Carvana (CVNA) 4 Nov 222022 Q3 Earnings call transcript

Good day and welcome to the Carvana Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mike Levin, Vice President of Investor Relations. ahead. go Please

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

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

forward. which financial moving Additionally, now intend to we not consolidation can understanding to the provide pieces assist Events page quarter QX found going & of posted of that do a website. of be ADESA, the tables set the supplementary on our ADESA the investors for full we consolidation of Please the this supplemental with with Presentations complete, in note IR tables

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

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

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thanks, joining Mike. Thanks, for call. the everyone And

a strong operational progress The was and difficult third economic quarter industry quarter the of against backdrop.

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have changes we are together industry the Carvana in economy, over markets As our faced great the of have quarters, the come work. and last several the and in people doing

doing difficulties and end And lot unexpected a keep inside company in. to putting everyone and there know all go. heads between the we We our We've know to way to to the it of probably go left and have this. we're down to work long hard keep are of we all do, still additional the here but for marching. a about We have it. going how you're got work Thanks

vehicle the we to There rate Next, what facing we face key us? three and headwinds that are those change price are now, key depreciation. and impact headwinds how are industry level interest dynamics increases demand, right

at Let's one these time. take a

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loans risen last Next the interest since over Interest good have treasury two-year the with increases. rates automotive year X.X% for and benchmark XXXX. rate X.X% a rising rapidly

spreads into put have equivalent risen last credit price monthly of customer payment yields perspective credit To for the year. in last spreads the of current about are addition, their this In impacts plus utilizing increase. a X% about in year the moves $X,XXX your in customer's a financing

using customers the unaffordable ever, ended their despite As financing cars XX% point a this quarter fact that the year. roughly most dropped result, at have retail for prices

risk market the credit time, move volumes other and is and changes for quarter future fourth expectations adjusts, fully our built evolve As the relative spreads other do benchmark, market into we before GPU those expect interest will third. down performance to in GPU rates our that sales which the over to impact expectation

depreciation. vehicle Lastly,

time. between cars is the retail Two back medium of affordability that be to is it the prior volume. dealers selling a rate good daily prices as roughly a and approximately creates increased GPU depreciation. key expect and over bring believe both way we last to it's prices seen which Over recently that have was spreads spread to this dynamics average action Historically see on offsetting. it spread over cost terms We've necessary quarters depreciation for in industry and as in captures vehicle the other and In depreciation on therefore can big rates saw into in average, healthy depreciation goods in the and stability clear. term impact line of with the in we wholesale margins, acquisition is acquisition near widen seen term, few a have retail it less the retail the is car quarters retail

on to this quarter. Looking it'll don't to but play continue know out exactly we be expect the to case average, we quarter forward, how

retail wholesale depreciation have further widen seen up daily spreads and move meaningfully. We recently also have seen rates

GPU us tougher Given expect these Over has. the is time as historically volatility it quarter. for fourth will that relative usually it our it, expectation call reason quarter retail than making it is normalize we the decrease third to But moves, to the is.

most share sources profitability, compare customer realize share average as relative meaningful by our demand to relative the on the focus sales doing how focus gains the industry due seeing depends we on rates, profitability. are more well impacts which to likely some and taking the summarize this. discuss as This likely The Moving way it for impacts differential a to is discussed on as to. industry? this but share. as are that industry and data to volumes the the it making driven as well funnel our choices on volume is than are letter whole, but dynamics sales we we understanding shareholder industry. not impacts of Quarter-over-quarter, we If in we in our understanding, of we are market the our relative results are realized difficult much believe with a market much they best use provide conversion a the our to taking we and versus normally simply customers given of year-over-year, our and market clearly we somewhat hope to do to above answer beliefs, interest it the setting is top clarity the to We question we're

industry more further stability, profitability sales to this up expect show when to and our We begin initiatives. general we approaches rate realize and environment the decreasing interest conversion when and to stop

march mean test to more reduce regardless term, Now we to of number of is company, efficiency our gains to to to throughout continue minimize in industry evaluate continue To rapidly maximize sales. near number heading the profitable to to put level we and to of focus toward to sales of what the and sales as continue goal on the term. profitability we our this can volumes. near the as achieve area what clear levers the pull In this, should profitable and to every plan less does our expenses quickly

end This want easy to the long skip what question. a mean environment. the the Lastly, to But in most of I hit question important the is does question term? an this difficult is in for

several when never through opportunity are intend even fun. ago we Well and we undoubtedly environment be be may last the like us Carvana environment year we well. true it's the if been things as couple the this, that still as define manage started very is brighter. belief to in will All the have were the long next three Our term to quarters difficult. focuses current The difficulty felt different today. Nothing our

and focus our better clarity in provide march we're of of side the will the time. difficult continues, it. to be intention If There's While the middle to use we on Mark.

of an decrease and a nature increase commentary retail decrease decrease near initiatives versus Thank our QX, our you, rising XXXX, the in $XXX joining And improving for prices, in progress in and executing interest of profitability. quarter included impact market by comparable made reducing from the a of for current expenses profitability. million rates, toward $X.XXX $X,XXX will $X,XXX driven full sold internal of today. changes. was of thank use the environment, was plan X%. focus and and external high we Despite $XXX a of volume XXX,XXX, factors. was billion the all to us QX, year-over-year significant QX, gross variety results We a on term despite SG&A gained dynamic several included you which X%. on Revenue Total Total vehicle progressing units headwinds Ernie. We sequentially. ADESA, detailed in more unit our QX. in significant sequential In of totaled focused period Total share of per Due the revenue and profit QX

has the gross GPU, Ernie's based recording excluding million with or reported ADESA, we X Carvana gift D&A, retail of GPU and depreciation, and amortization share associated Historically, gift acquisition profit excluding compensation GPU both ADESA has or milestone SPC. unit Following while D&A including expense reported and and wholesale including total are GPU expense D&A.

by X,XXX higher was to compared Other in in GPU in of retail of QX, and purpose X,XXX, in QX, QX to Compared flat consolidating increase QX. were profit prices primarily a D&A D&A GPU product and $XXX SPC GPU QX. in to to wholesale $XX. retail lower was GPU gross changes the by driven origination were QX, retail compared QX. Sequential retail sales in other to XXX For changes QX. driven between and Sequential $XXX QX, by GPU rates, sequential cost D&A QX, offset to of were was we're gift increase excluding and in X,XXX in full in Retail Wholesale now XXXX offset prices relative per acquisition lower excluding QX. depreciation unit in was primarily benchmark by Wholesale of in in of quarter securitization X,XXX compared was in rates GPU compared QX, XXXX $XXX compared sequentially. higher QX ADESA to spreads XXX providing GPU by gift Retail a changes clarity, ancillary in rates improved in Total relative higher and Sequential an both. excluding SPC GPU was partially to attachment spreads primarily XXXX QX. interest credit rates. driven and QX

channel flexibility We only SG&A in from reductions $XX the compared broad including ADESA expense to expect and expense, other impacts to by in we declined reducing mix nails excluding significant QX. QX, Carvana toward made expense. as SG&A progress low SG&A payroll, logistics, to expenses optimize were progresses. our SG&A advertising, quarter These QX. Looking million maintain based,

We in coming expense continue the SG&A expect areas of progress the plan to across on all business. we our reducing as execute continued to make quarters

including to in minus sold. compared Carvana from of retail as was stock have progress X.X% excludes of an a other X,XXX to compared XXXX QX, and and SG&A personal EBITDA This of in compensation. gifts expense income units changes Adjusted QX share as Our to sold, Adjusted SPC employees, QX, securities, value but based includes goal expenses. to well minus margin in led retail it in which we impacts fair improvement the excluding QX X.X%. includes EBITDA of despite of Ernie's QX improvement $XX ADESA XXXX, of lower for expense, to primarily the expenses. outlined EBITDA a to X.X% and ADESA million May quarter non-gift D&A goal in adjusted equated units X,XXX, In $X,XXX for stretch stretch

But We on on basis. are making QX. unit current expect progress basis SG&A due expenses to reducing do stretch the to dollar reach we goal environment, the a in strong absolute per not an volume

at and business $X.X to levels achieve liquidity real in at or higher is EBITDA building our assets, real GPU cash than lower On September the levels, savings billion Our flexibility resources, goal including approximately cost availability, profitability and billion manage revolving acquired volume including total to greater initiatives. $X.X achieve XX, $X,XXX adjusted volume efficiency of while billion $X.X we through significant in also current approximately in in total in profitability from to ADESA. had billion unpledged estate other estate $X and and

growth. production becoming cash plan now infrastructure operating center approximately our focused liquidity reconditioning units flow profitable and X.X us ended positive our retailer. questions. achieve giving Will also with our the clear for future and most driving capacity profitable your million inspection auto full runway, at of take We Thank our and quarter and for on us substantial largest of This utilization, significant strong positions position, attention. the you path goal well to capacity and

you. Thank

begin Instructions] now will And our Bottiglieri question go Paribas. session. ahead. from question-and-answer first BNP the will [Operator Chris come Please with We

we're income market above to and Hey, in facing vehicle seen now? dropping consumers I beyond is you thanks I be taking question that That talking first is sense QX. guess QX, be the the Like market you're But right incremental what customer out what as every guess one you may in pretty relative market in are guys, in similarly? QX I'm in there. in the well is segment habit behaving for low do it used itself QX. changing QX like There's market seeing specifically, clear the my itself the question. broader is pressure the certain appears and see what's we've pockets seeing environment Carvana the to that seems the the

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I year, what so this it take shoot that seen is rates give prices several or car that of seen their car the tune XX% harmed recently, customer years, put appreciation of that, the up also utilizing in I think about would amount at letter a depreciate a looking car have payment interest of And been to shareholder think, we've that today price and up stat is but pre-pandemic. tremendous we've seen prices over very rapidly. last financing, think And for the far XXX% overall has we've I a in we affordability.

is, on broadly I we think, car rest drift a clearly, different I like in of time. confidence or decreasing, But that it's it the statistics in there's consumer at consumer yield going some out economy. set always sentiment bunch is hard areas. see to those negative of that And any the think we a what's feels can around buy to at willingness look to tend point in

I will think we exactly know unfold don't from here. that how

I trying pretty where EBITDA. a as see rate. significant expenses volumes, going positive can. we're a fast top I on to we're fast taking volumes share, think well we business marching earn market we're funnel, think were the see that at potentially way and at the you These we keep to positioned do we're position in we as still lower that to

can think flat focused gains. can And it than for own pretty sales us are certainly so was in that months go XX share where they uncertain come our where ultimately six car But would over have hopeful market to the of where, next been that quarter-over-quarter, ultimately just time. in I on sales I leads more reliable, demand go periods and think kind recent we're

the there's see demographic are don't that you'd be else, to notable I all industry. But active, moving we particularly all I think anything do across I expect. income expected or things just occurring, happening, are around things all of those that whether it's lot that whatever the the a and softness, those entire general that shifts, that's you know there's credit, I'm wouldn't So think directions pointed

sell Got world like Like like stays uncertain, deals more uncertainty, talk to outlook. it, okay. financing seems that's expensive done. you about to up the for the Do just about able had open And enough but have markets can ally being partners we Like, just that abandon of actually, could receivables? close, periodically, ABS the you the like, the of you then if, you'd quarters? how other get and should periodically that Like think ABS risk a liquidity if are like to. through if or couple lined given markets those

have a offloaded talk receivables high very about your receivables maybe still You'd in level confidence, those originating of environment? this again so just

Sure.

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that sure with think contact works that is the works with we I one plan making great both for another, that way regularly our that we're come us. of we're in relationship up a

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feel as that's think plan think the great generally been I said, about been way about we've to feel them. to It's I we the it. a relationship. great and us, And there. good So they They've how same I hopefully

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

on the near we Or fourth quarter to Thanks case And third you've it maybe a to revolver have cash unit the if cap likely expect the the similar or And start looks on should if you Should estate. and in the we in I thanks. up tap fourth Based rates into offer taking the either maybe draw follow the is excluding need already? tapping And you real the for into a quarter you yes, GPU estate to Great. guide, be mortgage. inventory your how of like term LTVs your question. in leaseback done again quarter? might or burn, think fourth about real it the already to quarter. sale or the

yeah. Sure,

along, touched already sequentially relative dynamics. the expect lot do of We key to lower QX, on to So, a be QX. volume

lower we to GPU execute on that dynamics QX to and expect be of to be as same as SG&A the as At we relative expenses down continue well, efficiency also to Ernie our initiatives. of due to expect also discussed. cost some time, well, significantly, We sequentially savings all the

factors. are those obviously offsetting And obviously offsetting, so

come QX also would to QX. add, capital to in We continue expenditures I expect relative to down

on the of some QX, So dynamics I think specifically. those are

estate some a been ADESA. that think estate, of acquisition. nationwide very are, desirable for acquired of obviously, attractive as a large We from IRCs well. real around very markets we country, markets, have we terms big pieces also sites, and sites think large auction that I large building real attractive and was And portfolio. our those motivation attractive real network estate of the In We've assets, us in a undertaking are really just

I think portfolio. great real have And estate a so, we

we In leaseback terms do that, transactions, I we've history, have of, way that traditionally, finance yeah, options the think multiple for how we're used you we sale thinking can about financing in about can other those I think so But think forms be real there financing executed our as also we've of for of far history company. $XXX in million estate portfolios. a large

So don't thinking we've that's going about, -- there. the really thoughtful something we're don't estate I any we a I think think we're think executing real assets transactions. timeline But to on I the about of like base got do nice feel

of not you're to So front so any tapping in right you far?

going I be and thoughtful assets. financing best for think very to the we're about, way those timing

do follow lastly, mentioned looking underway at Maybe any highlight That that a are you're get there? would to come of sense in million that plus there? some the from macro, profitable already might independent, plus, you there's needs to to when maybe or Can GPU that close And be you few your low my the guess? out to SG&A. quarterly Thanks. and get hanging volume areas $XXX other fruit, levels. be still initiatives somewhere X,XXX current any expect timing imply to up, you where This

Sure.

step down to is by million future. to about mean, quarter, number, where I we that in to we $X last to look the the and a a progress number relative expenses which quarter-over-quarter, pointing is a reduce I make just big by is start So made would the obviously meaningful we

some place every as the in dollar you are And But harder obviously you're a expenses, gets march to than last. fruit. to expense undoubtedly, we're there's we higher it at hanging incremental gets down still like a than much would of still where be. that we're continue levels think, I low little

million if we most number. in meaningful impacts really XX, look gains all out force out quarters. that at seeing base gains additional ended. structure shipping to in the logistics logistics that cost, $XX over quarter, And we we that but million quarter out which of of operational kind down but improvements. very that the more is reduce great advertising $XX board was a since powered probably cost something a that broad $XX across far, board. of the go and in all the We've utilization the like then The gains came up mile. management operational think, million, of of across rolled a coming seen million to X% in per XX% we Network the country small gains we a of it's May, probably down expenses new that network quarter-over-quarter, was else. which by logistics XX% those reduces of at was quarter-over-quarter, payroll a we're across million lot groups. we had which roll our And logistics so the continued average subset cut everywhere only had $XX gains hubs bunch overall. we last in still $XX reduction sale think was per I made our miles kind to across hubs, X% of meaningful we, And an of And XX% we've further, spend that expect in I massage that fair the out by other made other And in to

of we're So I think where see break gains an really down that's tries a letter so table there coming hanging from coming business fruit. lot because business. across a still and we're come low excited of about And to expect making to also we idea kind from is in you all the can it gains the the across here from that put that that is from we really

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

it at it looking put taking will of for of indicate for through down back the we or kind and affordability next into kind you come I step OEMs retail to guess key looking be normalizing of difficult a car things big the start guess and of how thanks questions. XQ used down are thinking Great, prices you kind into of of just really more taking kind of get indicators it I come what kind year, is and ecosystem? kind you're seeing cars next as is if kind year? are this about is

I think that's probably a very question. complicated

all to I you So we and is be some try can give history kind back do in think think relevant. of we reach might points data that

point correct the you've years over the and cars couple OEMs think producing of about that is I relevant. made fewer last

Although several impacted say that at more pulled the And ecosystem sales the if XXXX-XXXX over I the by there period. years, go dramatically that. back we we recession, next during will they if of car to were look marginally used pretty out that were cars

debatably in data, of I think has it's of of pronounced. not recession. but the of years, over the the decrease I of volume surrounding I in And an kind small last the reduction in particularly the years volume that said, couple reduction you fraction over echo a been couple see production, think can OEM that

dramatically going And in think that Cars I long relatively in of other set. the I think stable. of materially now in relative other cost abnormal and in knowledge to at cost. rest is cars inflated that cars are were goods the time also the of dynamic really in my unprecedented, pretty up economy the kind really kind And at for are goods least a in down moved up. good a coming time economy same

a And moving relative potentially so direction. of basis, are a value like debatably think on relative kind I affordability, good cars in

that's of increases us. input. of most behind be meaningful is there rate curve where what may to use your to obviously forward I if going but true are of the we should a interest for use view front rates there an be customers as that of buy than And who are indication just depending financing us think go, more rates, the car, a also on in

think car market where try look take, six well, to if that used say, than the a bottom, to I before it and XXXX stock total. economy as maybe probably little did and we XXXX in back longer before and the we bottomed some give bottom, the bottomed like did months market or

I But right as time cutting at cycle. a did which with unprecedented. the when pretty think think happens when there's are this rates, that different that and started cycle. said, last And think pretty that I knows fed now of played interest out lot roughly in who I that's how I correspond that dynamics the

look at that without think there's -- think So some that sure I half worst, to I relative make be we can that there is other to happen glass full, think we things could want reasons good for but do trying everything auto prepare like more those believe the do to I They're categories the rates. in over likely by movement driven been interest and there's future those movement think unwind XX than that the not. in to extremely of the And And some I it that are of extremely in a the cars next are expensive. sensitive areas will that looks recently, to lot fact months.

attention we else pay So every will.

point. flexible can be be business think And possible. expenses as possibly and said, best. hard driving to the as a it as this quickly But as We'll down like setting the I up I X I for think, we'll it's worst to at the be. be hoping planning call, for

and on GPU. about GPU think some follow-up that And -- that we can into you feel and next maybe Can of rates? it's X bit? kind kind should just how how of to GPU do mean from like protect XQ year? range-bound quick of you factors How compress risk Or quite Got of at I it. much an extent? kind these into comfortable depreciation that is a

with things roll of kind the and market we're that the me then start let I'll into factors, of. control in So

all a the first efforts so about generally the to the market simplest industry, this that of And find kind is of model players think range. industry right? industry, in retail or we're talking I are profit for and that in kind the is kind finance to the that different obviously whether mental for think, over trying they're of its time, achieve normal certain trying I there's ballast undertaking, the automotive

lot I more that in profit than to think retail if cycles. have where a a correlation retail depreciation period in well many between goals. forces have similar over have And stronger that's They GPU cost time, because of and is similar input that's which that many view is why see least, see wholesale think spreads, rates retailers much not And it to don't that, cushions, variation tend lot They need finance in in cash across and to true impact puts of across our that costs. ballast I this at you of you you structures. probably the they retail have period. look more kind stability in much They huge retailers earn GPU. margins

happen moves so in But of think a very leaves think when And forward. period think also think I I market for I happening very, that either be room would going a are And in from And error seen relative I expectation what the I stable that pretty a force think some we're where those has fast. very perspective, that of we've fast, they our it kind been to historically past. just number.

I think need to prepare so that. for we And

customers. passing the increases I funds that been funds of Different finance different with there's be cost of utilize bit out than a finance on funds room we their think slower. more and companies is on passing with to forces in have two-year many We've the GPU for I which that cost on of different underlying seen for of cost think methods fed finance there companies to more side, treasury, fund evidence those for line little use. benchmark they've

in in absorb that, and that's that true, given do collapse that and a of the costs be more that's gap over financing have to for terms fewer would offers we by market retail give that But finance helpful who do to can fund play terms driven years, extent around to up relative watch abnormal would kind funds just I But we're think kind both in of going to that, fed of think that that volumes us, predicting there's continue could next and out. think sales that it that the more strategies, history. go the of and to have move different likely quality it probably are who GPU fed to would variation then I going just and is customers. ways see players by I and dominated our is think do treasury input risk the with cushions that's correctly I cash more two what stabilize to once rate should

cars set cost that for to our regardless input cost the for I where customers. we where we customers, we're there's If Now what's some some financing we we to in control? to And up. bit of take, do -- our where there room we areas, set that price of What's think able the where those room. and offsets those and or have an control adjust think underlying set of bids go it's buying environment interest of one costs what is where us cars our in rates have of our our on I all natural costs, in be from little probably likely a

can couple got plan. There's and as in we lot it's through so over world as levers as I I expenses one I to our think of next of to quarters. on from really less relative fewer be the we'll be it we to close it our to manage most moving very to like on the on here. things about said, has of think dynamically said, around what's the really And the focused the for close been, more that's purposeful vary room driving is And then number and attention to being paying pay us try kind control do sales, focused in that this a the as sales our going goal best And past all. profitable of we've of pull going profitable attention of to environment,

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

capital? Hey, up Ernie, going your giving family a control that does And maintain the if was business would as more the company to equity need consider required concern?

here, liquidity. positive quickly to see expenses of bunch going on as So of I us EBITDA committed that ride the a are can. I storm. a think We've puts and in driving feel you'll making think to get We've moves be we goals great got got as company. out -- as a estate. real trying we're to we our down And this you that inside bunch good And like position

away about we're then optimistic and that And We're hypotheticals, to think forward. just So moving from I that we'll just I stay all riding those. keep think extremely going play as it our running relates to out.

All right, Ernie.

quarter could the reduced. Just if much it. quantum as On that how said CapEx, identify you'd a bit backing of between much of How know could ADESA? target a million the $XX reduction, of And you but half, that I out was quarter, follow-up. a you fourth in was didn't gap target? that into from million Appreciate -- be first the the a the $XX

some at in think we and May. laid at I the was $XX And was our time by -- out quarter the We think I came target our million Sure. QXX targets million. initially think And under at $XX we I that time, for $XXX just million. for CapEx budget QXX

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

questions. Yeah. taking my Thanks for

much goals surprise, size those softening on macro? unit? your you help GPU have you biggest impacted quarter. So I your the how And absent made just deterioration at areas I'm how you of out back of of could those curious guess you relative expectations and if -- which industry, to areas look vehicle what areas saw surprise much SG&A you progress is can if asking operational last the would lay per the

Sure.

this we we when of expect several that laid we think those in our about bit plan about help talked get kind a how operating and I order laid for May, we talked goals, in we out -- hit the year, of from to to units. out little of goals would end

relative the what where there's then. biggest So quarter. think have would wrong spot the we're been clearly our I have And units expectations the probably that's that, moved last area the in where to change over been in a direction

We've right? focus move slow on seen profitable up rates our we fewer rates I profitable think seen as a sales. materially more probably up sales that less a GPU bit. car. financing We've Now We've originating seen and depreciation has interest on customers a lot most moved, move to buy down and quite use progress

kind the of kind line industry. up sales you and then of I the you which think originate with just And down want of broader the in headwinds moves also GPU. to have

in making time we've adjusting just we've that world, those been changing think else. to I been the as real everyone been the like adjustments have So

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what And continue so to that's we'll do.

you used impacts Great. prices for a hit up car for months consumers And floor in I waiting cars your used down see demand. picks coming how more And to see prices? demand? more or thought the to car buying, Thanks. materially? do wanted used to Or coming prices we prices in Do of pre-pandemic before you reach car there X% you used pre-pandemic at material prices at start a expectations ask about being sort that about point need rising and linear relationship to above if prices velocity? uptick of that I'm all. declining between see Do what do curious

Sure.

everything last be to I think in feeling the there's believe the going of call. on then unknown is the depending answer. just We going to And I particular lines the any to think to below. XX consumer is over after don't kind months article that drop how all of are there's article forces. that's good kind to pretty hard that's better. have think probably we a about kind economy, were. think lot there's don't cars that as else expensive all is spent six what our prices they're reading I that the of lower think those that is And that's a in forces to of of a difficult perceptions head we What a measure. consumer now. in But buy car think through I not how think probably would surveys the see XX unbelievably to of continuous consumer helpful is pop I some good on out I we different next and -- we time just way all months, it say right And they're questions, hard of

to So want for which think, I in those under want helpful. want I wouldn't rates think those think root get want go are is to those for We stabilize. our want, we car uncertainty, and direction. down of all when our to I economic we more and root call fundamentals, things to are forces interest start prices of move stability. is think the And affordable we to so to what also to for precisely I to root customers. And for all root for We

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

Good afternoon.

even consider market even You're on actions direction taking improve volumes one beyond fourth as anticipating metrics quarter, sales or forces. macro improve GPU, those and Do the impact in to actions take sequentially. to the actions are unit or And in you're forces? on the having to but drastic more here down you those GPU you be other

the And again, I aggressive think a and managing point think most would once I -- the got this hard I pushing made we've some done. of fact the Carvana best I people I that they've doing lot inside there's to great. work want fastest, effective to do ever is expenses that is the going company to in do what miss And think say. And we've down. I progress whole direction to we're try of of

fullness to the all a of But heads of that in now, and when so the I think now time, will side it's being harder we define kind fruits it's than I same. done. at work the unfortunate getting and see we of we're as little I And of this, think of really, think that And I think that headwinds lot But up. many of a great I that. get think fighting our think ever we of ultimately just more have. labor. for coming all down show time facing would so steps. which other more in the kind I done keep then through bit the is And keep company, it's we're there's I to that that a two

really grow good And and our stability. I to move to industry extremely going is economy, the demand Once I car just great a think sales if that in turns market bit then up, because exciting place is continue a you of to depressed think in once able big even stability stop get at there tailwinds a the get share entire the kind little I around, have think stay I spot. just where to puts from one level that's we're there, think then think we of us we double spot where a there. I and rates

you'd as pay adjustments for we to need expect We expenses And trying to have kind that attractive of GPU, tailwinds we'll now. for for that the itself. then increase attack. down and make the accentuated more go also make drive think have But get of which in I planning we're kind that sales We're we would just our be industry would own of not just us to by market more share gains and to. attention

up, on less, capacity and to doing in of you that units you it have some or to prudent a Just near point lot and $XXX,XXX you're low considering and run volumes markets? are have at for time wouldn't of and markets IRCs, this a X.X IRCs rate out follow million of aren't pull be

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

good Hi, afternoon.

I of working on So have, to the expense about the we the then talked first degree business you're question out there. which a and the side lot challenges

could headwinds, nearer as or with in are and you're So there contingent pulling? that terms in to at from probably these that consider side demand there would any both I pull demand you the term, know the they're that big other confidence, levers try your disposal you're offset tools Carvana to affordability is of

Sure.

sales haven't demand talked about in we on I the the is minds looks think underlying do better Something picture least. our this than picture at call

of massage to of -- rate policies and sales way out of customers cash to of think cars use for try us out and rates differential some players impacts impacts we from of that just I buy us. interest we if other the volume look massage one to kind is have that at to the to kind rising between

over the in grew by so XX% And over the that, faster was we rest we which than look if quarter, XX% at of year-over-year the company.

that's So gains meaningful pretty there.

more company. at I of many, kind profitable there bit and us the many articulate forms. choices think profitable different abstractly takes to sales to many understand easiest in to form for and less sales of the making That to spoken have is different I to think about forego regions look the But also just across to these country. try pursue we're a we

which more we customers, our we many grew look if quarter-over-quarter. the more the is to cars country, If coasts, our two we are meaningfully closer inspection centers and that we So many shrunk X% middle where pretty of at the at we of have quarter-over-quarter. look

-- the year-over-year. excuse middle the country And of me, so or

be middle causing so country outgrew the XX% as concentrated many there's sales the kind underlying in that country there of profitable of actions choice of even more as the profitable And are our by and to to coast sales. forego middle But more less the country, they're well. profitable over our sales the And impacted we of more by the in middle of the pursue pursue to sales.

and compounding look of effects that, them, And careful you And when start you all be that there's of look at so kind layer a there's where country that see lot less can when the moves customers, less out you cut growth you top really can of that to -- each see got to when at but and you're And we there. multiple look start middle at on we is the when to underlying you demand to you sales, other, there making we're cash can profitable growth. of layering growth dramatic there.

prudently if think in settle get of were spot and to flow, a they think caused we a stability get headwinds for so express us And But is a can cash reliable have to profitability start I growth time interest we've more to pull that faced being, a go our be stabilize -- we the little that for out manage GPUs us the back. the I can to if rates, we and demand industry as can chance view a little more underlying kind I think again. to gives have of number that stable and and where business and

the demand, imposing the in our on a dramatic seeing focus sort in that growth think cost change still I think like there believe, volumes a heavy direction a is pretty before, cost is strategic was results. to focus of it we certainly but on underlying heavy I from you're So on

just And Ernie. follow-up, X Perfect.

it's unique, So virtual is still Carvana primarily look, a model.

maybe in what's traditional think overall -- more vice As a hampered do still or you incrementally -- from picture, and demand Carvana sector the largely model you look happening demand dealers here that its virtual at this versus the versa? is

get pursuing you big I has many mindset. constant, change. as in harder and is of work our think swing of strategy, I fast in all part more growth probably in as already impacts every has profitable that, grow as as And fast out kind company. strategy undoubtedly, weren't four think change made a that than can a we're can I And bit a think else across as aggressive the from retailers the there of of profit you strategy, to a different that little that

-- been So we that I the pressure of that bigger felt. kind think that of driver probably has differential

our is the We you quarter. loss I EBITDA decreased I that good. look Now said, think whatever expenses results, think else, the EBITDA of or if it's or at direction direction the in our whether

the headwinds more else good given of So are directionally, I some I think else, a steps. results some the probably are think pretty But taking think seeing making good everywhere doing is job. the I with would think the has think seen that a change in steps and I retailers right? their we're probably team would lot worse other I it, get and that pretty all or quarter, I model. And been with great that making strategy change, hard, than we're associate constant, I the that in

we of costs level in to and the of and But is you're volume, strategy built at aimed model kind lot costs a the kind believe think variable business. you're certain a even positioned fixed of not has lower business is I stable another. where a swinging of higher you're to one this and at kind when from earn place in of volume EBITDA traditional

Pierce Our Company. Needham Please next & question will with come Chris from ahead. go

Hey.

not kind wholesale come market end seeing the level. aggressively, curious, seeing we're but Another question. at pretty of prices we've I'm retail down been just that

kind a trying this a take because sense to these they -- what Like -- what it inventory? losses? just need lower just is when come happen? don't of Like prices see do spreads want willing you to need clear spreads So these would about I'm out, this happens always back we much? when prices widen when to and Do get when to and demand that might are demand existing what out to happens Or see? and -- well, actually could not do you when not lower they think need how we of that coming back widen

sure. Yeah,

mean been generally is, lead. has over wholesale dynamic prices that time, the largely I which dynamic speaking, described you think think -- average I I the

not profit whether days that for of to car wholesale sell of and amount are to certain and XX of it's up kind car buying between mental most earning they in XX that so model simplified it's kind on or on that because, and make tend And and they cars down, days. lead. they're dealers plan car, XX they're at later, And part, going to is the that heavily a shooting then that to a for aim for XX the profit they

you which at twp they looked prices would the in we real direction you there many of two then over to there's think when profit in been that And the kind the equivalently But change change the pricing years, the market. wholesale time market then And offsetting gone so same. many, wholesale collapsed. time in up or every by a margins if lag have directionally if with of changes And retail more that seen last been the of we've I you time, last look as dealers market. And least saw spreads. depreciation. the of their it's we massively seeing down, retail offset over wholesale spread appreciation appreciating the saw saw years, was And the by retail leading we're

That's be think what couple see of next least likely way what the over going it's that the been in last we're a seeing is that the and out it's retail years. we're months. I in to preview at the that most over market historically of the couple So used played out, to market wholesale of played

waiting cetera, that and and dealers better days I So those et prices? about think of is at it to I'm push sales, be seems and unit how But like XX simplistic to like curious that too you having waiting know to reset inventory lower it is instead turns, these spoke would lower just it just about. think XX situations. of kind X would

on earn from aged to move of or my inventory. GPU So kind hope just standard this

if them cars -- think, that I now a I that instead So think take optimizing of I the retail kind today take oftentimes in is, many like pretty clear losses market dealers to optimizing over across you would real-time total And is framework. kind you go that be think total think down, market that, about the like were wholesale framework large and earnings and framework retail certain. of of time cash. leading would more a earnings And of

to your same getting just able your more but then profit to could on lower before, be you lot that of goal you kind you lower offset be the could was then quickly cost losses. earnings prices more put would out your replace and previous You would earn and to inventory cars, with if that as sell probably

retail that anything time. sense. what channel, impacts there's in off the and those where usually, selling optimize as some out out when you're is. for we we it's as retail I what what generally of what near and of be customers do is cars usually There cars speaking, so regardless make across through value occasions of calculate is of wholesale And time. think to most retail cars of And your expensive kind take But can do pretty we market the can of retailers sell long to healthy kind try the and demand usually across across better think go kind there you them

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

Hey, guys Naved. Vincent This is for

lowered mentioned regarding billion the again to inventory billion you've previously. target capital, $X.X So to $X working you range closer

how go. third-party curious And expect how you impact just So to much progress moving a that the? to lower your is in on conditioning

Yeah. Sure.

sort in do think I in we it we previously. quarter range nice expect out So laid inventory again to of in second We to that levels. normalized QX, QX of that inside inventory more took consecutive step-down get decline a towards down moving

the in goals of of And sense to sales. in and think unit relative light inventory also that do of makes so retail normalized level our more -- a we that's getting depreciation current to environment light

that path there. good we're to feel we the do in about and that yeah, QX So do on expect

any to given kind reach of Okay. your a Great. in goal ability And then color provide year-end volumes? the can SG&A you unit retail reduction base on

apologize. sure Do followed. you mind restating the question? I I'm not we

worries. No Yeah.

if base wondering provide given goal can year-end color unit volumes, volumes. like you per in on retail your SG&A reduction Just

Sure. Yeah.

QX? stretch you're the referencing goal So for

Yeah.

Sure. Yeah.

give is them can. without We down a we to XX%. can goal we as the to them try accounting for our as kind think by we load to lower RIF. down. to think able were expenses quickly those framework Last I possibly we push able continue for quarter, about of quickly how to push We were

now, As of fruit harder expenses of loosely inside but units reasonable tied ranges, and to lower lot little much try right drops, base would think we and expenses hanging as to continue we than we're said, gets there's together still be. I to I And then think it are expense think going more your lower so obviously a that. they normally to

I to are think those probably quickly we'll normal, just seeking positive EBITDA as then push and ultimately get we so breakeven down expenses to and flow be more And can to as moving ASAP. things cash to try independent possibly the

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

EBITDA to a positive to would flow, the to an back cover cars load? specifically -- have to financing you getting earlier what interest and your What getting -- even sorry, whole options guys. long-term now? that equity Because to not Hi, comment financing. of current can but Well, financing targets you about your have your going just about fix positive fix -- debt cash are target, lot There's even long-term your again, Yes. expense. you let's debt that the getting how over more sell EBITDA, right you do not even talk do that equity go to

Sure.

we'd Let a a cash perspective. spot me targets units, today's be think at start with from if our this. EBITDA I even we mean I great hit flow in long-term

interest and I comfortably be expense. our think cover would to able

So to I think sufficient what And that's think our scale been have have achieve positive want look that, I time retailers least to that we you kind make in so I most through direct think today, we've of control. sure control thing really expenses. today, in interest focus to I is it directly been are our this I at across what's think and other at our and that who at that over over able is clear. to where our cover EBITDA is is And going to the expense again, apologize got as but in environment, that stated, I on for goal similar

then marching most originate that going attention how EBITDA we're try down lot and so accelerate keep to we possibly going we're as of path to to as can And profitable pay that to we breakeven And beyond. quickly sales a we to to our the can.

to And plan on. working the so that's be just right we're going there. what That's

cover even EBITDA, units, million you wait, you $XXX or, at At where you So in XXX,XXX say, are in income. XXX,XXX let's wouldn't interest annual right quarter XX.X% now, a had that.

of price, you multiplying by and think think probably there. just I get I make kind you're retail you'll the sure

Okay.

barely Yes. get there. You'll

Sorry. But---

cushion. there with get way. Yeah, I of we'd a But either bit but little think yes,

Okay.

finance think do anything there on is on that just horizon term the that So EBITDA? can though, that debt other that have near than to you the you driving other of to any way,

we've From into billion to to available. of this total to I kind round stated immediately think access about the input that one I half number liquidity. as is we all kind use EBITDA. numbers, of think earlier, $X expenses Approximately of of drives there, that is -- got,

lot broken to liquidity. billion us $X of and real billion other down real access ADESA a gives about all estate that half of is The other $X be about to Between estate. of that,

with and about how our at it continue And thinking to so march we'll I moment, forward plan. we're think that's primarily the

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

Hey, thanks for taking the question.

to wanted off, first could. ask, Just if I

have in you going third-party all that back thinking be trying on. certain to wanted to to listings. had seen more or mentioned I of you that also pull emphasize pausing initiatives on had the about ask I But some You that. for back pulling may example, markets profitable sales. of, I'm

had partnership. separate So I then understand to follow-up. where just And sits, Hertz a the wanted that I

Sure.

a your finance think So are certainly for it's in would we brought profitable but to associated of you different profit sales, aim we where think they that kind variability If where sale. what types more with And of number those warranty sales Obviously, underlying think of There's There's the for the more and costs us of ask car question, a in there's also buy a And gross think where profitable they other those of than dynamics not with maybe I hopefully, et cetera. some of profitable then where kind I are where of don't. that type, across it's does it of we're choose mean? completing When related a more car the kind those much an going say variation about to be useful. what to -- car maybe generally can things sales. inspection precisely to lower. but when by it's If higher, shipping that's benefit that trying be offset charging fee, can it nearby be shipping to center, that's much, a than away further but a fee. can it customers is I'm the don't. this they I about

cars. gross expense. expected channels variable of types whether of different variation in types different either the there acquire be And then of or attract variation to cost levels kind so sales, can it's I also cost think can different of can That of profit sales. different some of customers in there sales customers those in with be also vary a And can underlying of or types

even think to think and drive different now levers we drive and sales. just that profitable that's fewest most the And And sure many there less for say Hertz. well. to continues would up brought more partnership it's two pulling thoughtful on that you that sure. that areas, all focus then there's across as excited think big I those profitable think trying that, We're about And groups. sales taking opportunity different very now will results We're alignment I so between and the right attention go right and make we're a I we be forms. the very we're putting

to added I ADESA think that it's kind augment as have. some -- the led to other we've opportunities to especially between of capabilities overall us, that we

think follow-up. said go a really And you to think well. I that So continues I you had

Yeah. Thanks.

baseline you follow-up and the you wondering, kind CapEx further some different kind May, had of in So just right remain of give at felt And kind terms have But sensitivity we're of all of was in the is us you CapEx. I where just you just what volumes flexibility around some pace? CapEx outlined outlay spend. on think challenged Can Do there? now. scenarios

the to shareholder Yeah. Sure. everything $XXX million also is we capital for decide laid depending XXXX in CapEx we I'm of future But a say budget the year million, letter $XXX out May, in reference. of to range expenditures in full the about to amount on elective And undertake.

from of the where sit lower think to expect that half we today, we I range. be in

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

All more think And everyone all work have. are ever against backdrop. thanks, to right. Carvana, everyone, joining than thank again tough for a done you the that in. do call. Well, guys we we it's inside putting the getting know you're I for that I

to I be thank think a great -- all I guys but of think to doing you've all more lot over and for And it. environment you still for have not the I we're do, tough. think but over left prepared it a to again, do heard we we work could and job, hope I continue we're

on you So And to everyone again thanks soon. thanks talk everything for guys We'll you call. the to do.

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

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