Carvana (CVNA) 7 May 202020 Q1 Earnings call transcript

Good day, and welcome to the Carvana First Quarter 2020 Earnings 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, today’s event is being recorded.

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

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

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

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

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

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

this the beginning will our results. of but the to financial commentary the gift is that measures. excludes our no non-GAAP ex-Gift, concluded include and employees, which impact material Our non-GAAP XXX,XXX today Historically, program we’ve measure longer used to has milestone quarter

will the milestone be for this quarter of gift. And on XXX,XXX referenced call metrics so today the any inclusive

copy our metrics in impacts Reconciliations reported gift can website. on for reported a letter financials. of non-GAAP found GAAP You can between which can find found the milestone Relations our shareholder today, be be called Investor results issued our and our out XXX,XXX in

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

has will unprecedented we the we the of led would This which has onset in spend unlike thinking we the today ways I health and more and are will has for specifics behavior, our on quarter. the we any significant planning company. than hit Mike, in everyone future. discussing time thanks been Thank face currently to normally a as changes briefly joining we economy. turn spend call. so sit ways reacted the the the and for time Accordingly, pandemic unquantifiable and far impact you, less The where the about and then we've discussing in and a quarter of

into is year-over-year. our how every half that performed get XX% sales with outperformed week-after-week the we demand see We reductions in From sales approximately XX% most sales of at weeks began difficult the in to grown XX% It share the being Carvana year-over-year. and a reduction about up period. clear weeks, in recent trough have but consistently the over significant there, industry over to in early back March exactly in the with April improved indication visibility this quite accordingly to significantly industry last market has several

lens, are these by and pandemic. the part we due believe don't it factors driven accelerate behavior are been we know that to You We but been customer Due outperformance shifts yet of optimistic. changes to through customer of will believe driven how our has this progress. likely preference preference by has transitory precise changes be, part customer medium-term

and dealing clear two event. fronts: that how turn early very we've a Now, time, we we it March, At significant with were were a In health. financial with fighting determined that that let's far. so health to reacted we became battle

inspection customers. customer our implemented for delivery our centers care keeping and for our have we enacted reconfigured locations lines, home touchless front, health customers the is safe. and work support and our experience guidance social from those distancing, CDC priority adopted first field team corporate a Our and teams, to Along have

financial The the front. second front is health

our deliver Here uncertainties and order expenses obviously eliminated growth that Demand overtime the mid-March year we the and and in unit necessitated three new the new we've with preserve difficult thoughtfully positioned environment, hours to continue most budgets, We ensure on biggest pause some to are started came In with hiring. our long-term had primary we progress and goals business to and significant see has manage and to yet environment, expenses goals. to align with shock align in expecting to risks and success. we travel our those reduced to those this areas pandemic important into to changes. absolute

has of manage component credit and We commercials to to capital been this quickly new and demand moved to period industry while to important carefully adapt or an for to to adopt areas uncertainties. be uncertainty strategy also a our XX scenarios. to we during the important promotion enable impactful payment our tailored risks us demand our our environment the designed easily this be implemented reduction out through management, In view of rolled expense environment, being managing expense initiatives on and day inventory levels, different uncertainty, to for values. deferment effort most and demand manage Another this customers reversible market

loans March, our we In late managing on credit credit and our on in active been the markets significantly platform. risk. also generated We've tightened capital

in values about purchase to view completed purposeful for the purchases weeks exposure forward our to in total ended. the combination with to sales significantly customer and reduces the the except inventory billion our purchase relative about managing. customers stock area all prior to broaden In outperformance addition, we late have under sheet. since We pandemic. our XX% offering of we to as upsized March, trade-ins covered $X $XXX five reduced just ceased want million we industry in which This inventory quarter the our and by another be agreement and set our Ally common fortify agreement a with that We to inventory flow balance

manage long-term to down also that continuing risks, important our areas are we and our As we expenses in success. leadership extend to the are most bring our

the important of our quality is most The customer experiences. single

three have primary experiences our culture, supply our technology and chain. customer our Our drivers:

We traditionally is in a existed to and more in real growth are easier, the to also invest This enables rapid on fill it's technology to customers. prepared we car a in even to are our to return continuing turn our estate for automotive fun supply chain safe more retail. make efficient continuing while different buying when our We're off time right. growth holding CapEx, pipeline so than

Everything for of done to of that Culture drivers do, list is the at a success the long-term together things we incredible all of reason. our the deliver is come top the any at to customer top experiences this the by An the are are fundamental test in in relationships our a is and for them like culture. environment great business. any people. processes People connect

more these pressure. about moments direct of about more and a intense learn people culture during You

Before tremendous for I achieve environment decided was across had painful undoubtedly to And way our our for the entire have back goal came you company. make. you team our significantly come achieve expenses tell we the our look obviously out far, difficult. In together. of value with poised together this the I this would tell across To growth. could use We we, most hardest learned we a we that made thousands This the we're as it in to we as this contend country, that extensively so most what on to lens tough period time set hours members into any The stronger all would we only decisions. this making this, values, want aligning reduce for the we've ever of this of a people to and was team decision hope. management pandemic that what mid-March, we

day unfortunate experiences decision goals for us. reality define to the on work reduce of all so not It's this value that with the The hard reality. hours right deliver an customer the align That our given operators together. Carvana that to did of was our every

company fund, all where of executive hours. and and wages hundreds the into people hundreds up of into salaries contribute lost XXX% offset for company set this had directors of their the we volunteer salaries during fund that a of go the their and the lost people a across including portion We the their those this that could hundreds would wages So time. and team contributed across voluntarily board fund

culture think clear our expression I than of this. is there no

the we're give themselves they're are part a In of a hours incredible all reduced needed came who this many they lost hand it more who I did fear Carvana people because people In income Really the They fact uncertainty, And many us. of leaves take They they that think fondest groups of that it it fact, contributions and did are think something and the of it more. did. time knew the who in that head the with together. for beside together. I'll or confidently front proud standing from Mark? tremendously challenges them entire that did team is brought so It into things apart tears undoubtedly challenges Difficulty at and all people brings should more rarely This been they were. decided because because did they’re dealing from it to strongest minute. There people. themselves, in is of. We've memory those be a because others together. they we us, about did lie that these this. but than but something

$X.X Ernie, industry units market XX%. week extreme you, light through and of the XX%. the and COVID-XX. today. brought thank Total totaled QX which reflect quarter of a Retail April of are was continuing revenue to you these for our Thank numbers disruption billion, and XX,XXX, company us was joining Carvana in of gains for significant increase May. QX by on all of an in in an sold first increase share, Both strong nation,

of profit was increase gross $XXX. QX, an Total $X,XXX unit per in

$XX customers. in driven a retail GPU highest $XX Other offset driven by $XXX GPU Our buying by Wholesale included to $X,XXX, to GPU was reduction of increased declines growth primarily by an in was in a ever of $XXX, wholesale from in industry-wide GPU, late was our to by in finance QX. $XXX. decrease $XX, This primarily ancillary cars $XX, increase which $X. $X,XXX, prices impacted GPU products a reduction strong

shelves securitization first completed to our sold securitization of loans program our existing agreement. under our forward part we non-prime two and originally that were our intended prime flow be March, In

believe While EBITDA the an QX was margin period. lower than quarters, decrease extremely finance a QX, in from XX.X% finance X.X%. platform our we negative resilience during demonstrates GPU our volatile recent of negative

EBITDA reduction COVID-XX on significantly during period March. impacted a by margin in brought key in demand selling by was the

late points to asset QX, adjustments we expect EBITDA non-cash our measures demand. that COVID-XX In to with by was align in do in In related impacted or expenses addition, several carrying X.X margin $XX better not took percentage QX future due values customer to to recur million periods. we

spread Following investments the and discretionary investments. of hiring, COVID-XX, facilities including paused new immediately and growth we IT new travel

staffing the marketing but decisions also and better difficult match We made to prudent, demand. rebalance to

Although revenue. a percent to we one while led as normalized we X.X% that when the outweighed early volume the prioritizes a generated shifted strategy prepared made decisions quickly, and also returns. lower light COVID-XX, increase to our expense a reduction by has are reductions growth SG&A ensuring for and in that uncertainty these of environment In of expansion risk

paused have vending reconditioning and centers acquiring We machines. new and inspection

continuing that process agreements on place. in and existing are were sale IRCs in construction we already that leaseback However, have

served smaller response delivery due markets offering, many customer with positive incremental our to delivery existing by touchless Additionally, our logistics be and limited infrastructure open investment. the plan we that could to to

resources offering to we Xst and scenarios. April $XXX quarter-end, wide registered with million a over total business $X bringing us range of completed operating significant Following of under liquidity macroeconomics flexibility resources provide liquidity raising billion. shares, XX.X to our our operate million These on direct and a

providing serve extended existing to agreement we customers. our Ally addition, flow In upsized forward our with and flexibility additional

We million shares exchange fully a on QX. XXX expect in basis

and we look be As business flexible our we're long-term we the positioning forward, as toward on to focused goals. lean march

your for Thank attention. you

now take questions. We will

Thank you.

proceed Please [Operator session. question come first now today your will question-and-answer question. Instructions] Fadem will Zack of Wells begin from with the Fargo. We Our

could more if and environment you can to talk has detail see talk inventory unit in the from charge. here? you the about And you little whether then reasons went could any if management per through And into a GPU us curious QX. environment improve us curious I'm evolved you believe the Hi. inventory through that how if $XXX

Sure.

that determine we framework for proceeds basically likely of standard So way that. its in I that then, value what what the of general, inventory value looking is that's a assess we're think receive and acquired pricing And is, to relative accounting determining we at our the is. that kind in our And inventory means to function carrying a for what at.

go level. we how our reserve inventory charges that's about assessing So

situation has inventory dynamic for probably situation down basically saw of levels think terms when been pretty of of going it's hit up It significantly normal what's how those while. on with pandemic I to wholesale in In markets very the the a evolved, the at dried volume of We kind levels. XX% terms right pricing. stayed dropped down in a

little recently to of a pre-pandemic We've a buyer, to also well. wholesale expected given sell-through of of it move car up couple a kind to bit. of any auction more which couple actually a pricing probably We've through closer and sold linear seen last over weeks up climb the been of as the go weeks up. going We've little also is march levels bit that's XX% up seen likelihood a rates, is seen kind that's over its of last

So I of there I as relates uncertain think been environment some vehicle still signs has to it a but there, in remain stability think highly we values.

And the There's pricing. that's retail that side. very stability carefully on watching been more we're definitely much in so, in something assessing

stability technical a reasons, much seen number of probably we've there. So but more

XX% our by inventory I do we've the exposure purchased could, trying me as the our was minimize of marching make our we've all do as end push and there, that world that excuse that kind had just a to what to we we stopping large down values that as of incredible quickly down purchases view we since March. attempted exposure. or to as that I sure progress inventory levels think think inventory potentially in pre-pandemic

And something about, so, to. it's it’s something excited I we're very really close that think, think we're I attention but paying do

you curious Got could day then if of in there impact for that you about delayed XX receivables no those how line. all customers qualify in it. there's that if And top curious works the of terms terms was maybe those wanted payment walk a I on there Thanks, and Ernie. talk offer. also And I'm the I and impact to through financing know transactions.

Sure.

qualifying the something there day on that is that promo for XX that. requirements So, are

are flow that are elect have then qualifying So forward customers or not sold many of them – the most for then agreement that an they and are into being purchase through of our to option of being not approximately significant is in purchase A our we’re of the customers loans the originating through which that for loans forward are that the minority today. flow are sold agreement, that. a third qualifying

is had customers. support many, We positive it do a in difficult the done weeks impact, believe that things precisely I of that's we're several our our probably last in ensure the different to of quantifying over putting best we've many light think that front

given that’s case The experience appropriately. kinds think their of size through to and Ally – past that's I impact that's offerings them predetermined. flows of And to So that in the in we've these with we steps to GPU one taken. to many something finance been that that GPU worked customers the being so is sold of with

So – been all working. that's that’s how

guys. it. I Got the appreciate time

Thank you.

with question. question next with will from Colin Our Baird. proceed come Sebastian your Please

buyers? catalyst the everyone vending pricing for Great, priorities, different market advantage I much changing thanks. And machines, be for that? that ad able in general, up of things whether April How current has to there is of needs your in much of one potential been and the related have a the guess safe And hope is that's with follow to balance scenarios looking beyond deflation? the the take Thank the ability the trends. And you on on like to connect been How some healthy. your you. environment what incrementally curious expansions any strategic think you I'm environment, of might and economy. around year liquidity then

Sure.

they been clearly I And increase impressions. a media consumers also there been more are advertising historically has in clearly than an think consuming have. costs. So in reduction More there's

pretty cost that think I fallen so, impressions dramatically. And have per

ago I across automotive, month up but in fact have clearly is reductions especially less and several also by so. over price reductions. in least the continued the the environment offset seen think consumers Those price purchasing are directionally last that economy until weeks we've impact this at or

know I – of front clearly been consumers. reductions where there's we to in carefully exactly but going message that very monitor cost the so, to it’s don't And that's your think to something go, And forward. that's in continue we'll get going

the million gives then a Xst falling bit I $X And to had as about fact That Sure. that actually close offering. question, of billion, would $XXX the resources on deep even start liquidity with us stress operate in in scenarios. than more $X of little April our liquidity total billion resources ample we

I looking upside we less have And likely to a those they deep we as four three of But flexibility a there well. than deep have in that stress then lot even scenarios scenarios think of think or lot ago. weeks in flexibility flexibly. perhaps course of scenarios were are trust operate

flexibility an expenses place. to we centers of our of match COVID-XX limiting we of agreements to changes have include on as then mentioned reconditioning I the expense think focus have a operating that the made operational been my inspection from environment. sale expenditures, have to obviously some and I operating in capital perspective drivers to environment. current Those in the steps where already remarks, the primarily taking number to respond leaseback And demand that

combination the levers plans into those then of sort feeling And half our stress even action through position those March. out in be which about the April scenarios really liquidity March we're deep that and the we good then, of us business. those leave through things second have because in the really of put so, half of in And started second to playing of

Thank you.

with FBR. of question. next Lee will Riley proceed B. Our Please Krowl your from question come

my to kind high a season as of taking of arguably of on thoughts questions. air demand coming travel the over we level for Thanks of One just holiday Great. have picture wanted kind date lower miles implied from April demand – just road, driven. this from kind tax the to thoughts the shift summer, around thoughts of more on vehicles more July. then And the also in

first think term the of both On uncertainty the a point, in this lot term. questions world new a what there's and in immediate longer your and about means, of I lot

lot what think a there's we’d out say different sources I data there. of

all take accelerates of There not as personal are road want read about and like probably actually less choose in people transportation or public this outlined traveling your to to ownership can partake people You don't result where more because expectations and effects a increases other and trips are that taking air instead. ridesharing. the those

those all hard They're very to to things of very are rely think I very, on. and they're possible. size hard

are what think share always the most time. foremost over market we we've to that take of been and is planning after I first excited and go kind about

market. to extremely is people aid preferences other prior as of in think likely push you unnecessary customer We've minimizing persistent around then growing goals preference, to think we that demand that will to be. the a gains. now direction very it's And extraordinarily know pretty we serves. differentiated and of the I our result that still We overall be, our we're don't market most impact clear We impact. our our totally impact how strong this and customer that world, business clarifying? is And is with I'm new know We know quickly a a all know safety assessing that know second but market large offering Carvana direction very, well. sure when would our what your new and that's that that increasing been mind directional that's that it will market preference how for question, and very which a small understood… customers I of as our The compared that this share. matters not don't in share us don't And

Yes.

tax is tax year, later showed that up this referencing? do the so refunds what you mean Okay, perfect. or you're a Yes, date, week that – we so

Correct.

to XX the from So, deadline [Technical XXth. the Difficulty] referencing you're perhaps July change in filing

We being I before come certainly from really just through that with deadline to did shelter-in-place see in to April the came could lifted, some any in think from get But spend into much impacts refund, would some customer the U.S. that starting think have impact in in think the there tax I that behavior. shift force on COVID-XX, the again. consumers impacts be very I probably melded out come would bigger much and July, from QX. orders

be will hard impacts. to I think those disentangle it

think out related I I shift. so that well. deadline tax impacts the win And – to We’ll over COVID impacts any and actually

for questions. taking Got my it. Thanks

question Please will Oppenheimer. from Nagel come next proceed with Our question. of Brian your

Hi. questions. you Thank my Good afternoon. for taking

we here I at financials. the as more that – question wanted, first of trajectory a are in be more to on in we month the second you either just of there should the some of towards, been as flex geared a the the callouts business, first March? earnings larger what it's significant Mark, talked the the look have thinking I we or and quarter of normalized would as about guess, So about negatives half the that to areas out Clearly get lot, call try quarter, had positives as but for disruption as to costs, Carvana,

Yes. Sure.

which things. receivable when we values obviously adjustments March, about in larger that in to I alluded really totaled was hold callout That turbulent the balance adjustment end portion of two million related asset remarks. a assets carrying is related was time split to valuation markets. is the in that the to of evaluation do So we very between $XX finance the sheet, expense was on that largest our prepared financial The my

the so balance some related that we an we And sheet. on to took finance receivable assets adjustment hold

was our business. days changes significant we sale retail demand, second the changed March, experience expected prices significant in of a end we toward to observe saw expectations our to vehicles. of And in some also wholesale trading of did reduction in largest the which number then that the used The we category of about

totaled to things million. consideration, taking of our those we adjustments some so $XX some made into those value and when inventory And of that both

So that expense large on a was very the side. impact

I In we terms those of really places in you per biggest to is, car and SG&A, sold think and compensation The early is for as big of invest marketing busiest a then invest or tax the period which QX times two investment advertising impact is the both QX and us QX staffing car we in where first months sold. one of know, were benefits of in of way the for the couple and per about think year, in preparation saw an season.

And made so, to those we investments, but what was like for this reasons significant we nothing anticipated in year obvious March COVID-XX. then demand related

elevated certainly per relative what we and to so, expected. would And have we saw and compensation levels otherwise expense of benefits advertising unit

a two. elevated saw the items, biggest basis the but We were unit also levels expense other line and on those per

returning? ramp is we and coming return right helpful. have you called normal normal then question the that. it. a question, is ramping? reset then is in I my is, QX, The continuing is the just bit? seeing I on – follow of in a I Or congrats just – appreciate look fluid at are so is, rebound very as it's out – now, know, That's again, And this is that up type you but of sales that you Or And it here? understand here it just is demand your second more shift some basically to a back it customers the it within to there back? it Or is

sense can for of at think sources and used different to the think I don't across but you many data to last datasets car many that in get several circle the what agree there sales answers, look of And So precisely sales. in weeks. same around are try April those looks like industry a the I

I of think weeks down in at maybe only down month recent set more XX%, take, on the what down little as give And of data depending entire to XX%. as you're looking to estimates range they to maybe or XX% XX%. from XX% April being

the what's industry month XX% We the In last month. estimates be those weeks. So early And weeks growth in over in strongly most then said, the I healthy, pretty year-over-year have end approximately in that of month of steady, down we to year-over-year been several all. of several the last came XX% think to we up, April, back the consistent would at as the weeks. troughed happening seen the very recent XX% barely down over have

outperforming are we that based data So, the it's industry clear all at. on look that the we

When demographics kind of we our demographics and where look coming our pretty sense the from, based to that may customers get be at a of try broad share before. of were

be And so, them that don't I of certainly would strong on are but some, to that there subtle is differences certainty able some observe, we're to real very any have those differences there that we maybe are in call. they calling think enough worth where or out information this

of online? was you that buying these been So you at questions there's out – one ones, pandemic several and out came million can was the customers – one they so I by of can, surveys many but that think in the would car lines a have surveys put something general different weeks the CarGurus out There it feels like it's of a prior consider improvement. been along to a look out ago asked you broad-based

several and time, online. jumped ago, like still car would something number that we’re weeks at doing their but XX% customers of And weeks – this, of about in would said raised a they that relatively XX% said early which buying to hand customers ago consider up that. all I consider of Several had

we this desirable new do very, environment, very have a So, in offering. that think we

think think we there quarters the couple amount know next of exciting marching surprising, in we permanent still but of late degree still in we're don't you unexpected I for We suggest take April. left. think the economic But a fair they risk really now the so, a these well term, And hit March them and that the if And big undoubtedly think entire bodes extend and pretty still virus. think out, I medium impacts. have won’t several that pretty steadily. respects. for I And the took of a lines We is market industry –the back solution

I think that called automotive We prepared there’s in impacts remarks. carefully. very number at watching out we're of our micro a

future So importantly, of sure months. to the is has scenarios honestly, we've about still and out that to I we're different I way think the you company what the we are trying the through that scenarios to responded that seen we're flexible sure looking the and expect several businesses exactly lens enthusiastic able the of as quickly think the and all response of most this. make next we're not sure But making to adapt at different

Got Thank you. it. That’s very helpful.

Thank you.

question Our William will your Please come from Zackfia with proceed of next Sharon question. Blair.

car going something that any afternoon. that? us we year? that inventory? perspective levels and then good finance GPU as per is March Should else the of normalize think you really quarter Or secondarily business, Hi, Could of mean, retail like you kind back what do last on of we the And kind of second of the to as I the you April there obviously kind similar unwinding looked on hampering for in end the were should the revenue year? into rest consider about rough. finance have might look was towards give more How that

Sure.

GPU. retail with start Let's

have then the cars. that's it were on happening financial and cars in choice the site I buying I some inspection reconditioning to And that buy first would are of inventory probability It statements given is higher they we have to at take stop we our those any a marginally retail get The put So but higher retail think healthy and sold as get that being if those quickly of was constantly lower purchasing and It's always March. impacted very you're do with late in day. you cars, our And very you flowing They centers. reconditioned number. cars longer pleased coronavirus, tend margins. cars think kind in by that up been absent sell sold our I GPU. through think put that to something margins to and that have the tend have GPU foremost, still,

out. and stop when so that buying your kind and to inventory starts of And you age inventory you're time cars, freezing

margin is the with that to statement to average depreciate because moving and flowing respect you time. the constant, else all so, income observe is And going cars time drop through

so, And likely impact that a be than the impact marginal that quarter do second it probably I was first. the a had larger think in would in

you very day model run then sale selling those any a in would don't cars average of on days. up XX of your just We're simple kind through quarter. out the you quarter saying mental buy If approximately of days of XX cars by go

what And of the can would there. math kind do happen on so you

that wholesale that to at We considerably. the markets markets brought purchases exposure demand down wholesale stability we're reduced as in that now there given as are both least the or our in our turn on observing fact back relative seeing and observing well the we've starting the the that now and stability we're we're strong the inventory

to be that just So in provide will an likely impact to larger in that offset is impact that is but QX a an depreciation, and QX.

this our how we're I first before in quarter. finance extremely pleased went in we of in an think time. extremely held for period per a We and platform did revenue market, that start but did short environment. turbulent We that get As non-prime with we the about done shut securitization our with finance I'll think, markets did car, up

did get but would still we gotten that with expecting premium premium in so, And a solid previous that. very were or pleased not likely and we're have we we periods, the got

flow and expectations The are pivoted markets those it a have forward environment as And this securitization, would closed otherwise might be then, were was securitization for in instead our prime a purchase premium of time. new received, again loans a we spreads short of we yields doing period sold pleased as agreement we And when to with. we moving less loss up moving kind up. received we premium are that and up but was are of than moving expected

and that take. always and I the excellent it view do to of would been as We actually resiliency wish go QX So have and think sign would believe numbers represents finance it was from even continue take what that a to platform. would a test what up certainly high would of And sheet relatively in credit will also to it me, a that to But levels. model being balance to an as very as models small number many that decrease QX dealership that finance on it relative held also charges the strong the I number represents gets. compared traditional

know, finance great you case. think, the number demonstrate I is in a to a so, its that's that think a platform us a to also in for resilient very And we only moment not strength scenario, downside positive but

you. Thank

proceed come your Sinkevicius question Please question. Morgan will from next Our Armintas with of Stanley.

that that than looking their is just occupancy, the really these of of as shed that there And warranty, services, you could registration. but (X:XX:XX) million taking capitalized assuming into something professional defined insurance, black over title doubled else past line color what hoping the expenses, corporate driving none year. I'm greater other limited and is market some otherwise I Thank growth IT And occupancy, on for higher? for here. a a Or has question. bit goes software? Is own items you SG&A I'm been at on $X box Great. this was it

the this hit bit on a little as We Yes. last Sure. call well.

So, being think, you that think as big I basically buckets other. of there's in can three

technology. The first is

The there's some corporate. expenses is second also in then And there. transactional

think in of terms or over in the been so, last that all that's areas. year have way of we investing definitely those grown I the

just in through. big cars from scratch, And was so, of almost essentially I walked impacted sources buying one of big of that of all those that buckets three investment customers, business definitely the this XXXX building from

and That was the a major major XXXX. innovation business to in adds a

line certainly true was it big QX. in That's the but the so, a other all driver SG&A also item well. items, And as big, line of

pretty are certainly be off a our a but walked in significantly car in just be as That's other demand up was through major in I a drop buckets. that March, lever that bit are actually march despite per the we model. expenses long-term QX little we'd things SG&A we QX. significant those in those to bearing expect forward of sold certainly over All time that And bucket

single quarter, the was item SG&A just And line for every in first Okay. higher quarter. than prior the

of some these line as be ahead to quarter? into see Any an benefits, of second comp costs advertising pulling for the burn rate that what and quarter, but second sequentially to thinking items mentioned appropriate here the are of the that what trending you You manage company? looking levers we lower you and should related the to

Sure. Yes.

expect certainly So per on SG&A items. basis declines those we line in sold car a

I think where does that per we've that on come unit response taken a from? I think is a expected to big COVID-XX. part of the basis the decline

March So of best, used our if month not were common which one a period in best the QX, of often a the where industry. were year, investing. we is significantly we car is our in in

And the obviously, sold a didn't were materialize, expected advance in of car our per And so, significant we ultimately season. investing really had in impact on that expenses that busy were busy significantly realized that when quarter. season

Of do per to alluded through to expect car sold decline QX. in that taken I expenses the we actions as course, for we've

Ron Our Securities. next your Josey come will question question. Proceed of from JMP with

normalize, gains things aren't Or for Hi, plus about then And something this guys guys With big to guys that advertising just to rebounding that leaning a Boone but more? recapitalized significant you kind level are XX% and Thanks question. the into change is what ROI? yet of XX% seeing, there is in question. you picture understood a talk there? Ron. balance secondly, Andrew our else talked there kind sheet, are you to why kind for sales taking on Is April of of that about you share with can

really fixed that built way model. you've business the Ernie, cost So, is a this

you through go do think like differently? does you costs model? about something you any Or push more make to want Thank variable a to that this, you. this As

Sure.

XX% that year-over-year – XX% XX% start extraordinarily the several So would to with down I demand We're before is year-over-year back way last say of I to happy and weeks have sales. a perspective. would being to has after us reversal a from the significant dramatic I several is we're think with what – pretty weeks levels pretty gone a being

that I we're and remains is we're I to the with think trying prices We've in markets. the very potential uncertainty in monitoring bit about that And a the talked clearly do we things think and closely. with inventory see. we're has as different you of balance trying many the upside how look the us virus, monitoring little forward, industry that the what economy to

bit the cut off if the forward stage We're good is on closely we still do the sure ensure carefully on to we monitoring to We're entirely get really worst it's before things. our credit positive, that attention all when of positive, website. paying demand we of we allow negative. those a a little very at things feel moves. ways definitely downside somewhat we're it because equation while good to a following that's trying possible it marketing think situation We're markets. but move the that that believe trying an cases We're I to to we're that trying that turn want We're close And trends handle costs. balance to we in like do sweeping make very of clearly make And we're look us advantage are this. we take that that also seeing early make in get sure we

all we rapidly. been monitoring very as to available. that would making make And very that information I be changes and we will have we becomes But anticipate changes rapidly continue will

costs shape no And this fixed to absolutely change model. at for variable business traditional is or think would think to that we swap way, form all. I want right relative designed the we move. that in the is costs And to

a largest degree And up you to ends prior the retailer. lead that cars per build. us being size profitable million the to the business right can that think, ultimately the automotive this, we could year most I that that X is plus that which you the function choice build of to of would that a business sell believe and being would that believe we

that information to any way, And think would I don't in us question have that cause we or form. shape any

information or even upside. that's getting more there that potentially make the to speed would the ultimate changed anything possible think I the us if optimistic about

business and I very positions we've So it growth. designed think way about feel to think the good continue us we incredibly well the

variable an the lower down tough demonstrated cost I flexibility spring and to it business And at looking size that of very when back then really And higher one business and environment. wings at the weeks. looking point its fixed demand That's the pulling saw right to also that's But think like of its I our pull to flexibility discontinuous up that market five incredible demand lower lot over built a six when ability couple these levers a kind over you're just setup growing or you're and that’s and large shock, when the with shown we quickly ability adjust setup shares, it's and quickly. long-term of setup last also the you're a a have is think costs. we've last a demonstrated the we've This in model. weeks. our

about anything think business great the feel that is we So if future we and designed brighter. the

Thank you.

JPMorgan. with Our next Gupta proceed Rajat question come will question. your of Please from

was then have you near-term? well? like of ABS And that the the And Hey. impact that a change Hey, follow-ups in just in that to we saw Ally deal? might quarter? into the overall of quarter similar the second the environment Or loans into the I tap kind And had forward and beyond, seen difference second good between quarter Could the moving any the the first ABS then the in questions. expect – couple flow the as and through the Thanks. in to evening. majority kind non-prime do I you second you as to questions. still monetize a finance taking the What’s plan of in XQ in as GPU a want is related my markets have well what GPU in premium a on a out? you – in Thanks up. financial for follow quarter break have

Sure.

pools. at in I – at than haven't both what on on have less both premium we received anticipated we So would We that. pools greater we detail say a was would is, kind than of prior. It dove level, historically high

generally monetize think don't we I at so, And levels. now, our to tend those it's similar but it pools, speaking, somewhat

I forward, to Looking with Ally. want first start

a) us and was very for purchase a with I forward and to to to sure should economy to this as which $X were the they in absolutely b) generally pandemic the quickly difficulty tremendous the – better the result we they're that billion extraordinarily with can because of upsize an for. us think reacted risk, saw worked grateful us also that make markets that when has you'd we're they partner that do as flow as agreement environment, emerging financially originate on us because massage credit been agreement environment, they loans going there in expect for Ally and in we – and those of out

So what's a interest we're they all quarter or impact also react coming that hard know will the interest to and quarters, able that. rates It's going and offset the happen the will two. do over better charge to constant finance to may GPU and market tends move that That rates else – said, the exactly market there. to in

going QX. GPU perfect for in be QX fairly or difficult. figure exactly to be around, it is to have there out wide similar would be what form. anticipate our is was uncertainty in Looking finance shape don't guess it best way, with bars any wouldn't We it somewhat and into clarity to trying I we what think to definitely

over to more weeks. done the up deals to over been And done last several deals again. securitization begun The There have markets open – anticipated over several be there's the weeks. many have of couple next

monetize receivables to and the up think I improving. so, be seems opening do And are those markets ability to

that there be plan of but that uncertainty. wise where So area of bit expect little reasons for I an – it's and think to also there I unexpected think the optimistic a remains to are there, there kind

don't precise for want will in So what QX. to we you that like give look think expectations I

a well? that due That's went $XX some that’s of of part that you want non-cash that And that interest in about Did more materially, a the I on then loss line question. expense to And was else the great that Thanks of the to just that. securitization. housekeeping material call out? is up of was talked Thanks. color. clarify believe to I as for beneficial just item Was that. that the million other there also anything into that

$XX is I million then beneficial that financial portion million. that that related Yes, $XX finance earlier larger that related that is bonus there's essentially. $XX then a referencing the securitizations. part retained And The these was that of million was the receivable portion another and to receivable That's asset interest is biggest in that of that's assets. – part payment

Got it, got it.

mainly rest the was – wholesale on So, is but finance the driven? and so GPU, retail just $X basically, like million the impact the

correct. That's

and for Thanks luck. Okay. good clarification

you. Thank

proceed Nelson Our of Stephens. next question comes question. from your Please Rick with

from impact the I to than seems later sales am you would dramatic afternoon. like and to that up. car that stimulus GPU. up overall increases are the there XX shift what's follow Were Good changes in come seeing think on much the this about It early Thanks. more declines April there you day in promotion? business impacted? checks curious that I How happening to used dramatic –

Sure.

the are So I that among difficult think things are to those disentangle.

customers. And different pushed I expensive tailored out to received marketing this happening less moment materials I in to stimulus think to think to the recovery marketing seems we through general checks implemented then There there, saw promotion. a reach rapid put that shock demand we that customers are by that were from sales We've day the market. XX down. these channels. be The out

are flowing there, are of And to separate. number I that difficult forces so, believe there are through that

the are speed seem generally the in we're up. sales severity market with what outperforming about of in excited the clear terms of it which are of that think, climbing decrease sales does the I that terms in and back we is

that. think customer think a by to that. that in so, shifts to direction. to us is want speaks disentangle think we're our these too But trying to to I And for preferences the take I – And that we excited at in impacts swing difficult other

Okay.

retail it. curious you website? do kind to And use or also got reduce inventory Or wholesalers? other exclusively auctions I'm that liquidate wholesale the through of to Okay, channel

the Through website.

the Thanks good luck. great. and website, All through

you. Thank

with Citi. question. next comes Please from question Our Nick Jones your proceed of

the to to a is get your to thanks. start other the you for you them put to to after any CarGurus way updated It like new there? thoughts Hi, try views for Do on of entrance guess Thanks I to changed do kind you seems so undoubtedly dealers taking what sell this. Thanks. more Have have you going on might delivering. and that's that competition one my survey the cars? tool question. have now marketing competition into

I what a this a this there think different outperformer economy, that in held be to think the and seems say, Here's certainly across I expectation relative would automotive, will I across out that during time. coming broadly e-commerce be time verticals retail and of

And so I think don't a that that's secret.

surveys many that point from very one a moment. think this at the I topical like the that it is survey CarGurus is came to clearly of as

what So news. really that's would is with I we think really, good think start we

built. And the last think, we've I that to positive. impact for transact specialized order is consumers offering the order big is inclined to years of to degree in a that you I to think then more need to build effect, first wanting offerings we've the to the the do that being seven through way then do similar some which think others second try

now. would And happening so, happen. degree I that [indiscernible] I our was more be will think that already will that But some likely think, happen debatably expectation that likely to

the tens I X% with market the is important thousands share. order of have look think, a on market dealers the it's hundred This generally. a to or at of where of top a X% market players

market. on a It's trillion definition on a dollar the large fragmented your So enormously market depending very order it's of an market.

it's really So, large. really,

the two so are competitors of overly as also becoming focused that one direction competitors other to of so, as because there many And points generally or small just not think many industries. in competition large that we to are opposed these there

that takes lot exactly a inexpensive lot that. to industries. visible hard. a for seven money. online great last is do. a unlocks, in It's across selection brand spent delivers supply It This to We And gives that of the business doing and thing online chain that in great investing building technology the that a the it's takes customers experience investing building years of It experience is hard clearly and a e-commerce time. customers undertaking. And

potentially expect driver that of directionally all than the competitions has much So as increase the we I online more of think, a been this? yes. competition the I competition Would we result answer that Absolutely. more bigger that transition a view is that are accelerated cars buying would underlying positive would be about excited consumers negative? in as think

we're overall, very of feeling think, this. optimistic impacts the I long-term So about

term. at Or medium least the

long-term of out. this from impacts to this term – play Longer yes, a hard exactly know will perspective it's

thank. Great,

you. Thank

next Please question. Our Montani of your Mike question Evercore. with comes proceed from

pressure profit of The along we place And in different there's the areas. to is question. questions that for might loans. Great. would a Thanks two now, remain kind for like course over of something the place like taking follow deal I get then that the the just be handle next of would on magnitude in that a on And lines had the One with year? trying the anticipate Ally are up. of

Sure.

expectations well, what reduce earn don't and constant increase tend as we'd up, expect would go happens those think right all to an all folds. then Loss I interest else to constant up risk tend several else go think The like to that premiums. tends is tend which quantify reduce in that to would yields because up, I takers environment which consumer want to all go premiums So this now which rates constant premiums. to

balance bit originated and automotive finance fairly hard retailers a little loans those the is kind combined through the to that Historically, stable. has companies, things of value predict. stack of of And been

would to where prior there. expectation and back continue to its convert this our upward be that to journey it was So from for then

I is unclear. of the that all exact timing think

an to a whether to But originating desirable definitely positioning very into conservatively. loans steps sure effort one the going taken make credit make positive are significantly, the try to is one sure We've step we've think that or that this next we tightened in pretty unclear. were ourselves negative I loans. is

and off we tightening crisis. way the to in the was financial the modeled credit way performed XXXX ultimately that that We of credit tightened were XXXX

although, made that were, are investor a the where the yields that so will similar rating degree. assumption assumption are That market. crisis. deteriorate today, more made today. clearing seem XXXX agencies most XXXX, to losses in And That's than be securitization implied the to we that getting the the the done to volatile more they We market seems that making to similar up a go severe severe a assumption or be yields would securitizations is the that

credit. also the wanted we're what – order do believe think volume in industry from credit of credit think XX%, those we in I We indications has to it carefully So to we feel I likely terms like it. about overall what demand have rest more And that very all ways the feel we tightened originating, strong of the good has. likely about which We very, on by reduced we're seeing. is we something we to tight that thought very seems how speaks the significant. of Because is than that our

that And may so tightening, absent even we performing be better.

move continue monitor from right moves move and the is those what right out what's to we then made here. we've the on what figure positioned we'll But next to ensure as going – that we're defensively

Thanks. front, of And all wholesale just the to then great. terms Okay, past would of what's additional GPUs. the in pricing color over weeks you two on if wholesale pricing. And could, what terms couple on be in through see areas. some of curious I One for just are the the read finding that

be So should that XQ current trade-in of would we side anticipate you the as quickly more of again or or the cars to and in the consumers GPUs go purchasing if is good trying ratios it guys are was be that you and once and kind question to kind up given on in persist, kind XX% and you scale as consumer again the are market trends And that adjustments enough. second down not QX any then XX% deliberate was? assume further side, on mark for of mark-to-market now

Sure. question the I'll wholesale take on GPU.

adjustments don't any in that expect future talked of we we to the earlier recur periods. So about

in assume However, reasonable QX. level I normalized be do will lower think a it's than to GPU wholesale that

lot going here. from the wholesale of think around there's uncertainty an I how evolve exactly still is to awful market

some not to normalized levels certainly we see volume come yet. at think back I but started

be we'll that a levels. think, will see the lower happens reasonable certainly expectation a market. lot there's what uncertainty And I now. than so And QX normalized in But right is of think I

think as And the on is into that cars the it numbers that buying cars was percentage of then the And bought we heading we’re customers are that long-term relates neither selling, number were to were the of to of our we source from Neither percentage were of I which of XX%, are goals. which those relative of positive trajectories numbers those cars of steep this. selling customers. previously customer both vehicles, XX%, the to that nor

except purchasing pause trade-ins, early cycle. customer did channels all We through for in this

purchasing will just coming what kind not that coming other And is transitory way. drops from buying down of versus are we're just function least push on of, cars, a mechanically we that so we that at selling is directly number, sources. what customers is the purchasing because a from And in XX% then of cars back XX% ratio when number clearly turn

decline and economic there fundamental, buying uncertainty of most to medium-term. be in cars would is. there will And the we back that in most expect long-term near-term, before the that I it is the source it what was customers to to to ratio in continue from And because where go cars the is think that

you where to And cars. so that's buying be want

is much seller you a where once market, the single many in market cars less have car much markets single wholesale liquid from effectively moves happening a every buying dramatic more years, are selling the Given liquid. the a customers in whereas

And have consumer both tend little wholesale a adapt virtually rapid price tends environment; to to disruptions, if instantaneously stickier directions. you whereas market the those be new to markets that so

and acquire and would of where be will inventory market to back long-term, to near-term. in markets. is better getting both of And be But from so the our the a where were we we those in medium sense monitoring And march continue expectations the to there.

Thank you.

Brad Erickson your Please come proceed today will question. last with Your question & Company. of Needham from

area, again, auctions Ernie, you the keep go you have how Thanks. guys. of What happen have follow-ups. before Hi little of that for to further. and physical couple needs wholesale but I auction, can wanted a just kind about a really little a those have follow-up. I to then on the of enough normally bit just just is were to a talking inventory to growth? function And vital driving kind

buying functions the it of and likely auctions I many it majority think on if cars of houses you sense the the larger in buy and normally, auction all sell this. the for half of fairly weren't buyers of of were Prior that volume would again, the cars is online. otherwise are have already order the what can to to this, been

auctions cars moved the many to many, but more so online, buyers And are have functioning. buying

is we a I fundamental limiter like to to so terms in levels that back And of acquisitions. whatever moving would don't think to

sellers to for moved many thing I think is recover. have believe the could started about to stabilized to happen that are shadow still what's there that again. going that There prices. are to to and sellers expectations have we that that not careful sellers be But reasons drop yet. want Prices prices inventory out our or there are

want be to mindful to carefully that's and what of And watching market. sense that so to we of do the getting going a

we've a of our made And eye down why that's on. reduce levels inventory to keeping manage part and our And the exposure there. something we're careful so that's decision

large the in market order recent because most pretty on the Now XX%. about the extraordinarily down is wholesale has opportunity probably also significantly of weeks dropped

a have markets only retail the And dropped percent. couple

is So available opportunity normally generate much, wider wholesale of it implied much because there. for And order margins there normally are that are much wider that suggests retail it the does a taking that spread the on the lot larger X% of than is.

upside opportunity all strategy call. risks we're been the the we've our into And that the with on so I together coming and discussing to think that balance trying

sort last of then plausible to where give to loss some really where, might you one under I great. how be at business, Mark, is sort be at for this the help where guardrails on that EBITDA just to can to the with one get just or jumped have And stay, is this level that, April EBITDA you be, the even late. But today it. if of way earlier, give business any Just Mark. growth as on a like Can you be would Got about for year a to think another I and the any at, of, on to any on apologize from any breakeven expectation here basis of say rates? scenario touched what would question Thanks.

Yes. Sure.

So QX. maybe And as that it to keeping these question. directional some summarize far. on so of should things hit that you relates I think mind a I'll lot way to start we've with the in call be this of And I think a on,

that somewhat to GPU some as were GPU. a to particularly from in call, QX of this meaningfully expect talking of retail dynamics the So result earlier QX we we do drop on about

lead ballpark I of unit would going second reduced we certainly levels – to we to as think getting expect SG&A dropping those And expect XXXX sold. I EBITDA of QX then two just to losses combination a there order from rough on better there of will dollar think down things we And QX. then in per QX. the car per also things a well. drop expenses sort half give And meaningfully think from to of magnitude to

it. great. Got That's

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

And to there want done it. We for like appreciate everyone the Thank to to really last in thank out job lines. six all call. team telephone weeks. over also the the turn you've joining to I'd you for then of Carvana you I

business crammed of have how that's XXX% tremendous, guys working. Everyone's speak because results hard. into working all unbelievably period. We've strides hard short tremendous so that very been and in for We you much themselves. are The made the

appreciate thank can't you really, It's admirable it. really truly enough. I we and So

in rest Let's keep you this. We're through everyone. spot. the a fighting great of Thank

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

may You now disconnect.