Carvana (CVNA) 25 Feb 222021 Q4 Earnings call transcript

Company Profile

Participants

Mike Levin	Vice President of Investor Relations
Ernie Garcia	Chief Executive Officer
Mark Jenkins	Chief Financial Officer.
Zach Fadem	Wells Fargo
Sharon Zackfia	William Blair
Michael Montani	Evercore ISI.
Chris Bottiglieri	Exane BNP Paribas
Brian Nagel	Oppenheimer
Rajat Gupta	JPMorgan
Colin Sebastian	Baird
Adam Jonas	Morgan Stanley
Seth Basham	Wedbush Securities
Mike Baker	D.A. Davidson
Nat Schindler	Bank of America
Naved Khan	Truist Securities
David Bellinger	Wolfe Research
John Blackledge	Cowen

Call transcript

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Operator

Good day, and welcome to the Carvana Fourth Quarter 2021 Financial Results 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 Mr. Levin. Mike ahead. go Please

Mike Levin

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

physical of and more Additionally, of from acquisition the our auction following US posted release business website details Global ADESA press Events announcement found. slide we today, where the be our IR page Car of on can and the Presentations deck

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

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

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

Ernie Garcia

so. Mike, an along joining Carvana, the call. the had cars. one buy changing our Thanks, millionth car EBITDA automotive our US do history. retailer was to landmark Fortune for positive sold than onetime accomplishments growth path history. positive sell and to had We fastest fastest our any to achieving people company XXXX first the named for -- year e-commerce company faster third ever earnings and tied items, organic of the XXX, growing in started way We extraordinary to everyone, our year in We being quarter. thanks, through year, we the We first became and excluding other full the

operations. toward cost and industry effort for that inside huge framed make our stability long-term That industry achieved Thank mission of from similar continue to is We've adds structurally path. frame to scaled results with directed deliver There unit scale. for our care a of always that care that the million unit little structures. the for long is The always experience level reasonable up extra the with great opportunity we compounding tens who continue value enormously and Work our that everyone for providing customer them, accomplishments, In clear out the must approximately be at ranked opportunity the of year to about set ahead every I'm share is of were any similar also is list. hard. That any While Employers for even of have are customer path, fact must economics cars only blockbuster accomplishments there the extremely Forbes named used over can driven differentiate great the and economics, other it To XX desire dealers technology clarifying. company simply. ahead time customer excited a Best excited unit other of list that stable Large in we and fact of to of always That provide and Customers a viewed frame the focused giving to our efforts production to fully we move any are of choosing that and units Carvana our the Number are XX% I'm US. announce XXX when people X by to team This US the excited top must proud that two, finding XX we company. sold time. company offering to auction the of economic relationships to alignment the customers miles to simple the for our That population valuing our by continue of year of all we We're to retail creation. locations, with miles providing completing of more provides auction nationwide For you way a Demonstrating we the being our of experiences, thousands large goals, improves who and largest million kick there increases out. achieve experiences we always will capacity we XX same difference. substantially automotive been customers. working customers. automotive with year. miles of US center players it many auction logistics to to US We that a quality move locations, acquisition creatively Number has XX% it forward built currently network of and of centers important four, capabilities of XX% the our to one, having population. transactions the population breadth same-day customers inspection XX miles these inspection customers This most our with US the within of and our new XX% approximately in profitable extremely interesting per nation's XXX Number shipping locations, will and significantly these of justifications. delivery starts them to of will increase primary to three, of from being from being together network. in eventually within have acquisition estimate reduce ADESA's million is the Demonstrating within solidifies about it path retailer. of and deepens are and ADESA our ways Number four we and or times it nationwide the the becoming within work our with second the largest us X many industry. to foundation new we will eventually XX look valued the population. with lays

ADESA long-term expect model, also to to our path to powerful from closer the being many our financial We derive given benefits customers. that accelerate our

from are of miles of XXX of customers center our expense. and customers delivered powerful that customer For within transaction can today delivery an costs, proximity how inspection $XXX sales perspective be, inbound acquisition unit lower higher as about economics result rates lower lower our costs than have conversion leading average a better that to to are

briefly logistics activity systems led most any history. to severe deal inspection obviously in in our out. in and quarter, This that difficult. logistics teams At in I'd network, the network up Omicron were to Starting very our Now, we time, hard to it our on late to current But in by we system. like like even in environment. is turn XX% we, have different the else, everyone the operational simultaneously difficult to the is called various constraints like of people relay variant. had changed centers more points with fourth seen hit pretty our It

the work a but rapid we of recent we prices constrained, through as time. with our rapid as backlogs, appreciation have increase to possibly this we winter make While to as severely paired wave, in work it we're remain Today, colluded vehicle are of to it largely These constraints, storms severe out well interest slowed as takes our challenging this Omicron hard rates, the soon can. progress. out of year's time and have working

constraints our has now environment. more our sound to X.X% the indicators affordable complex of much at like oldest While car apply first, to in are our and our this cars our groups more the our the our to we purchasing to are of pricing a we in team that, go. to we operational may cars they incredible. We've by in continue have anticipation in grow up to In has clearly cohort, look to if we has tax made season challenge. of inventory undoubtedly extrapolates of anticipation way but long about alleviating mix long-term customers to managed capacity operating reconditioning year available On And despite find nationwide, market not our that it the our $X.X to annual as been penetration. past, are grown handle logistics This and top to grew throughout customers. help million changes our volumes therefore, the and and, We've last cohort rising sales. operationally, XX% oldest

was per year markets at sales XX% our no ramping Lastly, in faster car than XXX the cohort time same life. its of we're are our goal, Two XXXX million-plus aiming the higher. longer is

have it. the model and Mark? the march ambition the do We The to business team, continues.

Mark Jenkins

Thank you, Ernie, today. all for joining you us and thank

XXX,XXX, making to an to sales $XX.X an and XX%, strong vehicles of totaled sell of billion, us Revenue both another report retail pleased and retailer are one XXX,XXX in increase sold revenue. year in We year. automotive fastest unit growth used units the retail increase totaled XXX%, over of

XXX%. was quarter, increase totaled increase XXX,XXX, an revenue fourth Total $X.X the units retail an For XX%. sold of of billion,

market in grew cohorts. growth grew our cohorts QX, cohort driven market by exceptional was Atlanta of units our In XX% our oldest rapid XXXX by to XXXX X.XX% penetration. retail growth within sold Our XX%, and through XXXX by

XXX markets penetration leverage Total our year X,XXX. or year record and the age, markets was positive one-time XXXX, XXXX, for As completed at EBITDA profit XX% EBITDA key our our ramping GPU of same the we full Atlanta crossing gross of In margin eighth margin, consecutive year of faster of numbers excluding of items. thresholds. year was than improvement, consecutive first QX more per eighth $XXX our unit and of are market are

broad-based, as driven $XXX, gains acquisition to both of $X development X,XXX, in GPU agreement expected Upon by higher components U.S. ended GPU fund sites, in from production added quarter $X.XXX appreciation. changes improvements we gains Our $XXX QX and billion in partially GPU an increased gains including wholesale the We offset total customers and wholesale QX, vehicles flexibility expected our and an by the vehicle QX, X.X%, vehicle to increase sites. and capacity. higher finance committed higher in increasing IRC auction significant Wholesale a In by buying increase $X.X liquidity XXXX, one-time costs strong centers, reconditioning growth in resources, XX. are by across our and in at $XXX, were was wholesale Today, of in items, is improvement additional plan. X.X%, in physical of we in percentage and billion XXXX vehicles in across increased $X.X retail, reflecting scaling purchase have million GPU driven prices X.X% from Other driven acquire SG&A definitive in signed our business. us year, by year GPU financing GPU unlock impact count and prices. capacity in primarily incremental acquisition announced as the by full Total This total Year-over-year execute was from by we units an of customers, we an will ADESA's increases leverage. an billion Retail of driven other. to QX in in In sourced increased these to giving additional well. approximately market progress loan negative price we of on industry-wide impact. EBITDA X XX annual second utilization. was a with margin be average execution to reconditioning including by $XXX retail $XXX X,XXX all the GPU inspection with of financed $XXX made and in significant in the three The that XXXX debt XX to close billion also production year-over-year.

preferred We XXXX, XX. to total capacity our of IRC at total opened annual our leading bringing of at opened XX of We our by units are end full line on of evaluating markets, open plan utilization And these XXX,XXX Following opening year-end. XXth capacity to our our we year-end, Cincinnati, five the XXX. of time U.S., near Ohio, end remain also as IRCs approximately currently full six In to on schedule, additional ADESA with open XXXX. track February sixth. also the to more on units utilization than bringing year new we X.X million acquisition at to we

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

to time. will We expand XX% expect over continue of XXXX US to to in serve the and continue population

year look and another As EBITDA expect GPU we sold, units revenue, strong XXXX, margin. toward on retail we

units retail XXX,XXX over grow to year. full expect We for to sold the

aggregate, and quarter, first through expect in we the approximately GPU Following taken EBITDA breakeven in total QX QX margin. over X,XXX

be the storms winter challenges and expect increase quarter brought impacted and rates. the recent by first on We rapid severe in short-term by to interest chain variant Omicron supply the

goals per We expected margin your expect on We're EBITDA mid have milestones ago, first what excited about We'll attention. such these impact this and you our tremendous to leading public next made profitable a major becoming nearly long-term SG&A a achieved GPU Since as we take now sold, many toward year. progress our Thank questions. the for and retail comes quarter to achieving have range. an single-digit effects loss five QX significant total in unit years company

Operator

you. Thank

Instructions] will Fargo. ahead. We Please from Fadem with will question the come question-and-answer And [Operator begin go first session. Wells now Zach the

Zach Fadem

Hi. Good afternoon.

the rate averaging appear that per two the you've over into business obviously number capacity outlook? can months, your more XXXX had have X,XXX worsened run on new dynamic up But of constrained upcoming way the to fits January. of should unit few half the how roughly you is And opened talk in and this host how new and week. So XXXX, in this second this a factors by the that now been a about comes change on unit as facilities weekly sales

Ernie Garcia

Sure.

number primary the I in quickly be The said really going customer. very connections it rates, logistics logistics those of the made Omicron in driver that in of at my trying got us Yes, say, would as enable a behind. really a a those us to quickly. it's set to constraints to how network. And for alleviate network I done many I again. what we been us hit catch we've call-out by set can should And then I job then the we remarks, team of and and catch We've The relatively also recently back by storms think prepared is as up. to us one. where us So week, And has working storms strong But think a system occur functioning have to that drivers high are this order we've been fully back. back connect a got did great a is winter deliver peak Omicron kind wave, set to another up the bit hit when as car hard. hard definitely and a we network

logistics of figuring then and I the is network are And there, from constrained when now, up constraining about think about we think catching year, the primary it's right any think of the remainder much look I the network, more our absolutely I which So is part logistics then now out driver for remainder it's business. at the than year. is other where sales. you Right of this the

back interest as seen of then, also car quite we've was up rates well. And price appreciation the QX. pretty meaningful in a that seen half bit have go We

on to on XX% has by that we And the by feel yet industry-wide don't logistics of us point really we've holding so XX% kind or the relative just depending impact we that us like network seen where of is. been But XXXX drop reference been back. constraints, of what's kind that's XXXX, sales to and have because impacted severe your

And our so that's underlies trying of put units, outlook all that what into and we're taking to XXX,XXX account and that? together

Zach Fadem

sequentially the then is should QX clear, units be to improves weekly assume year? just throughout the that QX below average we Ernie, and So in

Ernie Garcia

in the certainly and a in they in is inspection strong lot to built volume. the – to do going with outlook QX produce that a lot stick were cars So centers to constrained, out QX I we really inspection up going That's COGS. that I going just the and with we're in were there. of way to quarter. the been because unfold. specificity. and went in heavily impacts We've very Omicron, able the think will to be But built hit what tougher efficiency we've and still show think terms It's got up capability of down, show going a centers of a the that's it's heavily also

that's So look really a I forward trying clarity in through impacts and QX. we're guide then to think and up to those QX QX, strong QX to of that expect kind emerge why will from show to there. And to provide we

Operator

question next go will from William Blair. The ahead. Zackfia come Sharon with Please

Sharon Zackfia

– about Zach. acquisition, the line build potentially of pockets, the as for in excited capacity, you just the Hi. Good not assumed in customers ADESA talk of I through to might don't went the some of what's if a know line get kind you got kind buy I $X can that million on I there, of heard of them? versus unlocking of you afternoon. there? analysis got when billion attrition then the reasonable they what want to ADESA time kind And your incremental on $X you improvements,

Ernie Garcia

fit. as think, welcome I about can a we're We're Well, to first acquisition. Sure. incredible the We you extremely all, it's pretty imagine, extremely excited think of team. this excited

great fit in XX businesses to see think and the locations country, about of I close one talk customers. all together, unbelievable you you the our it's things an this to that all great around I They've got hope that is always think how about are occur. very synergies together. whenever But locations what's come to we so clear the very footprint

it's up add over X,XXX those locations, acres. You

up to you centers X,XXX inspection it's today, of For perspective, if our all acres. around add close probably

we that do million units, versus obviously get from perspective, where infrastructure to of to. it physical to for will where of what existing the incrementally a plus expect customers once we'll perspective we reconditioning of kind from we just and we terms deliver in a incredible because can things volume increase capacity fully have can then both to closer means them. and meaningful really That ramp X we also cars a access there our much up, So out location be

versus as customers that can so trading entire There's So lots working auctions about strategically together great inside – well. that integration, with business that buy, I that a talk this think expense And we model build respect for is companies, we customer's cut one to in is kinds And it's helps think really difficulty that And with of think basically When centers. machine we about another. that's actually used is the we as just we cars. big mental be market I kind analysis exciting. often our system through with the can to then of finance the inside a fairly players it a dealers, fit. generally think that way we simplest of can We've there's really And of kind reason think also a ADESA walk think big is is cars trade vertical of part with system. that that player really we we possible inspection all about system. same when as a mean there's straightforward much And that framework. be you out and to players for what want big of is are are as used interesting

need that high. when order centers expect on locations and centers. got They've very time in to out of through locations but it that production Coast, pretty got of to the of West to get would locations capacity up those expect pretty terms dollars, would out, to how very the especially cost get at takes they many inspection you expect operational. in build, in are them to that be on in the we for and acquisition. many the expensive get in the would high them locations country would inspection Northeast, similar get that build think And and picking this of be also we're We look build areas order to we XX ADESA them in long zoned it find we expensive I us

we perspective, probably access business. probably with very instantaneous benefits this we close that then buy get from great just So the a you're build logistics versus And simple think analysis, and -- you're pretty close that actually. to

XX% to out growth XX% bit the light Atlanta. think multiple out X.X% to growing we're that think to it talked or now being about the cohort in excited five So inside market oldest in we is are just beyond significant really X.X of generally compound think kind opening you path if time. know Atlanta about that by my it lays future. years. to context look that But materially to it this the million next execute. point know of because sit have up our as and grow rates a continuing is clear I even that happen at just see clearly of really units look that, important businesses exactly that's a don't the and than pretty you And many see very we at at that in you share. slower I years, And over where a that to businesses does We long where that path other as can very you'll they XX then growth you going just

year, to one-time after quarter making, our year all EBITDA excluding been margin point the been lights we been up had after unit and if best our this had our adjustments. positive earnings look extremely you investments think We've path marched we consistently. GPU ever, been that we've economics, every first I positive year up the bit we very the so is which marching We And growth at year all exciting. to and think But and EBITDA year We've exciting. supporting volume. is first think we've just our the

reasonable then other acquired and even to so all build so and faster is that this that of lay going at on and think basically we get is together that out relative then with So this that think to assets execution and opportunities, that cost top we're more comes is an to, we access to great from a many when footprint you just very game you put cost clearly would it here. what much that

now in so has extremely big really it. that because And we're to to in hands, spot, got and is opportunity been ball our excited this path never clearer. And a the the we run and with be is

Operator

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

Michael Montani

thanks saw higher Hey, the in to wanted out of if able just quarter? course then the to question. a you being year? can little used how my the to tease of prices costs. and to impact that taking for the ask car see of on I a you about the follow-up bit help kind out the rates of impact vis-à-vis And process vehicles you over I had playing the And some

Mark Jenkins

Sure.

impact reasons into of sold are there And with really is Omicron for cost inspection the different the case, meaningful goods on think have particular, QX. well. logistics reconditioning and I It's in network I then, and think centers impacts. the we really would Ernie are that. as first I of about if quarter, a our the it's in which a some this on touched to of of retail about So And with number I been efficiency going Omicron think digging start in the

costs and have retail inbound on QX. that higher so reconditioning we're higher transport we impact a And to meaningful to see GPU expect costs expecting in

interest historic speed, see Financial to of this. Crisis in to a short-term to terms months have you rise is, what few relatively I I go to think the I rise in like think the magnitude we’ve as anything rapid basically XX the think, over and seen last rates, the XX relates back to Global years the it

there's offer between other that offer our will some and typically will QX. rate we a when because we time customer rise then monetize so, And that GPU loans, in we lag and rate rapid impact

moves, also lessen QX. but on there Now, will of future impact benchmark we following scaled impact transitory be we're changes, rate rates we've the our hedges there raised have -- up and a the to

think, mentioned, severe in out we an clearly had well those be QX, would I weather, So call Ernie impact. I should as effects, having as

of impacting QX. number a are those are So that things

I XXXX. business, think progress when I QX through for in the very in expect view, excited the be obviously, a we're in GPU to tremendous total. about take the X,XXX we QX over progress broader made

think our I we're about overall good so, progress. really And feeling

Michael Montani

And Okay. then the of filings some your of the side, competitors. consumer of I the as in to from signs as on some some behavior well if normalization credit we're relates could, as just it seeing

wanted stimulus and just get added to in further that and credit the are you we some that seeing charge-offs how you So terms to from think get evolution, as of delinquencies color about about kind payments. behaviors all of beyond

Ernie Garcia

Sure.

of, we I with like of operates the So, that risk start generally the guess, asset, at as I underlying our complete credit we bonds. sell model would as that our is, securitizations -- kind through business well again, the time off way that the sale the residual

losses our flow were would the bonds couple from if future over of any statements. would into the that kind last to the be that of We impacted doesn't expectations of the for directly extremely directly kind necessarily of priced strong sell. neither through we kind that of get get in nor financial performance so performance And outside benefited future, worse years, we

flow of through So financial just our directly doesn't statements that for kind clarity.

credit what we're through mid-XXXX define some seeing where better approaching It there performance I than behavior. better pre-XXXX. mid-XXXX generally the by think consumer is, seeing, average, is on that of normalization I still, think better thing is of the is, which same industry is as of was it not historical, was maybe as kind of it's kind as historically normal in much But we unbelievable. times if

to think those been, I don't would but I And I say, trends, there's normalization some think just it's so yet. may be very different far. something So expect of there any orderly reason

Michael Montani

taking for Thanks question. the

Ernie Garcia

Thank you.

Operator

next from ahead. Chris Please question Exane Paribas. The go BNP come with Bottiglieri will

Chris Bottiglieri

Thanks the guys. question. Hi, taking for

their got processing then, the already this are processing title business? people, or process consumer? does So of fund to completely titles And are processing versus where transactions there for that different? -- compare first your and makes How utilize follow-up. efficient more synergies to for get dealer-to-dealer dealers. title core so to Like, have one ADESA a you trying clearing at, on out dealer I somehow the you is able I'm

Ernie Garcia

Sure.

start, a dealer generally simpler dealer doing would process, a as So speaking, transfers. say, I to it's

And so our that I think there years, some be the may found share generally benefits But pretty the think way you and as teams there. those that will can Certainly, think to over think about simplest speaking, about existing independently. we separate. is learnings I processes

an the registration job over Carvana approaching I entitlement Now progress. brought what you and so, we kind We're of last experiencing to levels similar team of definitely probably now the inside lot team or pre-pandemic. in it because title months up, deserves of unbelievable six registration They've think success a shout-out. done do making a are

So that, really this hard do to in and I that's environment. exciting, that's think

a there's we the there. working things make DMVs with customer going They're on our the great very partners that well experience in of lot as various as simple to sure possible. So make

excited very continue as ADESA So progress of on has, ADESA about we making long I or business as we the we're have, then plan front, we're period And over to the that think a there. operating I think time.

they wholesale continue they'll processing will inside business the and it handle to the people as that So have. in for be usual, all way business their the title ADESA,

Chris Bottiglieri

you. Got

I auction correctly, you're companies benefit instantaneous. Okay. then -- but reconditioning this is, I'm I'm heard for to acquisition. And think using sure heard I be prior that if already sure I think logistics you the not pretty follow-up question not correctly. I the you said two, would

some do you handle billion question can need need cars? for $X to one, my of any -- you reconditioning to facilities day and to your these on that or do partners, make you recondition is, that deploy So

Ernie Garcia

that to we instantaneously. I make don't want because Sure. I clarifying sure high generate you of appreciate expectations too Well,

network to of instantaneously you're I as us lines think time. can probably much to, we're that build as just but as plans provide from not And that improved precise that teams that we planning get our and will That incredible to referring we an logistic possible. as to have hustling certainly yet, soon possibly we on benefit time any enable be spin a reconditioning think very language meaningful to take and will I will capacity significantly capabilities.

Chris Bottiglieri

you. the And Manheim... Got

Ernie Garcia

Sure.

so I But guidance we'll think on partner yes, I capabilities. of that away offers there. So both third-party do too reconditioning. do giving with again, stay and we from some think Manheim precise ADESA

Operator

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

Brian Nagel

good Hi, afternoon.

So my ADESA on additional acquisition. is the question

some of a a prior may But off, want understand of questions. follow-up bit be to First the kind to of There just the here. congratulations. mechanics

than So there like relationship for you're an the just operate the IRC facilities IRCs? of going all or the will to same, the act will done, degree ADESA built said that Are they where acquiring, differently when organically? some is you they facilities ADESA function type and

Ernie Garcia

Sure.

capabilities of We've So starting inspection logistics our it. is on will and X about time. I good got good way to capabilities, as think simple they got we've largely businesses a same our and is out operate built that kind think point we've a land maybe center the over

we usual that of I that And well, the very be can in to go so think auction then they historically those ADESA on together. sort we working those place to The retail as I does. X,XXX We'll and way merge work both historically the sides. of has run recon place business where we very for be the And it together is land them the be working kind continue similarly can so as will quickly these teams we of acres will of think to operate way and have. around country the kind can

of low, So, are that's secularly, in there's happening important desire such ground large buyers and a transactions and auction auctions historically part cyclical many by going digitally at kind is place on actually both there's or of to space of can where, in go ways. secular integration, a other meaning that in transact we're sellers, then means great And of though with integration And very low, even cars customers, why components at their volume most of often can between fact. where on kind auction more is be the utilized us. person. spend the trend fit at less time of many least the single is very a place cyclically, this the time that auctions, then a that And

and these a meaning opportunity less there's of these utilized for so average there's -- of lot XX% functions means is than coexist. locations excess And together to for location work today, lot that to at us the land a

and need is So, again, go to we now take job for very, just clear And for think of lays many the next our that's we to very opportunity. path that execute. years I this this us the think full advantage

Operator

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

Rajat Gupta

metering. congrats the deal. questions Thanks question Great. the Maybe for on taking and on a

that labor Thanks. earnings today. you logistics how are on follow-up. Where comment Maybe sales? And are I a we to exercise? leaning you you about talked to or if with could the have that bottlenecks Are with still on You respect meter call. last

Ernie Garcia

Sure.

of tool logistics being So, the to still degree, last that visible inventory see. amount That we 'metered' today that in was a specific we fact, in network was to way is similar the quarter very utilized suppressing demand the that given constraints customers.

work really the to we I So, expand in form that we've that, the as the inventory available of in growth not think, is done to That kind means of our through capabilities that utilize tool. our is of seen yet flowing are that great continuing evidence inventory. much production to growth customers team has

make which to So, we forward logistics our that, alleviating the able on more focused more something have we network to constraints inventory in look ability do once are visible to of we is the we customers, very to being that and do.

Rajat Gupta

metrics, the of comment fourth well? the just second could some these if go year primarily the And of shareholder XXX,XXX bottlenecks to getting And the around to it maybe the normalization you units the Understood. on comments demand capacity-driven the that then some in on aspect. assuming quarter as And letter away? for is quarter is

impact due is the segment XXX,XXX Do in Thanks. to demand an consumer You successfully from of a environment. you the low-end a pricing to terms mentioned expect number? the that in order that consumer normalization of seeing bit well hit as

Ernie Garcia

Sure.

resolve the guidance year the think network the do and be to what is careful we for too the So, like our on that constraints what expectations that in demand industry somewhat environment, kind today. we want see is much total, logistics But similar the giving say it remains for underlies we in looks then again, about basically guidance. to what I'll of I

And think so expectations. I underneath our what's basically that's

today, I think As have -- we we're part industry. I of said, the

we us and the went there's how as constrained up as rest to of as not affordability interest us impacting a it's But impacting when quite car prices impacts that's much So went are, and to up industry. affordability. impact industry, well. as seen we going down bit the slow have that rates given the sales probably impacted industry-wide But be it might

side. we And comparison depending industry, like on so is, well. in used some see period on that of what give do sales the they're your as XX% our look take, evidence the XX%, And then down to in data or

driven today logistics sales are the demand by network flows sales not our the While through the to and the you that largely still environment, demand by realize. environment

look if example, less through so they're slower that XX% company than for $XX,XXX, are And our you customers the making year-to-date. about growing at than is

If normally, demographic see do you year-to-date. you across segments. XX% tend about when growth $XXX,XXX more, kind all to the growing different consumer they're of is look cuts, And customers or any kind of making company you at similar these faster reasonable than

income consumers, impact had of clearly consumers think And in showing so lower lower affordability consumers on younger has up that It's data. that and on kind and pretty FICO shows the the I consumers.

assuming that, and customers affordability will from environment. a buy price impacts importantly, that that. for improve most likely more place remain lot to for it decreasing There's would that customers a potential a where We drive most somewhat hope So they're environment similar. we're again. ready would But to would result of actually

what we assumes so for, outlook but today. kind a And we're to that, of similar think hoping see is what we environment probably that our macro

Operator

ahead. Baird. will Please question next The come with go from Colin Sebastian

Colin Sebastian

guys. Good All right. afternoon, Thanks.

color guess, in you visibility and unit think on said curious were current if giving QX. what macro So if environment I of the and be Omicron, how around in sales that could And you the favorable trend, the in part quarter sort and a you material would some of guidance in that's February price beginning declining trends you. you you expected Thank impact add here pricing versus then, the the what's environment follow-ups. a the right terms a of you terms would Ernie, into environment earlier seeing there profit just with couple gave? later first, of pricing lower in faster outlook, embedding what of improvement a

Ernie Garcia

Sure.

be can start quarter a impacts number for So the these see tough I of we think through, So to a lot of to first going right? is reasons.

on, That $XXX less severe start So was through centers. impacts In we of bigger we'll This flows order and $XXX the and smaller to think on inspection the COGS. that COVID a kind flowed earlier inspection I waves that right? of means just wave, that efficient. saw centers with COGS. Omicron in then more are the through

is those to And you kind do, those costs recover, that already margins. to inspection when spread the heading you in you get and so Omicron, into of centers sell, up visibility. so work get lower get direction some move the cars. but COGS onto through shows starting are visibility And can then it there. as cars still But can have We

as our earlier, toward And we of the move Mark quickly, they quarter. when that quickly. I moved securitizations do rates, tend think said the interest end really to

they that environment, as that where originations impact in different quarter, the a so a to are the we have earlier And see different and in expected spread then well. had originated were you

that can of so flow And there. through kind

And little seen so cars on a I recently margins at themselves, the of we've look think when we car in while, the also for first price time bit, a reduction.

prices by maybe prices model year-to-date. like kind something by seen cars year we've of seen retail say, We've XXXX drop So wholesale for, X%. maybe drop X%

reduce, cohort dropping. that car prices well, start look potentially little while And as so we are to car started bit of there at can better little prices margins fact that to cars, despite the least see the a

car affordability look rates. from there, know months interest over I about happen like. exactly or it's be And giving next what And it's logistics helpful to going perspective, what's units going from XX hard with in that, alleviating about, primarily that's or at as So all then to well. really think least And I visibility beyond to network. prices a our with does in then us think it's constraints the QX about,

sales; is rates prices. your But as interest cuts how else between speaking, think good all wholesale all helpful. actually going down unclear The think margins going helpful a reverse then constant, retail prices And generally kind from is, opposite. the down, ours there. constant, as else I by for guess is active, the because, driven that and of margin gap I it's car are

so all about relation how And markets two in move to another. it's those one

visibility impacts, the next solid because to from bit. I are of can a into you these we So have several already where a think lot pretty starting we quarters see abate

Operator

question from Stanley. Morgan next go will with ahead. Adam Jonas The come Please

Adam Jonas

Ernie. Thanks,

results, our are in after liquidity. and two growth right things, right, concerned the people including about with So main look, clients, really discussions

fourth a me and time, one this get for or growth, third question I I quarter retail take this them, if units. On at just take Let do units, even your one you, quarter, I Ernie. frankly, would to math, I annualize if around your XXX,XXX

fourth quarter, the of on either for or annualization this about year guide kind of third your retail So XX% take. is above or the give

those And would year experiencing now, me, you get but constraints that still I we and those agree was you're half hit better. think You Ernie? second of last constrained, capacity the anticipate

guiding on the should growth XXXX, than of what say, we've in fourth only to balance seen, less capacity XX% the let's you're constraints quarter. be, So over

XX% is thinking So or about, ago. were big what capacity long not adjusted below from a XX% And change for XX%. constraint, guide, maybe your people growth well in your too growth that's XX%

-- you're visibility price left when just shock, better. know logistics citing on just logistics and I the with much don't are is So it's people get not

or in growth can determine scare Carvana-specific we kind logistics watch people a of thing? you so metrics an pipe it see for the in what is terms You size can of that this industry whether real or of time out

Ernie Garcia

very I is, What confident. say I we're from mean, would perspective, demand Sure. a

all saw of you these the think number market the growth, of penetration kind over crossed all different that lines. I markets

grew that there's XX% grew cohort our It's very XX%. cohort by oldest year. saw You of there by average Atlanta last signals our are a lot and clear.

see top-funnel If traffic, in because is extremely you quality can a perfect a it's at -- traffic which but fast traffic least at continue metric, to reasonable growth top-funnel not look website metric, we website vary, website there.

to So specific that's that network. we sort will I said, is have of see we And we forecast baseline us then what's in to where we our where a do driving Carvana the are. what thing logistics alleviate the exactly is to we first our have constraints think get

We are the subject conditions of industry. to the

things and when And these we when industry the where at think are are we the attribute to account see down XX% likely into about which think look we so remainder that year. between the I that XX%, issues, today, we retailers to taking and many affordability of head we're for

what's built that's in. so And

Adam Jonas

follow-up to can the Peloton, it. of get other ahead money. out Listen Is itself -- I'm get capacity in. on going of and what liquidity. two, your Carvana for getting and is questions from Tesla higher just daily. you're is past you Got companies a -- we've than kind Ernie, seen where bringing like this growth of the market this kind with of run

$X.X got Now, billion liquidity. you’ve

of You’ve cars. got billion three over used

need out in some But obviously just financing money running financing do a, not and kind you much do, of year, to acquisition. partners why this get Ernie. presumably you your how And you're b, set got or place here, if you level with for what it? you if need do great tell You of it? the Thanks, you're us how planning money over are going to

Mark Jenkins

I question. take Sure. that can Yes,

total liquidity had we $X.X year, So resources. at the end the of billion in

you it if inventory finance assets. platform look primarily way the investment in we was investment think XXXX, in in and I used money at

improvement was think a assets, approximately That $XXX our I only cash was inventory million. activities million, flow finance operating exclude $XXX million, from you minus $XX if year-over-year. and platform

so, like activities. cash point in than think I to investments using core finance business in and a other the operating really of where, a got platform assets, it's investments And inventory again, lot XXXX not in from

so And important I think to one make. point that's

positive very meaningfully. for we're business, Investment in the view selection obviously. increase investment for I we now, visibility think right I inventory our actually customers, inventory metering a in the think as thing

we've inventory not full the the So far. in of so we're investments that getting made benefit

Omicron, un-meter more to so that the visibility I benefits. the some forward weather looking get think of off of coming really we But of feel limited we're these the time, that. events of think can good inventory and over impacts I even and logistics network the we about strengthening

I we in assets, to invest in cash in platform that Those financing automotive financeable in finance real which an and match think that, use things that's We past frequently a are used and extensively assets, the lot future. invest retailer about of one inventory. sources that invests using expect the We liquidity in and we in assets assets. missed estate. our traditional the are hard highly those we of needs invest

about thinking of our those think things And so to elements about. key all some we those of feel good of be business, I really the and are

Ernie Garcia

these into was the visibility we in we we were we if exact cohort then as we strong to which Xx prior. get the roped in really be X that the forces you our we couple years. because future of in to grew next if lucky visible by future those And that same as sometimes by, go public, XXXX pre-pandemic. we the on And as we expect a kind to of today. are growth I are over But I driven curves quick a story that years, growth enough jump very than can have I execute. the went that And could We long in think pandemic driven are do and last think said, I the were growth back we think size a were order of when X-year that more period, company too. X/XX

It's all time. become then visible over visibility these think hopefully, is work will cash things for into I very that like clear. on to the Mark feel going front. the all helpful answer And a So out. demand we was themselves But

Operator

will come ahead. Please go with from Securities. The Wedbush Next Seth question Basham

Seth Basham

impact think do a prices? outlook? afternoon. in your will retail side gross more have expectations on a and see guess that. quarter in you an wholesale should profit sharper you car prices, negative and on GP is or we in used around that first think Thanks the even your really retail on I If good prices, about we drop lot for What's question the my how embedded

Mark Jenkins

Sure.

can I mean going of factors the key you I So tell that some it. into are

I think we've this on called them out call. previously

on going key costs the are and reconditioning COGS be to of extent, inbound a factors think and weather really logistics costs. impact Omicron I certain the to

going retail of seeing GPU that's few higher then wholesale, do be wholesale the to past the we market quarters XXXX. than moving on rates in we And think to are biggest in we I the depreciation QX. in -- impact seen have think

And in so we do impact on expect that to have an wholesale GPU QX.

previous depreciation to quarters. it expect we've as result We lower be seen the of rates a higher in than

Seth Basham

And then my frame your help about acquisition, you. buy into the IRCs about you that bit improvement take costs. including building compare business. consideration additional does Obviously, their the versus additional a little more? IRC? for can to auction What stream profit an But you with that equivalent is this decision Thank which versus ADESA. talked And the million build of per is you with capacity $XX on XX location, follow-up us

Ernie Garcia

Sure.

high has very at center very think a is that's more expensive average probably it's historical And amount. not a by decent I inspection level, different. than been our reason pretty the

are or XX-year also Our been have $XX been town. that. oftentimes $XX million more This footprint parts But like average in of locations inspection cities built is, period. in these more to million, something million like probably $XX and the more past, in expensive a over has expensive

is out and bit for to out we bit it that we locations were would closer example, build to customers infill to the if and than and It's of closer lot a build many trying a a little location. of today to a so little going And employment greenfield. find farmland,

center be it but when it's wouldn't there, too evaluating So just again, the want I to precise off. probably not inspection way through similar, you're lens,

Operator

D.A. question Mike Davidson. next ahead. will Please go come Baker The from with

Mike Baker

Okay. the on here Thanks. wanted million mean, I just I same think maybe I the up acquired to on lines. did $XXX presentation EBITDA. in question, follow Seth's company Yeah, along the based slide

There's You're to times. exclude CapEx. paying be billion, $X.X synergies the additional That's in some XX you there. got if about

you talked or on you EBITDA. don't would million accretive? and the take of to but when accretive, or how accretive get in if a at give I it quantify options $X.X debt put in you're buy some you about that probably quantify way this can earnings synergies, get reasonable to the $XXX that, way rate us this is it, is to, be incremental to So, Any it. or above billion interest you suppose sort in interest If conspicuous going the

to So, help some our accretion if be this model you great. of with could give terms would how into us in that build

Ernie Garcia

Sure.

different be honest, to a probably I about I way. So think, pretty the go analysis

pillars that, that's think, time. it it's an -- incredible that's it value will can think other asset kind our of rationale the extremely to present, that But -- excited I EBITDA a and in terms think, ADESA the been of important, and this. you getting. long represents is that built I incredible period we're for can about but created business be through I think I think of that's we be And also of over by the

have reason portion ADESA. was fill incremental to centers. that business, these the a into by to our of this. the higher land, transport sale unit $XXX of look to our customer thought to customers lower our inbound billion that into there is we happen ability sales million model, so units, units to it across you're and long-term benefits, if curves large just build our the of you -- average at And look That's capacity. lower conversion that to extent, give the annually. think the at the two $X if what in that can EBITDA we added lower it's million the means which is be very put production of a delivery. estate do entire logistics because an that we're you was off cohort to asset to important at able today, to about XXX-mile and a economics that To incremental costs, through valuable costs order we then, we produce radius due owned demand acquisition And visibility our that inspection you financial that on country, And on this can have because And two outbound faster the if compare better within real presentation if

that's number. a big So

of important isn't sorts possibilities. -- well, even imagine when sales, to numbers right? important, to so And numbers big what's to fast. those And get sales our the you I execute when is and apply our really those unlock even you math of you isn't math The start just extremely can start to those ability to incremental against kind really think gutty

say can know build now to We that's So We go now is the now we where facilities economics. that. I job do of. path execute, We on the clear. the demand. see our have to is And to the have because top unit

And so our where lies. that's work

Mike Baker

you I locations And that, that. to then so -- to to Well, Seth, on the cost given just appreciate similar. said the just think follow-up would build, Okay. I great be

is to the sort your ready about going it But of million take get So could IRCs. if things with some to it's EBITDA, little. help time really would you is or it that not or for Thanks. cost to us it build other it's more and quicker? just that similar the just $XXX be gets these know time a about you synergies the there if I

Ernie Garcia

Yeah.

all different. So I end I think, of then the think above, think potentially think I is I time, and location also point

that, I quality When of think of all locations, those large I being benefits mean, this can you So think say as I transaction. locations. about things

Operator

of will Schindler with The go come from America. next ahead. Please Nat question Bank

Nat Schindler

are, for more point, in on it of I after paid that the can from car fact the that it? begin risk hi, they pricing is that for questions. sale Two and fact because the much this so was to the guys. bought of created had the car because not that, than environment, been rising the year, mean -- the just financing cars? much on anymore the disappeared quick from has obviously you but someone price how at that to the you've was due how unusual revenue, this default loan with, has rates this there gain higher sell other of, and Yeah, prices fact very good on matter One, used don't kind GPU

Ernie Garcia

Sure.

at assuming that despite now, So, that was benefit you great the our over well, the industry. better the I are time expected performance answer to that loans very a loan they're at that benefit is multiyear from -- across great And that little purchased. function have Investors asset the the generally I I purchasers of case losses class. purchased as than -- And fact all. would imagine, economics can that mean, mid-XXXX to on they buy I a aren't of that observed who be of that losses simple were the residuals the that think think even the question then they The they gone when to expected. the we life will still are mean, the forever get

result of underlying so material as the expected who the have the years. significantly a outperformed they those we the of haven't have probably last moved a way have great bought assumptions performance. prices of what result driven And that that have in that loans But couple received as a really

Nat Schindler

cars, is normalization to in in drop hedge back get that are back loans prices, buying not but then But risk that on they're used X% loans to the your the funds pricing that significant there that because credit here they so price? normalization those significant with is can't you a a going simply on in car a to and there, take significant used significant,

Ernie Garcia

about originated, So but the market. this I'm are to time, going all about which the I rate try that that exist it could long set to think answer think I talk concisely just are on that's do they is, yield loan by loan any a for loans seeking or residual given expect market because we a whether receive the And partial is that would generally that form, expect. in to loan rates whole that losses the buyer or or allow interest it would would whatever the they interest

we question I of will evolve, really a how that's with rates that's market and the just So interest -- think market. evolve

you rule to we which the is profits expect market I that absorb changes. impact as to when wouldn't to all the we general, exception as expect there to be we sorts expect is QX would to is all through like evolution we expect wouldn't recently But and with happening our expected high, that in the rate large. be that have impact saw, the and Where we negatively. to very a think flow to conversion move, impact of finance long an those in rapid us market,

Operator

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

Naved Khan

you. Thank have I hi. Yeah, question acquisition. the ADESA a on

that just I a Carvana? the buying, how at on if focusing that you're business also once think about operated I participation play the look And dealer by you're the and core should auction So just it's over it read risk time? that to there a real estate maybe the that I $XXX generated and there is a million year, in could that? that? possibility And business is about the last think win EBITDA how little And should

Ernie Garcia

ADESA as extremely for So all usual customers also our and would that first of people all to as say, inside with. all, work for there of business of we're discussed, the plan I is ADESA of excited the

the always in plan. business. risk There's any that's So

So I mean that I no say want don't think to that we there's risk.

that lot opportunity. think there's of also We a

bit think that that we of provides like there last opportunities And may I a Hertz quarter of opportunities we future. into the well. maybe in with types a exist that transaction be could other the announced the think as window

our to to both to creative plays excited advantage the and that better to incredible together see options. get increasingly joint built independently now So of is to the team business even as term. to plan people of in usual. to I that we're the immediate excited find give We're welcome customers experiences out the and customers work together that ADESA, think of ADESA ways how assets and come we've We'll the take the to continue

So plays we'll see how all out. of that

Naved Khan

sold currently from from vehicles question, Approximately just you maybe us what follow-up where percentage of just, of, dealers? on a an ADESA on you then update sort consumer direct the Can are sourcing. give And versus Okay. consumers are?

Ernie Garcia

Sure.

we in excited customer growth. are just in over provided in fact we year. haven't had year history, pandemic had extreme we XXX% there that every from another XXXX too, growth bought also the have millionth That's company's a transactions. we year a yesterday. And for numbers there of pointed but precise total So our we car our to the happened except year, we've This while, across

that So recently was achieved. a was great milestone that

that a We've reverse. that is seen our very extension business business, and the takes we've that in the customers So very very straightforward which quality is continues be continue it's is showing our that easy, got to offering and to because that the an see natural just And always growth in we a in which customers, all strong. there. we're mark trying and that for we logistics of hit. simple that high fair have that's it love, And up of network our lot to results success

Operator

next Research. ahead. from with The come Please question will Bellinger David Wolfe go

David Bellinger

Ernie. for Hi, taking the Thanks question.

of that of you first higher So in any And conversion given unit back look in on of just these include get the auction, vehicles at ADESA? for XXX,XXX some XXXX at some that your from unit in more does demand guidance is attractive embedded maybe benefit lift type could a rate, guidance? terms of

Ernie Garcia

immediately. in to general as super result not acquisition. assuming the rule, I of material this to but business break we're first guidance, don't as the We a more core we soon -- working benefits think year come our future going that out a want will that in can, that's hard then as of as possibly our the those we be in. to come find think but will We'll operating benefits assumption obviously

David Bellinger

it. Got

sales? we just marketplace initiative. quick and get progress a the Any the comment Okay. anything And on on there update, economics regard to too, can behind early then in those

Ernie Garcia

Yes.

share more have there. ton I don't to think we a

walk done there's this great do do remains excited partnership partner. quarter, and Hertz, we we're both early As to last to excited to anything which with so have the I that, potential there. Both all unlock and I a customer think far, work certainly on. offering. really arms think, early, we're great left the – to put announced seeing into we're with any got work sides sides where that. build It great But by to really about have we've results and And exciting

future. potentially more there in updates So the

Operator

question come from Cowen. Please with Your ` John last will ahead. go Blackledge

John Blackledge

be or type you there every savings, of second to of facilities? referenced the XX they long-term XX near will Two you. locations, does overlap of margin Will them billion And $XXX spent -- will $X the the change Thank And the envision then -- some across questions. you capabilities, locations? question, Thank is Great. cost kind the of in the EBITDA existing you. or range? IRC IRC how have all do that

Ernie Garcia

Sure.

more account of our CapEx acceleration as $XXX, estimate the our of kind I reconditioning on question; will into I an long-term to yet. likely So going specific and say account long-term on taken our to add be that billion And taken estimate then not $X relates in is capabilities addition our also do the locations not all that's to. that. we're that incremental too That million it unit $X some would first model. than in plans to approximately to is into think an there is get it of we There model

had into assumed our that was reconditioning XX and those long-term expect drive this XXXX, country Day our reconditioning that would Analyst that centers at For centers expenses of would model. transport our a lot you simulations we have XX around those in that down remember, we the we getting down by therefore, of driven built drive the that financial distances be and, to and down acquisition,

relative faster than very than otherwise locations that the way XX benefit more that locations are they up this just a numbers So, that clear even the better in in But have. showing to small is we would meaningful then. is be assumed our difference back pathway to would it

John Blackledge

Thank you.

Ernie Garcia

you. Thank

Operator

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

Ernie Garcia

you have Thanks. and Thank you Well, year. team to years want The the been you've for last of another occasion. incredible on continually to first, risen everyone do. guys everything absolutely address I Carvana, insane couple

Forbes with could told achieved that of what not you be prouder I we I've As list. before,

working. a to as hard that, such very as we're all And think we're it's achievement. that working is I cool do hard when

all thank around we I you you and more more the next in for the reason thank over for the I our to making do are excited the it extremely guys it everyone cannot things fun success. said, To days. for fun several and you. doing cannot hard team, that ADESA well. it's and having meaning we talking you for And finding as be incredible, We'll So welcome enough enough. I That's together as

opportunity always to know can always I is bit an scary. change have think we you want together. imagine incredible this But we're a that that destabilizing, extremely I be excited. we can

together. our things shake that things the not sure do together. business to wait you a forward again, do and we built. want person a going the fun, you. have too too. I We we going shaking imagine to can can't really ADESA's we ton think guys respect can talk too in quickly. And working make we the We I of goal as and to excited to to lot would have what work And I and think usual there's look you benefit. everyone's bit, with say a is it's our can And to news is be much hear We for that think up We're to meet together. to extremely you customers, I same. you about commitment

excited as valued centrally. of remarks, that always we I the customers, our And value way my we've as welcome to we're you which And is guys in all so opening will customers. said same

you talk quarter. we'll you thank to and next So, to everyone,

Operator

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

now may disconnect. You

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