those can of path would different And around really whether and they rest out speaking, least lot these what's lends our got line itself automotive car, of a

path So people. we build for really career a that can exciting is

compensation in into that of their to not people in bring lot and So in ourselves we being career in in, that career build applicants. us. building to of that but in effort as facilities a just that, well. can with can able early possible put development and kind And the we a they support and then And milestones in milestones check way market to way, building then

true inside really same jobs at the with story to in push it’s So of advocates, in I with those think, in not we've kind that Carvana. logistics, outside advocates, true really And customer in hard areas care efforts careers ops that. true is worked we've inside market of the for and redoubled what all it's calling, our we're

So we're that. putting ton effort into a of

now, build think right environment foundation very I time are a tough in talent. of lot that enabled a a finding is that build it's that a to having companies us is an scaling us to And scaling foundation where enabled quickly. it's

talent. I think a that so far find doing to job, least we're good

are of. went comment we that's proud on of it you Thanks really Glad the your that for something are a constraints giving facing. And works shot. your responsible car partially appreciate us, then to So well. And I for that. selling that generally us

Edward Yruma

very much. you Thank

Operator

is Mike Our go next Davidson, of Baker from D.A. ahead. please question

Mike Baker

actually XX%. Two looks on It's website, ratio are for your questions, about Okay. pretty like right numbers thanks. in inventory Hi available consistent that's one the range. that's sale here, it versus immediately of if like that my it's the inventory been

XXXX car you? you should But at produce you having sell their gets tons like piece your people things to want for question what's ratio? And was it I quicker it you're trouble down, can I like? that risk Is can you to fewer it right the to going obviously look is everyone knows understand now, money the to guess you and guys or sell because of Because because so come sourcing this of your competitors. with what is this to beginning the are that right the XQ car are that quickly. imbalanced? XX%. more What inventory constraints, Although the closer

Ernie Garcia

Sure.

is metric immediately is most in available I consumer important. most important think inventory And the the eyes That's the the So driving inventory of inventory. up.

absolute immediately up So the getting most number important measure. cars available the is just of

your want the cars because think you you relative head, you'll have process. I might you your And the head of to them that you your close be, the can out the a are to customers you kind percentage in right. are of constrained And because that very have to as in one And they that as ratio of you website. be purchase never that level got lower locking demand there, checking of high larger and are, more referencing, you'll means you've that's the get process them. and cars in the

might then would you're than If little like. you a your constrained in delivery times logistics, longer, be

proportion of show that'll available lock so inventory And well. up kind longer immediately as of a times lower in and

sees customers finds when with and the as is So of for that's customer alleviate up. they're that we that that kind proportion represents set I most through of should cars go just probability the is that's to desires the number car site. precisely our what is are a think, looking they absolute But a what given any I of the customer constraints, think look number important that available

Mike Baker

an learning process. guys you of and of mainstream think, That different you adopter, and Carvana. and makes bit follow-up seeing sense. early it in a is and is about lot perhaps online Are earlier a more sort A get I sort earlier a maybe were advertise is Okay. less the you everyone the as customer different adopters little of,

different a how now people online think the about up need of need savvy to Carvana. impact a sort staff customer. maybe to or you that And about so start question, operations, to And of this whole online does on you less newer previous it's thing how learn follows kind how were to or

Ernie Garcia

let Sure. with this. so me start Well,

that’s to that, in independent ways is I or are Our experience customers psychographics. demographics build goal think, better for an of

the the experience. best selection, best to want to we So, best deliver value, the customers

appealing that And an working so is offering to we're build very hard absolutely to everyone.

all not but by younger than younger bigger perspire, bit more generally think average from pretty the as as out get of little buyer seeing little to U.S. the We're in a the there's the a directionally. the a I a true a to a I more We're little skews emerge generally I than that psychographically surveys. out time those lot, not we're our think seeing constant, been demographically bit we huge other earliest What there, mix And do competitor speaking, across else that again, some of a saw there. we but beginning. the expect buyer, we a more days, we're from diverse bit that's seeing amount, similar at affluent least mix car well. more pretty seeing and used according anyone think by a of that was buyer any probably it evidence

So strong. skews. Again, that directional I not we they're super think do have some

customer our mom. And demographic what From and one values your be so those we're that we've perspective. a be from psychographic a seeing our got would perspective, of values, next could

works I progress that that we worked all are adopters. think offering build can't in that And mom. great for what's scale something and growth growth we're we personally, that our an kind the continued for I think of we're for and my just We suggests that early you psychographically, really our seeing. is it that's, Something appeal. broadening continually mom. driving think my there And I important making this our And that use is building great this we think be case, it's

And the I that matter is just best think people that, that's continue dimensions to think, experience, we a best to working got So, of we've most, do appeal lot offering an that price, to improve time. all those if we're think we which over best hard going selection. in we

Operator

is question of ahead. Securities. Naved of go next Securities Truist Khan Our Please from Truist

Naved Khan

a share talk follow-up. maybe about other the trends how far missed it, might've looks into quarter? have July, any did you thanks growth a lot. so from I I guys And then but Yes, like

Ernie Garcia

provide not provided did the color in outlook remainder obviously our numbers QX of on any the We we for July. year. So,

into the that's in outlook. And taken so account

Naved Khan

Okay.

assume the that but cars, capacity how the us increases terms your they you to balance moving to in higher? about kind for is that's it that it trying obviously already fair just growing year are business put of the not least of place, at fulfilling thinking model of you that the driving transition out, are In

Ernie Garcia

catch we to constraints do we where to quickly positioning are. to as to alleviate up to try got think certainly do operational can. that We're as we've I work

specifically As across that customers cars I most said, buying saw the quarter. the the dramatic in business, in and very we growth but was

a and that. lot we got think hard I we're to now So and it. alleviate good we're making feel very behind of about And working progress

Operator

Next from is Wedbush. of Seth Basham go Please question ahead.

Seth Basham

afternoon. for material? what sale. good My I'm available on as see question on Thanks if units can And also because is follow-up when percentage that the a listed sale that And define XX,XXX units the are as being inventory, is do XX,XXX a I site as And inventory the lot. today, What marketplace? today? for of is many you to

Ernie Garcia

Sure.

So, let's just sale. are that units for start first with available

that data for QX increasing The throughout letter, cars average immediately shareholder was was which for were available for we quarter. perspective that in the So the X,XXX XX,XXX, was average sale. provided of QX, the

So upward and continue we're there trend. on an to expect that upward trend we

that time, that types. don't to at be just stick metrics. think break I with there. start but And speaking, expect the we feature impact inventory So, least expect probably we hopefully to we'll generally built different directionally some higher when it, could we spend on out level our more that it discussing thought until that's time we'll that helpful . results, We would just When materially

Seth Basham

helpful. Okay. That’s

Ernie Garcia

may help also well. then be And hopefully – as

in of and So, approximately our perspective year. COVID for of immediately inventory to, XX,XXX prior terms last peak in March immediately the available after of was kind of inventory total onset

COVID. even approximately have in still QX, the to seen So, that half the we growth onset were peak inventory with we of that of the we prior were

much, lower I please levels I we'd obviously go like we're ahead. much apologize to at. So, than be interrupted,

Seth Basham

by were that that’s XX,XXX Am can't quarterly XX,XXX units right either a now, for dramatic XX,XXX second imagine over, yourselves I party. right in Okay. or the available third not something listed Okay. for I quarter missing pretty versus average sale sale are that Yes difference there there? a now. by

Ernie Garcia

out of different that at we've or immediately checking locations. think on considering time a I customers stick as there customers given those to point number transit obviously maybe any kind in are I The in the And So, the well. you available would of numbers are then units. in with purchasing, units

that's at directionally hopefully least So helpful.

Operator

question comes Our next from Colantuoni go Jefferies. John of Please ahead.

John Colantuoni

Thanks for question. my

capacity sales. Just the understand between interplay wanted make I and to unit sure production

be separately, then rate says and governed second team sales record will looks a unit the additions primarily like by outlook So half recent production quarter? week. a see hiring interpret third from there's sizeable sequentially you've in by the to Thanks. I quarter weekly production of XX% parts moving sales But know capacity, aside ramped to about it the and operational directional increase in we comments relative lot set the unit ramping for in infer a the hiring. your second most the should July could hiring to

Ernie Garcia

yes. Sure,

the well. operational hiring technology suggest are and across obviously and groups up groups our of So, our that But I corporate across vast think across you booking operational of to some increase in should people we're as interpret the groups. the majority

behind includes it operational inspection but show to hard purchased, groups. kind in catch capacity, our to will working show other of cars We're then today, that'll that work we us will show that those produced. have to that the constraints cause up have up alleviating already So available also will in cars through that And And we in kind not production we've first across other inventory. up. allow up which the of yet centers but increased then

John Colantuoni

much. so Thanks Great.

Operator

is question [indiscernible] Morgan from of ahead. Stanley. next Please go Our

Unidentified Analyst

Jonas. Thanks. behalf on Adam This of is

consumer improvement? Thanks. the two from the getting of customers, one where are Ernie, can are make question from one biggest you Just the areas feedback the or what experience you

Ernie Garcia

the – it's going across better I today, But that can across alleviating had think experience it pick probably we where most I important is I'm time. thing millionaires make a constraints. continually there's if one to our

see anywhere can and above those lead in constraints we think automotive retail. constraints. above anything else would we're to else continue that up. our we that anything our are are to otherwise deliver constraints NPS I can to meaningfully automotive didn't constraints, friction continuing show to But versus And meaningfully available have retail. Despite be able if we experiences scores what deliver

having show slightly reschedule ways. different up odds it can show registration longer all can higher in So in delivery constraints times up could the show time of delivery They delays. and missing a in of up that to kinds

quality So errors I think, the now right extremely machine catch experiences, delivers seeing. high in built Because also most experience. given in and that important the thing that that we demand can have up we way that is a the do customer make to absorbs we it's that any it we're customer

And to we're able to in there. behind. staffed and well, built You way mistakes we're always a that seeing. when volume as And here be we're we're the properly for make that today absorb

one area be would that number think I focus. to the

a spoken before think lens about Carvana. XX have we've I taking plus groups how we across product longer-term

think those single the of product all a exciting one I with over has is place. improvements every extremely myriad groups multi-year that roadmap

think of I today in but wouldn't lot for single better to continually I to of we're And things want a experience that try a make there's even this any lot out, those to think I opportunity. customers. there's investing of So,

Unidentified Analyst

Helpful. Thank you.

Operator

like to closing for to I'd That the concludes conference back turn question-and-answer management comments. you. our Thank session.

Ernie Garcia

think one myself thanks that to dialing hear We only for on I first always team. doesn't and as can I calls. I Carvana quarter and because wish odd it's into it the your across And the completely, for profitable had these questions everyone venue. thanking sincerely, thanks time, Well, come an I you call find always our as

I that is gratitude. unbelievable you hear an our so milestone. hope absolute This And

fought we've a done together, who times, ago continually see, today COVID have extremely and those we just and out, whole time, of when the proud seven, things and together, was fought For was battles long of it. a million to and a hard been six, improved, stayed and I'm through time figured we've lot we for years eight we've so we here much together, so there

parts that contributions. of thank together please for and you this make the so Carvana. happen [indiscernible] we you remember And all does without your always not And up just

much. you thank so So

to moment your And your get of, them Thank appreciate be We proud. we of you of. got of But take I all. hope take and then in up you a to feet proud kind space the have you so I a do. and kind be down really let head We hope lot to put it of head right a and a we've go done building far. to still ton your kind lot because it. don't

Operator

Thank us. for Thank concludes you. That today's joining you call.

disconnect now your may You lines.

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