Carvana (CVNA) 5 Nov 212021 Q3 Earnings call transcript

Company Profile

Participants

Mike Levin	VP, IR
Ernie Garcia	CEO
Mark Jenkins	CFO
Sharon Zackfia	William Blair
Zach Fadem	Wells Fargo
Brian Nagel	Oppenheimer
Rick Nelson	Stephens
Rajat Gupta	JPMorgan
Chris Bottiglieri	Exane BNP Paribas
Michael Baker	Davidson
Nick Jones	Citi
Seth Basham	Wedbush Securities
John Colantuoni	Jefferies
Edward Yruma	KeyBanc Capital Markets

Call transcript

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Operator

Good day, and welcome to the Carvana Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [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. ahead. go Please

Mike Levin

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

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

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

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

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

Ernie Garcia

thanks everyone call. and the for joining Thanks Mike

recorded our consecutive becoming nearly XXX,XXX march automotive third quarter customers; continue as revenue; positive of grew cars sold retailer. $X.X profit We over great and by toward was quarter second another profitable Carvana quarter largest and to total the gross had of to for we The billion most XXX%; EBITDA.

which numbers the these facing strong that making in delivered and retail the quarter, and to despite wave volume, both quarter the meet team peaked chain. implemented with Our operational choice ease system, entering found mid-quarter late despite Delta constraints, while of purchasing significant COVID the the operationally Since parts the onset demand to up we we're we to ourselves on pressure various our constrained the operational we of pandemic, in catch seeing.

otherwise done constraints back those have an While team our where has tremendous made might us exceptional has hold job we been, and throughout. relative to progress

been in the fact, did many per to the delivering buy experiences third times the in and to we as of all quarter the millions become did sold invest In quarter continued cars because to sell in we technology, This in pandemic, eight and for. bought and necessary continue third as times as is of possible three long-term, XXXX we people, the quarter, that are year, we've to third we infrastructure of many customer focus known exceptional the roughly, while cars the XXXX. on as prior over and we

with make entered detail into To believe that on Shareholder discussed hard recently choice. exciting we also progress Rooting Letter. clearly in so Given right We've Hertz is our Carvana you. has opportunity, everyone across more with thank worked this our the possible, to two we partnerships our continual

represent. to so over the time we details significant, plan also While to both time. each share exciting very products, underlying fundamentals these potential. scale excellent These they color and and they're excellent meaningful partnerships providing very with their and is exciting, we'll they're early opportunities at what respect therefore, be has potential additional financial, this on each stages, our of But are additional partnerships because ambitions at of not these

the to building and the scale, platform customer constantly exceptional and continue continue we deliver experiences to Carvana As our increasing increase. opportunities horizontal to handle vertical

As assess of maximize the opportunity, to for to forward and we our we our necessary the has our effectively make growth must balance capacity simultaneously and scope thoughtfully these progress. increase been opportunities. inception, continually business our constant scale appropriately focus since manage the explore must both And the to then case and to ambition with

at in plan spend we'd and at energy business far, our can right to. what done be, the future we need into getting this tackle team building we these like in So have. job capacity to To managing trade-offs to has these a and to Carvana opportunities build the the it we'll capacity think good more to given continue

forward, overall market. Looking quarter, reached revenue we're XXX,XXX $X.X We've scale cars of over excited. the approximately a of billion yet only remain we and extremely X% still per of

the is and we experiences same today we doing was value costs, scale, of the that on exact opportunity. our continues. maximize our focus on them, for leveraging we The building on the remains can on very provide along them, Our our with so give technology as minimize perspective beginning. it all the to on on to maximizing customers, Mark? It march long-term

Mark Jenkins

size. an the was of XX%. another variant increase Wholesale $XX. GPU acquisition Ernie an gross thank of profit an customers. The loan for the history. increase and year-over-year on $XXX, was grew more industry an partially beyond. higher customer XXX,XXX, highest $X.XX GPU to finance, prices both EBITDA, ended strong increase Retail us Total per a of giving and positive totaled by unit by quarter joining X.X% flexibility execute wide offset of throughput, XX-month the Retail of which wholesale consecutive resulting trailing from revenue This per The units vehicle increase a in positive lot, $XXX. ratio. billion, quarter $X.X a second wholesale Total increase source marked and This costs, by production was retail quarter our was an GPU XXX%. decrease driven in by to today. primarily unit GPU prices, you buying QX. despite plan. Thanks $X,XXX, gross higher XXX% $XXX. other change in was and wholesale higher increase strong growth all and driven our second was due liquidity was on from profit reconditioning $XXX higher Delta cars of investments part significant positive $X,XXX, sold us for impact primarily Carvana. in record $X,XXX, quarter $XXX QX with EBITDA in was resources, driven of impact was XXXX quarterly GPU and in of and the of We total volume, of is average for execution margin unit billion approximately Other significant our

variant past and of in the our network preparation IRCs QX, to and from operational notably, throughout teams our allow production We new and impact continue number units our cars To of retail units mid-quarter remain focus in grew the in for are manage by in meet our launch units in an production immediately on reduced growth our XX,XXX experienced end We we QX on buying building to retail which volume. focused remain Delta from we sales inventory growing well on XX,XXX demand. higher capacity of to executing to on pressure inventory on up benefits quarters The XXXX of to growth. limited on available shown began the to despite demand. to search metering Most increase the vehicles of sold. increasing the to QX. retail to track customers explosive volume, We in eight catch results, bought customers IRC available the future significant ease our units two capacity an system and average in we system, the customers and also cars placed constraints both immediately

to an toward in increase expect our We QX capacity operational eye XXXX. with

units, to XXXX. operational margin Looking year growth a In expect forward, to our be QX, expect by to retail we total governed and revenue, record primarily EBITDA unit capacity. complete in retail GPU, we continue on

revenue more growth aligned in expect closely unit QX. QX in than be it with to was retail We growth

year, mid-X,XXXs GPU We the for marking substantial full our expect eighth the to gains. year consecutive total in of low

expect than We seasonal in lower pattern QX. QX GPU a in with QX, total

current to EBITDA leading margin with a prepare to SG&A XXXX beyond, to for business plan to full in in we to and up for breakeven retail Finally, for and growth invest pattern both year. close continue the seasonal to and demand and unit catch the QX in

extremely are rapid of proud made constraints. navigating company managing while environment, in XXXX, We the in macro progress the operational through growth and we've delivering unique

now ever auto leave us year take attention. units of to you X continue excited the than and Thank and your We'll for our and profitable industry more our most goal the path long-term to per largest million retail toward retailer. than delivering model about more questions. the relative becoming results Our

Operator

come We with will go session. question [Operator Blair. William now from Our Zackfia the begin first Sharon ahead. Instructions] Please question-and-answer will

Sharon Zackfia

Hey, of more you was buying make XXXX. I good on that shift of search hoping I quarter, of commentary saw, correctly. in all the like impact kind to that the can the level from you're talking cars afternoon, that down the kind results I about And where consumers color customers? took I you the were concurrent some provide guess, then you metering how you I that'll can early back normal an of mean, you're and just be then to sounds it much to guess dimensionalize understood that sure And that? want

Ernie Garcia

Sure.

of we've that go and then there. start me can with let been from So, we kind constraints facing the

think entire primary cars but business. constraints then definitely continued saw the the buying business, QX, in strain I additional put most the which driver was very we significant customers and of on notably, in growth the from has

COVID, otherwise and it up it it hiring little given the was in a environment. ourselves little especially might behind, by than was think harder we centers, catch the a to unique bit bit found I probably have accentuated been inspection then

think constraints. there necessary actually be and some us that of longer that can to increases call resolve, in greater really on clearer the amount to takes is, have I them by calls. what's work are than we delivery back, that of, transactions the that have gets and it we network And reschedule additional we can bit If from see I the kind on business kind full so that put we we'll are kind certain And a a is that a what a been strain to To network. logistics logistics to question, behind, if get legs, increases that total of inside going bit customer on mean in customer have see. delayed, more of the that's we little because make delivery

and And transactions. so kind business [ph] more the see work total grow you necessary and of, can than actually just

into we in then so starting QX. over and QX saw And spilling that

general, varying a constraints, us, XX or question, a a us over demand their buying sort notably, and whether someone, over want have of answer they they're funnel, the question? starts how a is at does when they most maybe looking car and is reduces we're have we on to nature difference XX levels not historically and and itself service our they're they because to of last includes the delivered, levels amount what look long can think answer talk certainly so elect little in car? had last out, a want bit, would phone a to buy Now, And In the out the It the specifically, or we find and is said, I I of generally deliver getting delivery date, The seeing us, some quickly of that sales for last car of life over gets the it customers into of of car kind how us quarter to service to was and of you'll three life of and and see And kind can includes our this where that faced likelihood and system think throughout that causing the to of and that's that move number four. active, balance. if and If looking to top the is we the things. with then fewer kind up, demand. interested throughout we as the it the for mean it constrained, see therefore, then we process And then be balance you'll that degree. we're sales or therefore, say and restarts we months. been below them kind the conditional call chooses in they shows customer car take many through catch from go function normally those approach to that to from a that customer balance back I up that months, demand a degrees,

it I total would have with for saw, we than to speed the think that that move. liked grow, more we just transactions moved

being to a and of we we we that So, be average, certain of reduce can markets, need to inventory have those most alleviate associated if vehicles constrained. was several, were very a work but maybe in amount we of surgical of which inventory market on see to kind certain that more we can amount That can them where position ends that that very up pressure which we of logistics certain were in the chose tool, groups powerful choosing reduction and it's classifications We people take to the same legs are there reduce with certain on. places of have because just in with what was places. effectively what the displayed reduce customers conversion, really inventory see drivers, just and notable

was use just the fewer and And effects a us otherwise to so they the for was were saw have likely car for tool from that would to they looking they're effective perspective seen average cars lower. customer than a to and find the therefore customer very

want wasn't an it, -- a to overwhelming effect. that of quantifying terms it wouldn't quantified wasn't In it precisely factor

degree the think that period we wasn't longer that the to we're front bigger is ourselves I demand time. better to the get a just of effect allow and that the But a general all seeing. in implemented out ourselves in way we've behind that certainly can of set then been kind over that tool the that's quarter which in catch put up of back to so we affecting position

Sharon Zackfia

on weird operating human this want you just you in that you or Are the I issue? is a complexity guess, think at in is the to when environment is this of cars issue this just helpful. super in That's where all it staff tech about mainly be consumers behind you're general, buying it from point? a and

Ernie Garcia

Many think we're return. generally then they it inside when from reaching and take person can of are a buy across also Those payoff to dealing a Carvana. Carvana and order I longer. and we're asking bank groups with in processes this we groups all that different issue. then different we the relative banks where like we're out example, understaffed -- Many for First for be. environment a of in our title customers, to And extends get of to cars operational outside

as person So, in first I of more priorities and to GPU, expenses more inside then issue Carvana. our of kind think it's I outside of think Carvana if first of of expenses and means automate the then technology and order generally experience your And we process. that building across past, customer the outlined time, volume,

getting immediate, further part also time. of it. lead-time we that's of solution automate that's more generally people. across But continue Many these to the of longer than more So, processes, of, can fast-acting kind

Operator

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

Zach Fadem

afternoon. good Hey,

on bit last follow-up to couple want just a I the So, questions.

and think variant is your the gap in and you share actual widened the and labor the on of with then compressed Just or new XXXX? metering And unit IRC between through the in anything move or quarter, can with constraints do quarter? we sales those timing cadence as there IRCs all demand you your openings, Delta

Ernie Garcia

Sure.

this way first balancing. a that kind So, I steps natural we we're would of to on we're quarter, and just and just our say in that the is widened we additional that of quarter first think articulate would believe kind proactive meet the ,I system demand the took we in

widens. I it do So, think

success we've think we're of has the constraints, like constraints our to talking over and also I when alleviating sure out want to to I that that. point work I want those had quality and Now, time make the about here sure, sitting do team done make

transactions got as the in the times of by months prepared over to all we've correspond we've total grown yet this is I the it, my two been terms three said, last last the So, three XX years, eight to it's constrained times. I remarks, over repeat over years, and but customers previous

seeing, been been been while think pressure, and a continually I up. job. very fought very the they've demand catch also the think of to have seeing, exceptional relative quickly. constrained done under scaling They've we're with So, teams the that demand we've I that an we've to hard we've been And just lot

extremely so And believe job. and we're grateful to I them do they've a great done

by information As relates end inspections to provide expect we've to the eight cadence only to that the XXXX. open that of the of are kind of rollout, the we

And so giving. for we're of, that now kind we're for with to the guidance going stick that

Zach Fadem

partnership, Root asking go sourcing platform Got the source way your elements as to to without it. on new the well in so a about Hertz this mixing and without of to then as to off a to I many let can't wanted appears be the vehicles unpack just you And auction. higher But in drill I partnership. having side as of on

curious, just on think it be to marketplace And extent to then could the your economics the addressable XX% partnership XX% expands believe market? what do gross and So, unit margin? you additive like your long-term partnerships this you offering side, to do

Ernie Garcia

Sure.

over generally it those think doing are sure So, want then to build give or scale, a you're We that independent that if way that's make experience. differentiated long-term then think going in want with think and that evaluate for able we I And to this we we about the framework we're to I economics anything to use that believe because things do be we that high these this, time. all kind to ourselves in whatever the generally if make scale building customer of it's true, we want it that me the of that it let partnership, opportunities. of make sure quality we're is, two something we first we we that to start can that sure

this think build think partner's partner, assets -- partner you -- can you there's a that do might to. something you there, from when I you'll of yourself? of going to lot kinds have access considerations do you're think of not I all I there question And we have

go both questions to up to There's can about alignment terms good try resolve, you faster. are with you that for You have to sometimes sides. have that come

they've it So, vehicles questions are rental of directly flow with which not think, whether utilized as around start make their of sense. quality Hertz, a partnership of Hertz, ultimately, coming or is there's makes manufacturer you their all then an I another kinds high to the from incredible hands a relates I'll asset, consumer. in then got fleets into and way that

really quality got at be I hard we So, there. us and a would And least replicate then they've on own asset that then high for to to would think like think what be very to built to that high which scalable we're sell hard we cars and would natural in partners to very is really platform so highly for way. that customers a quality, them build our

And the excited so we're partnership. about

think, about work less think part there's of partnerships that's a I think the to means. means transaction. bit it way I that is per scalable little of from that important the probably these scalability most directionally, a I perspective, what kinds think And

much And to question company there can how that a then, get to for lot you of something of be I of work how be is, of is work there units, to next to do think, and transaction. can it's per it. grow a for a function kind has scalable, much then amount the the demand

and we to So, work a and I partnership that do so car to think total the it's to customer get amount that exciting. that a way, reduces of have

testing then a and them Now, and last broader months we've a couple this with weeks. of we early of in signed the it's for extremely been deal number

job there's take lot nail business us think there. insurance out a time. imagine, really might of to you this we time has consider quality covers more a And done you complication will Root Root, lot that great a way. same figure high is to they've in, but the when So, and I think that business a interesting I potential a a on a distance. think, the The under try in very building kind It's To from dig for over that complicated product I of business. touch

we vision pour because natural partner. we a So, And it a takes that's a share a really can a supposed we what think is anything that work think I for means that solution ton share of to great. important, to work like, both We into view that look it. really build they're

also very so I opportunity also for early. think it's And an exciting that's us, but

And to partnerships, both to it's it very But to work lot early a get their we're be. those like relates of where potential. and them excited would there's about do we so as those to

that working those be we'll we get the to So, to want. place hard try to

Operator

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

Brian Nagel

questions. afternoon. Good my Thanks taking for

we So, operational with a discussed this the first I question I already, regard the but bit have just constraints. to know,

you to the this what understand that you of constraints let naturally? and that? would do light now, better, at starting believe are up see I mean, easing aspects flow think you various at the fluid point, environment's -- but it could much in these at more business to very if some point Just you all the that that recognizing at And look

Ernie Garcia

I I done well that when That's in we think when don't needs the the like all -- -- we either what they think So, well amounts show of I we that we've And work that's forecast to look as of would if to think would as mean would hard, up. right? -- we at that's -- say be don't executed where execute future, at we executed don't constraints like. very least this. accurately show that I when we've that up I we or when through

what's accurately didn't when forecast going happen. I where think we at look to we maybe areas

this several and in decrease didn't a therefore, waves, think that -- we led the several and foresee first constraints. especially, efficiency -- COVID to I

in and prepared from would did said, customers so the we I part weren't not that it. we early into we in buying growth for year, this as I think think see, QX, specifically, cars foresee all most of the heading I of

demonstrated for growth. ability as again, long kind would that like it, the of, very to we, high prepared we've as think of, execute think to levels to we're I

going think so to our that. to to constraints I for and that ability and our what's ability happen then that And foresee to really plan about are execute

in COVID or quite that not, will kind the don't last And The across so not is right is unique totally this And now. a if wave. was you bit find our from then, know. we when We'll a be would came hope out I'm I buying of, of sure fast customers than that we general, true continual spot as cars the foreseen. that's said, thought. have board otherwise meaningful market

is So, investing do now we would aggressively up, what to can lot excess to say we like as the across we I clearly we're a because there. think catch try right demand business of as there's responsibly feel

And how hard this to of responsibly but going the will grow unfold, business so exactly to be we're can. working all predict quickly the it's capacity as hard to as we

Brian Nagel

buy cars helpful. efforts to That’s the regard question from follow-up directly with consumers. it. to Got My

successful. offline, There's other pushing number business, very in to of both so of this been and the you've aggressively now, So, also online a players say. aspect

reacts? players this the that where are seeing So, ultimately greater now pushing impact it and of the fact competition have does does you more an - this, are consumer

Ernie Garcia

it's think So, place the that's to and right think to the that I thing I err assume. smarter

level. and from influx last than the from we've very we're buying more high customers ever seen in of an I massive demand cars think several already a empirically, quarters

all believe speaks get ways. stop customer never offering, focused that to to a that to that’s quality the product the it make we've better that team also can to today, make continually but and comfortable of a that got smart got think lot we've a plans interesting it's we building. lot I believe And we really also on And and has great offering of quality that highest think better. important the while of I So, it we kinds

be what offering So, make that's And it years. several over area spread else between more a next probably to it's more continue attention out there. the building attention we'll gotten sure the several the think of that is a will undoubtedly, quality lot we years, I an our to over continually get keep and last

Operator

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

Rick Nelson

Thanks potential to ASPs. you been affordability about a you rise trajectory. where pricing Do physical pullback any today? on about They've concerns lot. Ernie any Good is in ask I'd a like demand have given and rapid afternoon.

Mark Jenkins

I one. So, can take that

through customers less that higher an think there some able meet rise used affordability that are effect. -- do has specific an budget. to demand meets to are I payment there's And certain used targeting budget. that prices Clearly, that are vehicle vehicle that be their on monthly likely So, prices impact customers as

we're to in you industry-wide, do I if QX. that incredibly I you on Ernie so about. XX% XX% industry-wide, think constraints industry total And have XX% talked growth look sources various despite mean, if sales of the down, obviously growing with quickly year-over-year data But looked it, call order the

there. really, we that testament which I effect I despite really all the to do there's think seeing. is growing so quickly are an industry-wide We're think a that And effect, demand

Rick Nelson

was quarter were that their caused before Thanks to mid-quarter? about unit in final the what back you for pulled pull a things. I things or [indiscernible] that. And that seeing the growth you carriers straw guess follow-up, during And you

Ernie Garcia

Sure.

stays able intra-quarter the think of the further a behind, if even you per allowing sudden you work we that flat, you're the more we all once catching we And I per is faster show demand and -- what work amount up, get, of -- face go you itself. that behind, of think And yourself cycle into we can So, been demand risk don't that where big behind say once growth. then to weren't there to transaction the you saw up. I of we've see jump and happen What on that decision want just the up details drove historically, get up. catch was that and then to influx situation to run transaction I would the can just because further the start and

and get so think stats the continue we centers, our we've see we're service that logistics, answering hard years, breathing the so looking the levels even weeks, at handling a over seen -- an We've ourselves at about inspection behind just given caught tough. time up. that's tough care, when that seen it. mean, there. proactive extremely up, to I catch inspection general, we back customer we've so could COVID lot and centers whether it I another looking a better I several up inspection what big measures there. making we several wave, room to we've done better think last little despite progress centers, in have bit in good industrial the get really And inventory decided the we've to the customer last feel that's that's the they built is fact you really which they faced transaction, get quarter to really again, improvement drove several in they've job. but In undertaking, If a we're takes the amazing weeks. made we the we're but the And last all it's And that we over the back take of give who's questions, those -- of major groups, catch across

structure. line We an assembly have

has we've done done there. seen and job they've levels handles service improve great offices, a which last-mile job. a So, delivery great Market

good, think catch but to I which and hard behind is seeing So, do remain improvement we're we working up.

Operator

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

Rajat Gupta

the question. Great. Thanks for taking

that the GPU, guess, likely second benefit bridge, pieces? sequentially? there fourth costs talked inefficiencies think was quarter-over-quarter remain quarter, questions quarter? like has any number couple On a of to the moving or higher price labor impacted intra-quarter just the you fourth strong in component. I about Just in And decline given that about the had lower continued how just GPU the the a But quarter. was should seasonal so impact the recon Just pricing just on than we retail that

So big for F&I. would we And expenses bridge should curious just challenging, you anticipate year next any IRC. just inflation follow-up a just wage or have mean year? overhead GPU on I the on next impact the And I environment and to be maybe face as to then why as lastly, the to continue case? ramp labor IRC the just of remains that And a

Mark Jenkins

Sure.

at So a take the let me there. all of questions stab in

on QX so So we quarter GPU, $X,XXX. a in came It about QX. first one GPU at strong had in retail talking retail

seasonal we COVID, expect we'd to prior to if think see in retail GPU. some I normally think decline back

This very relative I COVID. think quarter, we rates even prior we saw similar though depreciation we're a the up we years slightly pick the saw a -- obviously in to where a little QX. that early bit see in of a to couple effect did environment for year, unique

the had that so sequential QX. in going an from And QX on change to GPU definitely effect

Delta on we The unit basis a in efficiency, other driven part your which was unit definitely out in per That higher did thing, costs quarter. increases which I'd per reconditioning call cost. the see by is then production impacted

in of time, saw at were there impacts dynamic a of we late change. similar And they but this impacts those and so part sort XXXX. sequential smaller were The that

GPU Now a you as questions basis. forward, retail we look a about asked couple go-forward of on

break total reconditioning XXXX, full down We too possible market year. say. GPU. assumptions asked for bit in but say our out you typically would So And about guidance labor effects the for of costs. toward on some don't guidance, in that further on then the gave guidance our we And components it's to you there individual retail GPU the embedded are looking a QX early I

looking any think are the that we GPU in cost any sort be and can compared wait small magnitude of in likely adjustments labor of overall see I relatively retail overall event reconditioning and to to XXXX. how goes out costs. But

my third on be thought that So question. would an your area

Rajat Gupta

Great. it. Got

in one. other But third in the the finance coming or Sorry, quarter GPU. just on like

decline And that service Have was assumptions looking how towards more impact back could contracts business? quarter in? we other the decline should albeit to it about like finance-driven broader picture if many normal customer's take for we quarters? are move on to quarter-over-quarter, started the that or delinquent Just any and the ask, GPU? going The forward they trajectory curious how third color think slight just

Mark Jenkins

Yeah. Sure.

little other said bit So again believe GPU quarter-over-quarter. down I a we came was $X,XXX. in at It

sequential in other the from normal well we would range GPU movement quarter-to-quarter. that think is within I the expect

would sort QX of rates that I interest variability. would the largest early in on within optimizations just change. of came sort small of driver sort QX, In driver slightly finance, particular led lower some it's biggest normal to late sequential rate of change that relatively be So this say a well range was of case, of the the

Ernest Garcia

item as of and what's useful a happen quarter. also can maybe to kind by can exactly could it going provide way I a the if very line be predict business I of that way Rajat, I then, that little think the it perspective and to we prioritize the about very what bit do we're And think doing -- well. think a by internally, exercise hard we often be because

a bigger try So we view. to sometimes take

think suggest the and XX an public I margin, years think emerge. exercise very I if plot all at an And amount EBITDA level because very, look the you so and stability you you'll across find different of in There clear is what you go start I time retailers. on stability. back And of graph, very to that is would different retailers extreme stories the all their high

You long retailers relatively which can time, than periods bit suggests better see a some retailers performing of execution. other better little a relatively over

can financial to happens crisis. what see You the

when you'll our that the we side? that of is public you? compared a the somewhat XX-year on of back that the prioritization, What's important. I like very tend one happening of as probably the poorly have quarter-to-quarter, But variable through profits compared get of in even think can GPU, frame, I structured fairly that are first a last we that now The industry have relative lot think customers up of both started of is how see that putting realize dealers dealers where the the way up experience similarly have look those over tens do result, what history. is sure moment make of to kind to will of what's that in are in not the kind went -- a structures of some transaction expenses there similar are that to write to many their least economics, your of that time on try things just general are going the is is to then was from that very industry. components performing cost customers would and performing we other quality if if and think the across see buying customer And that looks stable our sort scalable see to You you're use, right their very of revenue franchise the to I We're very are because those providing and ballots been or most total reason everyone there you then else? on that another. the different when lines performing XXXX, in that to are And so, look year into frame the are and to to that's And completely well XX things those to the very And this from to generally the that a those the squiggles thing performance idea our you so think a good, they're important is, we that period, good. to somewhat at about is little report where now. And we're in quality year compared similar history, cost interesting. thousands that once at a place that energy auction reason And of how cover add And we There that's where most some there we that is of access important bring which graph, very, experience history. but cost that thing. you'll right to interest these cars chart just you see is most of the capital. offering you that

If is performed a the because And business in some important everyone you're the pretty it the way, in think in very then model it in general And that we it's thing, the buying else. looking cars you to bottom-line, really then return matters way there's the customers. way variation that's to stable think think, when the And compare that, that any tends good, of important based you that's most. looks the about to be kind structured. on long run, compared from what we industry perform at we we the -- most how even there's and

Operator

go ahead. with from next Our come question will Chris Exane. Bottiglieri Please PNB Paribas

Chris Bottiglieri

question. question. Thanks had the I for actually taking Hey, guys. a

with marketplace reconditioning third as a Hertz So seller. party it party seems rebranded the like large units. your same you are At time, forward as moving units you third

units? think you about recognition in these units. partners third to opportunity that you talk if use and about them reconditioning own do like party So foresee with decision sellers the Hertz? an their your Is there conjunction more, Maybe Or please?

Ernest Garcia

I don't apologize. I your five one quarters. or answered questions in of we've Chris, think really like four

early do But the Hertz early So marketplace we It's answer partnership. in point. reach in definitely in at some will think I general. an it's

evolve. to I room to think choices continue of for lot there's those a

I apologize. I so and this not And think at we're additional going to time provide color

Chris Bottiglieri

of least it, that. I keeping count At appreciate you're

SG&A a a retailing versus bifurcate trade-in to on further incur wholesale much trying you Is between bifurcate to SG&A like, and incremental cost you then. understand buy there wholesale? move way to SG&A Let's is retail if -- understand don't trade-ins further, how the car but Like to I'm your different it? trying one So to costs? per of customer SG&A impacting from to that personnel the Just versus you unit selling to buying and a profile a customer? sell transaction is customer, how how SG&A and

Mark Jenkins

Yeah. Sure.

additional start customers mean, I from if buying additional high and cars operational does incur requirements does So incur a level, at costs. I think it then you

go of be be site network -- to back show costs the up up to the customers goods you. on up to to those our cost car bringing would sold pick either things in into of what reconditioned the it like or out going that Some get and have door

set There cost one of impact does cost. SG&A. is that's another that So

just about -- that where the calling in transaction a Carvana buying think a to car than talk be car one of customers from to Carvana. might they're I rather selling their example

-- these being and buying There's from of there that direct also effect buying a show Ernie customers couple bit an of a on example some up And growth concepts, does the of that just that's sort in cars the efficient. quarters. SG&A. customers just less touched cars form but So in we last the in very also from costs everything, indirect rapid takes of are that of experienced of

that so think And and both costs costs direct are of I there's cars indirect by from buying customers. those driven

Operator

Our will with John Blackledge go ahead. Please from question come next Cowen.

Unidentified Analyst

John. on for Max This Hi. is

think be talk build, for next a you'd on of wondering if And through year, wondering through and year, IRC looking environment, then how guidance in And but would rollout the IRCs? if takes you. about not puts there what's of targeted balance the additional through, building already XQ for but rollout typically Thank are that pace the you level building being build, what could inventory for end bit talk the just a to might there? is a like still XQ to able be typical Just us forward, little in could like, the you just you've us that? inventory, a is through should we that the get the on constraints given just

Ernie Garcia

Sure.

really about our IRC mean, feel trajectory. I we think I good So

We new IRCs eight it of end then comes when the XXXX. with And more -- stopping those expect making IRCs, progress. are by to to open we continual

we production second that team. in are think, the have And I of phase building scaling terms the we're progress kicked out dividends. seeing there -- and of many implemented of is initiatives paying capacity, the nice we're off have think I which

I feel the our the selection customers up build it QX say to good we units, level, simplest by took -- website. somewhat the there is, to that, QX. of steps way that effect are I the on to do available on think some And that from immediately available inventory was in so XX,XXX climbing want all the we sales. about about metered that, of cars just it under I But progress to we as manage think made in talked just We XX,XXX we to over think that

to sales. that conversion, And make to do as march the available our driver feel customers, that inventory. is other system. we immediately really relieving operational of so want building available think to selection throughout driver constraints I making up of and that think And the a continuing we a selection We progress keep particularly on about we're good

Unidentified Analyst

you. Thank

Operator

Our next with from Please question go ahead. Davidson. Michael will come Baker

Michael Baker

the whatever to just fourth Or anything that I because that because we better questions. that, then Two that's time, of ASPs sort business may is related the the revenues, same GPU or reducing that, at metering both then customers And boost Does this any you. need that before should happen, there guess, the And the may to margins, may way said GPU. ask I'll or in of thanks. Is Thank the you've is that happen didn't GPU. as related out? that is inventory that guess, flatten out in and they to case don't much cars plan does a show specific way have reason the think One, should to available GPU can any question, equal ASPs process? you retail will for Hey, that course, that I units I I be, think, we quarter. you in why expect GPU and seeing? lift that quarter? of it in or the you does idea work it flatten the there inherent specifically to give to decline? expect naturally see not

Ernie Garcia

the to get on algorithm to deciding on return is cars which first cars results, in sort not not answer the the of to into is particular metered the goes Yes, related that the car. cars GPUs that Sure. in no. search which The question,

the that is straightforward, no. first question So, to answer

think to goes unit that's do give one terms ASPs, to of a when retail think that. think second about considerations revenue if One into ASPs. relative growth of that there's in growth, is go guidance growth, question, things And we we that's the that the on it. revenue On relative retail I of a I so growth couple think unit retail I into And component.

in and might ratio QX, cars retail another naturally from total wholesale customers. consideration impact will both we units. revenue. metering mention as And sales buying is expect of did goes Second from We and then the volume revenue it that's impact wholesale into retail on buying customers volume cars consideration metered well. an that you revenue And to have

Michael Baker

you. That's Thank Okay. helpful. very

Operator

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

Nick Jones

the Great. questions. Thanks for taking

I do maybe equipment maybe some logistics, franchise some to, type Thanks. sports. think the more that's direction large of ahead large your for kind of other thoughts are Carvana And into I think I to larger, of react success the mean, what of kind some other from of you guess, profitable kind there's power I on a in the competitor there's competitive trying caused guess, future? incumbents and kind get getting of handle adjacencies, of the like going Carvana heavy has maybe the reaction? logistics

Ernie Garcia

Sure.

I first hear think the Okay. part got of didn’t it now. I I but question,

So people what there's I you're that. see say lucky I to think, listen, -- going would is, I successful, mean, anytime be enough to other are

And think right. it would think -- others I that's think hard, so right this that enough And from one are default given the that be it kind is you're on the to more can is. much job assumption, this going is building assume things and you're actually easier of than of be think that be, mean notable and a notice I that you give it color maybe that But you're the lucky path think really worthwhile anytime distance, to be I than how getting your to I I making move the business a don't can know, I And and should I business mistake. as this better. to mistake problem imply to can don't keep in that, then any is make a just do our And direction. easy I to

do. remanufacturing And that handling around of registering you're When when a new on to of the -- all into that then cars adjust But that maybe in believe you're car that difficult incredible something work And you're And XX worked you're And varies over clicked broad states with to talking and motivated so have website for visibility I'll really I you're to of vary as still order be different over running but requirements. a that's and their you'll that is the when selection. that, we at view process, it financing, I our in that with that's in really able extremely and period of they that kind putting possibly when about running quickly shipping the from get as across a problem. buying start when products that we've providing be distance car, start the into that to registration can straightforward very really, of replicate. a bunch and first you're well. this $X,XXX information where parts goes think you're country a fundamentally left fast with that. to a would counties give been just relatively is labor on a think side, U you're people that the send handling long through have we car as running kind verifying much with so a can it trade-ins, customers in time. when warranty, There's when that lot financing, easy of to hard, buttons of you're that customer quality, be

keep we our getting built stuff So think we is turn as should the that future that expect a that stuff going of We the climb past build notice now that we're a once that to left also the we better. moat big and sits that in we moat success to then pretty people us, behind that there's think we're job that And that'll to into a is well. having. the lot we that hill, think in

have we'd running So I think keep to our I think. plays,

Nick Jones

Thanks. Okay.

Operator

Naved next Securities. come Khan with go Please question Our from will Truist ahead.

Unidentified Analyst

on from I the is This question. Ernie. Thanks Naved. for one Robert one Mark for for taking afternoon. have and Good

in any growth did prepared about you Is how constraints should improve can So this you basis? higher wholesale the And touch inventory seeing was operational vehicles because Mark, Mark, Ernie throughput right to constrained constraints also, on the wholesale color there's on expect But it think guys your side, the there increased some vehicles on the remarks, question. if to to sequential of I in then channel three operational in a answer due just channel mid to the we demand said, are think and supply you now. stockpile market given quarter. actually, into you unit fourth seeing but going in wholesale you're ask guys demand the

Ernie Garcia

operational I on first mean, expect the with so toward point, our capacity yeah, eye QX Sure, yeah, increase in XXXX. an we to

always to ramp our the it's a first QX work So always us following preparation capacity operational very we year. goal. a half investment And for is significant as for of period exactly this year the that's plan and in

strong. aware commentary market which the partly our that volume question, market. about lot year. -- lot strong of I'm wholesale sure of GPUs in wholesale we've you're has the appreciation there, think are the a as On out GPUs to to I so well this -- And due have wholesale partly of a wholesale seen think been our second that's as the well, been a due There's do very I strong the -- been particularly

certainly some so dynamics you playing of the that outlined are And that out.

perspective, we've well as so technology as from way from a also to able buy cars fundamental process that's both think in of are and volume the made I from perspective, some certainly an customers, improvements as well. awareness our that driving we really great

Unidentified Analyst

Thank Okay. you.

Operator

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

Seth Basham

Thanks metering have you in the question the fourth eased is the My metering again, on a yet? lot, afternoon. around and good quarter

Ernie Garcia

moves just existed were the made that metering. they couple is pulled want eased impact. think There's we in we already that have but real, we the on to to a a restate, that I the again, system bigger the sales on not probably impact not before. materially I But constraints meter have steps the do back bit, weren't And materially. that and We took

that's hopefully, helpful. directionally So at least

Seth Basham

something a at a And the be least of the that's of reason to shown the lack of for on West as or is customers that? found a to than to proximity we other units else? metering, areas helpful. the of IRC market Okay, country. That's to What relates the severe because more of lot number Coast

Ernie Garcia

kind the to So, that impacting to choose different to the say as I that try I based I'm more move think, to it of we show would that particular is, we do generally, relief to a search provide do question up going number what on more in to ability the groups relates of have answer result, cars just of the cars suppress.

if behind. of type customer cars particular to cars And care, we require that more like if so, classifications be that we're work care in customer really this, then if operational that may suppress work inside locations, trying legs, less have busy may be to not traverse to maybe is needs handle of we then to done of from that group we situation those they more certain have market, in get market, more a certain legs a to groups inventory would be when that certain need logistics to that inclined so logistics of that displayed

really but operate so I say surgically. know, surgically, as can fairly And we perfectly don't that, you

so in use type. use by this. location been, to a and by tool which the didn't high a situation And quality it's And of to it's like does us for we vary I get degree classification it inventory

Operator

Our Please John with Colantuoni go ahead. will come next Jefferies. question from

John Colantuoni

two. I've questions. the for Thanks

pulling tight And where at purchases, it's consumer you're towards that your view a much total in to inefficient your just the the talk because a envision about that Just back a out point track, car back consumer profitable, as of gets more market you the start how channel to inventory. you simply of targeting back of felt purchases you do customer maybe wanted just versus that up. increase on for follow necessity, with Investor it's levels new is sales? a manufacturing wholesale percentage to on related And have Day purchases, once perhaps I of could

Ernie Garcia

one best but to puff you're well, adhering we'll follow-up to the do roll of band, not our Sure, answer.

first from cars customers. buying of So isn't I think, all,

would I the describe it. that I thing be not would the think way that's

profitable and way a allows us I access from, would it's then it that on of possibly as as it we're customer better. us that build -- of describe provide is do experience I high-quality it the to think possibly much car want quality gets is we to It's capacity a buying you'll inventory and to a can. to that average can. to much food more higher that we want business so We as as the to we handle

year but you And talked before, do we are I the very, unique channels, normally, a think kind today, market kind is go they're Now, can we're XX to we if acquisition are this stable. margins where there that of speaking, channel that back between about of different very across available differences very time, in if see be stable, acquisition channels, fairly at look fairly to you that generally idiosyncratic tend important.

that customer of normally the think equity index today, that car returns that is a zero, of has on keys car in eclipsed I And and the best returning and which right, off Cox lease number, an equity customer to the numbers lease probably a the a away that have. $X,XXX, it. enormous keeps source number positive There's walking lease from recently means that dropping of an $X,XXX amount Automotive closer is returns. is kind

channel in an So environment. advantaged this that's enormously

constrained of reason that few before, to I are as constrained there are suggested a for the have the auction, And because cars really high-quality there's There's the that has been performance. way it many in reason of auction. customer many dealers been in side, been this making result, off-lease all which dealers aren't being other for a credit and you On the inventory. heavily constraints environment, the repos

fleets in that of The struggled market. cars have to less the to get haven't showing there's rental up depleting. So been

that the of market. in less been it's So

very And auction And the so, the tight. in are that market are margins has been available result market as small. a that very

the better of customers than that is that parts today buying normal. even means And and so kind channel

market of to kind of all cars very relative very that start in to past. world over in also have ways the to see many Our things position just more idiosyncratic, we'll these the strange in think going move this I know able that would normalize, today, have access kind we're time to have they probably us, that, today on expectation, again, changes the buy because these given I lucky a auctions. in are from period normal that in a long be for persistent strong existed markets one as have customers to the don't and another to be that of ton forces

best as and a So could for we'll shifting I as react I'm think that the answer ton is degree can some as changes moments. you for in it that intelligently those imagine to I that happens, sure not But we us.

John Colantuoni

like expense per Thank you. unit sold XX% And one it quick was one, up looks year-on-year. compensation

Just you're building about the capabilities, trajectory Thanks. of about and we should talked reflection expenses. cost a higher the think employee if that's around customer of how from acquisitions compensation

Ernie Garcia

Sure.

that just year, the And where both QX that we also can So for expense first for XXXX. the team, us advantage really places these help half last the can the invest help XXXX. team the just and business throughout to believe of the we in sure relative some so of largest is in business, the opportunities. opportunities many so long-term, unit retail component making in And that take per of we compensation I scale it saw think we're many of us building prepared we see and advance of the

So, those were components. definitely

from think constrained. then compensation up customers a buying as last point the there well, is, I were operationally was that would more thing that mentioned, some I show in we cars component as SG&A. to I And there's expenses

impact. operationally so for unit investing can you're the when sales lead that but investing you're to long-term, per and next and a result, year, meter you're constrained also for as And

points some primary the that are of those out. So would I call

Operator

with Our Capital go question Yruma last Please Edward ahead. Markets. KeyBanc from will come

Edward Yruma

guys. the questions. Thanks all for taking Hey,

you service been look pressure feel some you some do the guys wanted backlogs the strength little clear a to though Thanks. about that customer as have And negative really to How you well? there's something organization issues. bit to today metering and been that's relates You ask of of it the think do about as I satisfaction? at have reconditioning. customer around

Ernie Garcia

Sure.

foremost do. here you'll important thing it's great we're why think customer first delivering experiences I is that and we most So the and

everything So the we it's our of always in that's something absolute mind top at do.

customer recently across earlier, expect lead I well, does experiences. language the and deliver than constrained are I across think our periods, when rated anything to you said, levels some in at as retail with that else in best and levels the use and these use out through time, on the as the would experiences impact get you're constrained much we get automotive customer that out service of we've That to experiences years, continued higher certainly par impacted, there. customer directional to that

effect And go while so, pressure the choosing to proactively we to we to have rationale sales, we've a like seen seen seen of but for of there, strong room levels more that would We went And bit a and into have traditionally absolutely caught that pretty and we the still little that also that a We've seen at. got move back kind move. up. have see. meter that we toward been reduce strong we've the

are customer have So general throughout in when have by great. they But definitely impacted them. the I experience constraints we been think

those to impacts. better. continue course, we have way job get customers. can our the and to no business impact to we of it's whatsoever so a But that puts in on And some alleviate build constraints had And

Edward Yruma

Thanks so much.

Ernie Garcia

you. Thank

Operator

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

Ernie Garcia

in But the once faced And call. quarter, here. was another again, in that That's the number share. And we team. put spot. rose we in. that I we that's And the great we Perfect. the toward a joining And being us to Carvana marching not everyone always say thanks thing thanks foresee. the the this place mutually on you everyone for didn't we're why I keep and Well, challenges a goals great more of for be same continue why that apologize creative. challenge we

next that you quarter. be so for you're Talking Thanks. without doing. thank you. much everything about So We here wouldn't

Operator

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

now You may disconnect.

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