Carvana (CVNA) 23 Feb 232022 Q4 Earnings call transcript

Good afternoon, and welcome to the Carvana Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Meg Kean, [ph] Investor Relations. Please go ahead.

Gary. you, Thank and on ladies Earnings thank for you Call. Good Fourth gentlemen, Quarter us Carvana's XXXX and joining afternoon, and Full Conference Year Please at investors.carvana.com. webcast be section call the note Investor of website the Relations simultaneously corporate Company's that this on will shareholder fourth website. quarter on IR is letter The posted also the

on of website. Presentations and page our IR Additionally, set tables QX, Events supplemental we posted which the for financial a can be found of

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

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

in otherwise letter to and found adjusted our specified, a Our of to shareholder to commentary and metrics references between will our IR references Unless metrics, website. will include be results Reconciliations which can GAAP all the today, EBITDA metrics. will EBITDA. non-GAAP be all be found on reported for and our today financial non-GAAP issued copy SG&A can GPU non-GAAP to be

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

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

enough of were cared could and need do for do build were XXXX, we we way be were two proud group our January most world the people something offering One, to there for Carvana There to million we bet reasons that in What and have. what reasons simple: in change scrappy passionate new little a would even we of do believe love. to Georgia. we who new against would was we We cared were sell But ago, that the were trying would and believe we in a fight aware it. who launched years people big group be to why to cars. XX were room buy Atlanta, people we was dream. to who us customers could there a ready Two, of.

was customers XX here later a to love. We imagine built from started. do place hard we years where an stand in offering We it

country. that over brought have We the across XXX offering markets to

We have things cars laid sold sell we've whole the way big the foundations in The of bought and many buy new millions and more. a people, things. to to little and overpowered millions

an it a There way. lot and impression. days. lot were were of gives highs and hard fun is were there It and a lot were and a story There This simple high low there time linear. the skips detail along there truth as days too ups result, of the downs feels lows. But and of skips a were

days is the true. linear, I way that This in Progress are world sound more building are there it doesn't think easy still days, of the again. in the than is XXXX reminded rarely even of hard and there truth usually us that stories. though that something new

rapidly similar automotive year nine to One, the had rising for dramatically after the impact years. and the pandemic combined came from than growth, carrying we interest The positioned the So drove rates affordability lower in the prior Two, profitability. priorities historically a experienced XXXX? result, snarled what straightforward. and a happened sentiment we excess story we've shift what to significant is into supply in for, positioned Four, interest costs. toward and been in we away used had as our markedly cars. lead of growth volumes to and Three, rates this market rising combined chains to

days a us days. and best scrappy lot work always and XXXX people. in right had a we're better, way, people group, The doing But of worst we're world we're days scrappy a a way. hard for Scrappy thing the find aren't are hard hard making and now. our finding the

that part As we milestones of three major marching have are this forward. we work,

EBITDA. drive to breakeven is will we drivers remarks. more adjusted these key in the our business current to step goal is of first The This the discuss goal, and this

is unit step adjusted to not significant positive EBITDA our it milestone, the second business a is to Breakeven economics. drive but is The goal.

Our goal positive flow. cash is free

only the we to the make. profitable. visibility that already future, we're way nation's first-party with on infrastructure, in largest and growth. on we've The focused and delivery inspection Today, billion, used for launching significantly we vehicle expect more last more in significantly is groundwork investments capital Since third of reconditioning step not we We significant network automotive and the return is first mile XXXX, the are made our automotive high than $X growth to on to network. have the the investments growth but building well progress laid logistics step, believe efficient made

First, $XXX plan $X complete XXXX. billion two will we the continue over expect our next This SG&A SG&A aggregate by SG&A annualized the reducing quarter million expenses since cost in over of quarters. approximately to by reduction reduction quarterly first expense

all to reductions for we us We not this reduction importantly, components. future across the to of broad-based expense part plan. be expect expense expect do these large But be SG&A

retail us volume unit demonstrate leverage weekly our sales SG&A of to elusive to stabilize expense at will in to allowing of unit that that headwinds tailwinds. to SG&A unit time saw catch seasonal relative declines. we savings Second, sales volumes, second we the unit retail transitioned weekly the up was we Stabilizing as volume our expect allow XXXX to declines retail during seasonal half the periods to retail faced

accelerated inventory significant a expect QX we reduction lead gains Third, in to we in substantial in to GPU. which retail size, our

While expect gains the QX, in don't to of inventory quarters. see benefits become retail we the meaningful reducing following on we apparent GPU to expect size in see

have shows operating and significant. we are later up in are in operational and made progress metrics Across continuing operational efficiencies business. The all across groups, to operational progress metrics those making make as out the financial and first then get flows rolled the is we already the utilized

In since vending time And have In XXXX. us doubled in systems a phone sale now they we retail operations, last built one pickup out XX XX% a more up at scheduling start of over we though advocates machine out logistics, less business market subset have their machines the nationwide year, early a per of than pair vending from only even our X retail with vending down markets. since car our spending picking pickup, XX% machine of early our customers of with in care, rates up X of our year currently In than allow customer vehicle XXXX. deliveries the are average delivery XX% in were our just ago. to is X sales that have

the our quality this while months. done improving over Importantly, we all experiences customer of six last have

and and will and the made color progress, them some financial over As quality factors to that we items beginning expect provide lead up. when operational and outlined to convert there This the improved the shareholder are currently in will Mark EBITDA to beginning on next progress really letter, is well, into clear some is these These often as progress to need really significantly progress to the adjusted making. of see of the explanation require time these less through continue is onetime get to case to are the the two combination to over transitions extrapolations when quarters. working are profitability be the show but three as we

XXXX still executing. clear and where This be. a of to of market lot still want get a a XX us market share. we We have million just on still a hard we work unit have was a average. plan, to front and X% year, is But we year to we are in hard have

who fight our passionate and for dream. a still group to cares are We who's ready scrappy

love do offering. customers Our our

We little reasons million the millions to with foundations millions cars and still laid us. bet and are the and have sell against a buy there to capabilities of built customers, and

We expect things to things in as big have they the overpower just the the little past.

to continues. Mark? We the path cars. changing are to automotive most people our largest on and achieving retailer of mission the and buy march firmly The building way profitable nation's the

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

the make priorities came volume decisions toward external driven results factors as drive into reducing Through well size executing significantly more year, overbuilt ultimately XXXX resilient XXXX for more plan to expenses, were Our as normalizing executing flexible. made the initiatives realized. numerous and We been profitability. steadily our shift in have to that we efficient, our by internal us inventory by more we and profitability profitability

X% For the decrease retail sold of XXX,XXX, year-over-year. full totaled a XXXX, year units

declines. in that marked marking market our Revenue the billion year year was industry our $XX.XXX XXXX, sold XXXX year of backdrop this ninth first year-over-year, revenue totaled consecutive of double-digit While year-over-year, the units growth. X% increase retail our consecutive of an of share declined against ninth gains

a the dynamic current scale items environment, quarter remarks for year that on on line near-term time impacting with results focus used our largest year. sequential seller the long-standing which our as outlook. have have to consecutive particular it country as fourth and the and well of the unique nature the finished the the customer changes quarter focus achieved on as of Due our We demonstrates in remaining the will offering. we the achieved of second strength The already the we we vehicles third

into long-term SG&A revenues flow. expenses. that on to goal. of and non-GAAP gross focused into of In near expense, that progress progress, is are free service this visibility and reporting our non-GAAP in Our management order noncash non-GAAP on adjust cash metrics, non-GAAP goal, a and In significant is we term, are generate financial new provide the for QX, inputs metrics beginning in clear set financial profit two long-term net to nonrecurring this driving our goal and team income certain

on in as EBITDA Events in and from page restructuring our available and provide Root We well XX-K. We Presentations are the of supplemental metrics and as expenses. these financial on also to Form share-based compensation our updating exclude detail more our tables website IR adjusted definition warrants the revenue

totaled and retail XX% sequentially. In year-over-year XX,XXX, the of a fourth decrease XX% quarter, units sold

units the three, benchmark decline proactively interest actions reducing are to adjusting inventory rates; normalizing in several taking larger Our our two, sold advertising; profitability increase size; executing one, sequential was on despite than and retail including: in to focus of only four, increases near-term profitability, XX%, we decline slightly to industry's sequential continuing initiatives.

QX, a units and XX% in billion line sold. in $X.X approximately decrease of with was retail XX% revenue Total year-over-year sequentially,

total inventory acquisition sequential were changes in which size prices than retail elevated retail, by in items retail $XXX our by by Non-GAAP higher lower between million inventory partially was rates, was retail several $X,XXX GPU versus in GPU primarily in a across and components. sales by spreads of driven GPU driven retail cost Retail prices relative retail $X,XXX unit industry-wide wider impacted or QX. $X,XXX rates and and GPU wholesale $XXX driven QX unique QX higher the was Other in QX. Non-GAAP normalized was to adjustment primarily retail QX was allowance, versus $XX and per depreciation other by offset GPU depreciation sales. Total to in volumes.

to realized being addition depreciation, size on times the equal. the sold retail relative These adjustment, of impact higher to lead impacted other to higher retail turn to for in unit in which One has date. times normalized way turn inventory extended times. GPU, in approximately compared QX GPU than per vehicle XX impact to retail by within was longer acquisition days which allowance GPU negative higher retail a units vehicles isolate $XXX turn aggregate. a to retail things resulted In quantify vehicles sales, is of carrying Longer also GPU the

due combined $XXX Non-GAAP and QX. wholesale we $X was and wholesale a million in driven GPU certain changes wholesale unit $XXX marketplace impact these by wholesale GPU loss QX to to impacts inventory the in adjustment per volume. our quarter. $XXX a sold Wholesale seasonal on $X primarily retail wholesale million were market lower in in in versus GPU vehicles a included the Sequential allowance

timing by of was and Non-GAAP QX the extension the incremental in in actual Other loans per the primarily on and income GPU a $X,XXX shift the agreement. the sold to sales other a from January, impacted sale align less million estimate versus a We timing to unit pool of our realized price purchase forward in flow other $XXX $X,XXX in $XX December. reduced of loans Ally of upsize GPU earned we or gross this on loans we January QX. in profit shift to based by was December in with interest retail of

In SG&A expense SG&A QX. QX, the second $XX expenses logistics a greater including we sequentially, $XX broad-based, expense following reduction by for advertising, benefits, were made reductions million in consecutive other. progress and reducing reducing non-GAAP significant sequential quarter, compensation million and than These

we While expense levered pace declined units SG&A past sold the SG&A because unit similar significantly SG&A two expense not to retail retail have meaningfully sold we expense over reduced per at quarters, have yet a reductions.

seasonal half to of volume tailwinds. to we to as discussed, stabilize declines relative saw headwinds second in we seasonal unit Ernie retail weekly transition the XXXX the As expect sales our

retail our volumes SG&A retail to to leverage. expense We unit allow SG&A catch up to leading to savings stabilizing expect sales unit

EBITDA EBITDA impacted of loss of million above. a of a total items XX.X% other GPU to wholesale revenue. negatively $XXX due $XXX unique or described was retail, and QX was million Adjusted in by Adjusted the

impairment the goodwill impairment of as of related or in goodwill our the securities our by of $XXX we business Finally, not a expectations trading of changes long-term result fourth end our expense the for quarter, operations million. acquisitions. a to recorded of decline in any prior the prices The was

our profitability levels. business over goal total higher manage previously, achieve to lower GPU discussed current, to we've As volume is significant the adjusted or and EBITDA at X,XXX

in in expect progress our as continue retail make and we On normalize units, currently initiatives. the sold GPU our we QX. GPU, in size, to compared in profitability On sequential optimize a the sequential Focusing following. QX we expect reduction expect units increase compared currently XXXX, QX total in to retail on we marketing inventory on QX spend currently QX to

QX We due offsetting expect multiple in to retail GPU to increase effects.

vehicles. fewer are average quickly First, units time, inventory age the fewer QX website, sold units being Purchasing size our vehicles to added a by lead same to inventory retail we our total benefit inventory GPU. retail reduces higher reducing we means QX, be fewer adjustment increases our age retail the purchasing things other of lower GPU to retail than the are retail of which allowance size and low retail and expect in inventory QX. At to equal, leading

December shift in a in GPU We of loan sequential discussed. January also previously other expect increase to in the timing QX, following from sales the

QX On SG&A continue SG&A, million business. targeting the areas plan currently approximately we of all QX of are an our $X compared to by expense aggregate reduction as we in to non-GAAP execute XXXX XXXX across quarterly

in assets, with XXst, in $X.X of December approximately estate and had cash including availability $X we $X.X and billion than liquidity more billion unpledged other in and total On $X.X billion including resources, acquired estate real revolving real billion ADESA.

locations. annual We units reconditioning X.X utilization, ended million ADESA approximately full including with quarter of at capacity center and also the inspection

made reconditioning we've the one and largest of network. most and auto industry's investments expansive years, into last several the inspection significant out Over building

focused us near believe to leveraging massive in having existing remain we limited the infrastructure well with for this access term, our very more the investment growth efficiently incremental we in positions While future. footprint on

in and auto the position, production our our flow goal runway us and operating of liquidity profitable future. cash clear and positive retailer plan Our largest driving most well the achieve to becoming focused and position

Thank attention. you for your

take will questions. We now

Zackfia ahead. [Operator Instructions] with is from go William question Our Sharon first Blair. Please

XX% picked fast. vehicles were at you machines. up really I were Ernie, you think talking But vending said of

ago? of is of shareholder also customer come you machine the the incentivizing at to were question, the number? What maybe a And get kind that catch for when offer go? what terms get to It could machine I quarter. fourth pickup? I vending in kind a GPU trade-off letter, in also I in you compared the how a starting non-vending to think to relative mentioned to I that begs high year of to it to guess that And pickup was didn't locations. you noticed

sort would more is of to kind pure long I this in guess, as we model, a omnichannel would I ask, be model what e-com? are the question an which So, of seeing versus just of a think evolution some

Sure.

talking. for fast apologies first, That So the my habit. is

the prepared compare markets, of machines, even and at though vending remarks, XXXX. in subset XX% anything. a double have didn't only it nationwide It I so, to in And vending roughly is that is we early since machines

are incentivizing We well, pickup testing that. do to other as options are and we customers

all to is I seeing results we're getting there this is many them opportunities and decrease experience. car is, what what one would business, to think And impact of speed testing areas the strong entire of the really our of then where a both also costs say I across I customer operational and customer there. kinds see And think we're

mean Can I important transparency, follow-up? mean, car high customers you car, just important, when is delivery they're of very on but research, quality of ask I and seem all is really the I the that So do customer a is getting, what how the delivery would list? want? it

customer, I give on the why the system option. them their think it depends we've structured I of kind think to and that's

can But We kind is to remarks. customers your So, obviously, those understanding. are aggregate, from responding measure think to I -- a activity many of think important. That that many us. XXXX. now I'll be we one are cars a since experience. the talked about about there of customers sure make XX% spoke And distance also talking I all got other we I examples bit prepared in buying we've but down my Delivery there's that pairings. thing early confusing of can easiest sum in And that vending that are their is, about of total the repeat the how are things machine,

to that have many customers are selling We us. cars

allows that leaves transactions last more of lot obviously ensure a the to X they customers is our from schedule building in the complete efficient. a is single approximately that two path, year. into pairing or a out about when X activity X logic vending to gone in XX machine, us a customers hub so in And can customer which a That's

to we're but up you're that take making show which I time. peek more So, the into have gains first, really seeing And they'll then a over gains financially, place. starting does in think operational all that we impact are get

and out of So realize we kind in get a tend then the dollar able we to and then nationwide, we impact for them and of experience roll are thereafter. roll out We these and markets. customer efficiency, both sense gains the cost to

that you'll think those I really So two cost next over examples quarters, good in different why months. about up that every reduction we're probably umbrella. take we've to next all and gains two more same But of our the start we've we plan doing group, six the over many many, and customer the more see But been under fit experiences forms seen feeling quarters. of go which last in the would is

about So I team great to think overall, lot playing a do, still a out. doing job. have is we're really work of but way the the that's We excited

for you're that? line question current I towards working What's said know you me. on Last on timing Okay. your EBITDA volumes. breakeven sight of at

fast As as possible.

quickly I I possibly quarters. to guide $XXX moving be we're around hopefully next two think, SG&A helpful driving going We in by dollars million down can. as rails there think some over the gave, we as

bit is that high. that quite we GPU some visibility of spoke a have the very Mark think I about

the likely choice those environment, size balance, to turn now And Sales inventory inventory are especially right are we're transition Something to right times a expect confident that in large those to means longer. things GPU but in of we that therefore, in the up relative right an drive in inventory future and, the too inventory to taking get from our high. volumes for sell down are choice We're to two of cars that margins. in significant that turn across high the we're in the low showed very is as business. important is lower and allowance rapidly. have even quarter imposing more are carrying cost negative the of depreciation it's times the that the That to a that's very GPU

So, cost. that's a transitory

it's at look relative cars better you have selling at number, a rate the inventory, expensive. but If that which much we the transition the we're is in to cars

we Mark that So, I a have sale of in visibility spoke about was costly. we shift loan QX finance think there. a had a timing visibility lot the also there's in as bit

heads as lot I there of we'll And So, blocks give as down and a a is hopefully we think there will you building there's can. sense. that our quickly sprint, goal get

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

you still allowance much left. imagine days way us in inventory QX, And Like The taking wholesale? still retail out Is to and that's XX first one of what in just happens increase left? but context adjustment a frame I how provisions there today? And is, -- causing are to Looks pressure inventory percentage units the are GPU routinely, for older? or what's this like they're what's give normal? is

Sure.

mean, I I think the I One, what's think that. left. concept couple about -- I think there of is any So ways of say different a wouldn't there's to

think sell the sheet looked a we going at we XX/XX. a we’re allowance set those to that at cars at that And cars on -- level formed going on and then balance cars at loss, loss that about we're we to then that the on recorded and XX/XX, expectations basis. we sell on what the to allowance had we I

the I that the of do inventory think some benefit size. is things inventory allowance

sales inventory, are of certainly Those volume. shrinking allowance. the more from with inventory inventory think getting beneficial in standpoint line I retail

in and on of industry-wide As that's large you in particularly a QX dynamics inventory than month, quarter. is adjust light the something It that is every XX/XX allowance depreciation also inventory saw our retail very normalized higher rates. happened allowance to, results. our much reflected always allowance just We our results in inventory in retail with alluded elevated every sort and we of be to size retail

effect outsized it why QX. that's an on had So,

our sales moves in we've so size our QX inventory a and is point to made in just think really normalizing relative retail strong inventory size size that closer I QX, over to I far normal home, that to we time, positive do for materials. much certainly in think take will out throughout as that think we into QX. do our it than was GPU volumes tailwinds in And called flow

you. Got

then these current picture natural you're to speaking question. When Atlanta Okay. business? levels, at share them to rate still you And can immature one I profitability early Thanks. are market like are extrapolating bigger If of think point personally, squeeze Because Atlanta level in. achieve over national mature that. share that compared a run just near I to market your why just think above I Was profitable visibility a in matters of time. I'm frankly sure gives you not volume your markets such some about more that on you the what market at a profitability how or get guess you're thinking similar some curious so at this time, well level? penetration? Like but And in I the the term, profitability low of all

Sure. Yes.

as well. the mature frankly, more on some we're for ton more and we progress, ton GPU progress way volumes I interpreted, seeing, gains we it at shares lot market markets. we the visibility current simplest So in that achieve positive the I all be can given SG&A, EBITDA can company. mean, which a there's We're think of not across have extrapolating that there's and to a that kind in making of entire in at that room progress we're that We're operational mean of the a believe we is

shifted has difficult the very, it's us to this think been there's that's The world year a a no company. efficient But very change priorities on quickly. we I Company. more last for been that So, undoubtedly, in our And think a And doubt massive I leading transition. quickly. very changed priorities very,

I and numbers, expect think no in the not-too-distant operational the in doubt showing up to in show up the it's in very up it yet we clearly that the numbers is fully numbers, showing not future. but there's

then current that obviously So, current to expect EBITDA and on we believe as basis a continue positivity and there to and positive EBITDA volumes, EBITDA from to even we at get from get to to volumes grow significantly can more well. at there unit we positive

we've think a work lot but we've lot a of visibility got of as well. So, got of us, I front in great

The Rajat JP question go with Morgan. from next is Please ahead. Gupta

next think the the later if elephant is at year. $XXX expense, some next or of EBITDA room year Ernie, million get you the point interest I in to breakeven so or

to also debt take find some curious Is can additional to some Just of there. some a form sort just bondholders? with considering stage burden, have need the place, you add a that And estate the the leveraging broader that do to follow-up. real there continue to ground restructuring level debt. you pay perhaps at that? engagement middle You more use anything can of ongoing and I on of have what Any thoughts or Thanks.

EBITDA mile break Step meaningfully a get positive. the positive into Sure. two mean, unit, Well, is one have to We've markers way. Step per so get to to got three steps. try is positive to I I think plan, believe And run we to we unit need our additional to EBITDA plan, to continue that start opportunity capital. raise we economics. believed to step that have and to believe And then and that that grow. not is plan the three with along we have

capital the Obviously, about bit. up change and which drive drive speed the we'll a the whether can curves of quite SG&A, which a also speed the function answer question once in we're or we we the not we in shape future subtle which to units, at of speed up at the raise largely down at GPU those changes bought And them. the drive able is

the attention. we'll do So, for capital. But be that's right our paying plan business. need is to We'll what to not raise do obviously, to additional we need

a in of I think we estate forms. high We've that's real very have capital quality. lot access got many obviously to

is real chose to right billion and Carvana put real to in capacity well, which equity. that unsecured of in financeable -- believe a have half got The We've high-quality the debt. in we half are inspection approximately We original other and centers, $X capacity more approximately assets in more We've properties. estate, raise it estate. we've secured got kind of as we could of of was ADESA got majority we Obviously, put choice, future, and debt. lot to the

think So, lot operating we're options the that's for we of But attention, we're the that we've that's if marching to that a that have numbers focused full got choose plan we our the and today, hit I outlined. right Company. on the path

on coming mentioned just And Maybe clear. half buckets. also in reduction That's across you it. the talked first $XXX additional the different year. about Got million in SG&A, you

where is component SG&A, area other reductions I coming one I also of good $XXX that expect think SG&A. force reduction. yet item? mentioned of the particular you line think Is or seemingly I that your forced reduction a you've don't a believe Because the that you million more meaningful bigger not from seen chunk fixed

curious help just us Thanks. million if coming you $XXX understand that So from. is where like could

Yes. Sure.

about expect the to So, over we that across the quarters The bit in items. that SG&A line reductions quarterly talked in expense do million the reductions, a we're little we $XXX the next in letter. come two aggregate -- targeting major the

payroll, bucket. advertising, that, in would include expense the I logistics would and include I So other

may reduce traditionally including do certainly categories other expenses, there's you in see fixed. think SG&A we that as of -- think I opportunities to

our to in efficient corporate ongoing expenses. I have be just technology projects think we and numerous more

we're very component I many over where next to the across as areas of that that think our plan gain quarters. component efficiency on and expect part SG&A, from two of there's savings do focused

Please Securities. Seth question with next Wedbush go the ahead. from And Basham is

Just a plus million you Even goal, breakeven in hit in the $XXX CapEx million $XXX on your carrying still you're and EBITDA interest expense. question. follow-up if do last

period support So in expect And you'll do address time. maybe -- that $XXX eventually, cash. million so liquidity you How out of that a your to But time. conundrum? run burning or of for got

think and step X the that, is plan breakeven Sure. we grow. is of EBITDA, go and Well, as discussed, beyond adjusted step I step then X is to X to

visibility So, a not plan, lot think undoubtedly the that's in of got the it's that. we and plan, milestone beyond but a we've

lots of we're we ways out So, shot in then requiring And go got as we hit not real that and a to that believe hit we've at ways we're it, that hit we capital. additional focused have capital. aiming discussed, to plan. the we If additional wrong, get we're to if

Ally, in balance sheet understand the relates agreement secondly, this relative to is could the on the agreement to that you had on under billion loan point at of quarter? time those loans whether old to and you to And end there relative help as the still it. the margins it $X.X at substantial Got the us the sales new

Sure.

for that I with quality in We that like the in had It's outperforming were been it's recently. times, of. great Ally. for a first been there for proud And credit including similar difficult generally completed and deal high-quality to in us think order, that there to So for we're of are relationship. they've something entire think that that great COVID. both They've year us. the think That's would us program extremely we certainly loans better well, times, as They across we partners access them in loans especially we've been time. that seventh

a I partnership that's great think for So, us. been

had we're we year, end looking the sell. to headed we to the as think of of that I loans bunch a And

also push the renewal the over getting and that of done. And complete to sense We years. it kind renewal made are first that

$X approximately billion had of extra year-end. loans we that So, over shifted

in we similar us enabled that And that is you'd earned spreads, and of historically had. more pass they've have the part as than spread and As kind spread that GPU finance deal, in the past. those have conditions, market which them we've that of structure then is deal. take Ally reflective But to what on, we generally of imagine, to our earn does we

a that's addition, closed in long first and certainty year. our a we couldn't a it. also I time, today, then And been with us and great It they've we deal of the securitization us. for of be happier So been execution, great partner think gives for

strategy, So, to on up multichannel sales and plan operate we'll we continue year. a in to catch the first of this half loan

is question Wells from next Fadem The Fargo. with Zachary

This Sam for Reed pinch [ph] hitting is Fadem. Zach

from of volumes that follow-up. here, And Kind in the you're Thanks. looking other seeing you're the then picture. does big what's QX for across assumption your you're industry industry? embedding what And industry First, one got sequential I've unit that pullback outlook?

Yes. Sure.

So, bigger little let picture. me start a

we went I were sales now we made a pressure at year, with dealers. and industry focus we we've were environment for up XX-year-old correlated think And industry -- independence vehicle stable shrink to reasonably well, of stable volume life, bunch by I think level somewhat drop think then We more on certainly relative we give choices years the then, of order life, our similar to of I saw for last nine certainly with that basically a the -- I but had X.X think that And a and franchise level. for our used XX%, at in volumes and on we're think for through even environment. those and in profitability, the of years to on the a or take, has company. COVID, basically, still I

year has by for year quickly very a all And years. much year been we very, so slower last X%. where grown actually us. the the first It's shrunk in previous undoubtedly, We've

up When correlation that was the think is correlation when was more stable, down And that were relative is so, were this where shrinking, I by growing. we've it all rates small prior there quickly market moving I the would to to the The than market shrinking. be year that to in how very think year do market of relative causation. very, we is every growth we were direct we the XX% our growing. life seen or

success. think generally around have happen So of biggest don't we industry I we something that's level. the to course, think, the of driver an But going embedded our what's always of at view that

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to best evaluate them precise that was likely at that results market to what level through terms in enough generally super of sorry, the So, same are go don't in way we to ever likely where I our second to But then impact the total. way in say us sum flattish flow I macro would to that sales question? also, are dramatically. expect are in movements We your And industry volumes is they the being would looking part forward. we impact I'm the industry the speaking the probably think, are that

It just follows here. No, on advertising another kind of and question industry it's volumes.

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well the I think last through two incredibly done franchise dealers have years.

you the years, I extreme EBITDA bottom margins pick last to years. the outliers you of couple your it there, think kind grab metric, kind to their last XX if over but you comparable make line over of grab of see would ours, if

there. volumes more by gone there's gone lot I the new have volumes think while have down, down, than gone a been margins profitability up that and of have new so

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able acquire even are roughly they're residuals market historically, value, though that below far So approximated those cars residuals the value. to market on at the average,

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that those well. from categories buying I strictly and as two there elsewhere. think there's There's buying for that independents, were those probably auction were

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around that I feeling of confident year. December. inventory normally seen car think and price and money this the this a into appreciation tax inventories coming, when a And year is and year lot we've of there's in after weren't super came November with definitely build dealers probably kind time low seasonal the of

has set set on marketing. growth materially think I there, then, peer as companies think back is kind well, companies which of And that there's undoubtedly technology out peer pulled and another I and

I think we more been the pulling and probably dramatic, back certainly have moves much there dramatically pretty on are marketing.

that our in of I there's that think certainly and QX, in come. results more you see can to

the all We're profitability acquire. where almost they've means And over than in last that in We've unique also focused exclusively transactions are environment a lower past. more make fewer we horizon, would the not on customer those longer-term of sense GPUs constant, is acquired means That in transactions sense kind this we been because environment. And recently. recent made have the they a been different believe time we acquiring have that responsiveness that then to many over year.

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about all was it to that's that question helpful, answer long asked. I So, but we're a a hope partially was you thinking how that.

Winnie question Deutsche is Dong Bank. with next from The

time logistical then frame footprint I achieved you that I prepared the back be you is getting mentioned GPU. GPU. That's of around for you with if that you And what was $X,XXX ADESA can the that? in was first can sort relative to wondering wondering of where to are of an question, savings if follow-up. to your have us it a benefit can the integration in the Thanks think integration and my I and remarks, update give achieving you frame on

Sure. Great.

efficiency we're a country, from now change from to where customers were that is locations That's those buy means have wholesale ton sites a to and It helpful that ADESA at much of significant have where we inspected XX we the That's ADESA obviously it with we we're prior months to integration ADESA. properties. has currently cars very and the means are than would think landing an six months the historically certainly I when perspective. plan from transportation or we in can sell ago incredible really ADESA. So closer that are progress less It XX ago making of ground that we XX% those around on the the location, of they acquisition. cars been rapidly because a sold. the to get --

And in start wholesale see so to that through margin. our flowing you'll

is tough really look of a ultimately, equation, wholesale, to in which of that and job. the to reconditioning we up. to a been In businesses. will gains turning ADESA is lot those growth we in the great couple step get get X the continue and, back doing logistics in we'll years a think But come That when forward footprint time. over incredible, gains I the more team has been It's for meantime, of auction

the has we're I They've doing a auction odd on, in been pandemic got great for time post excited But job. path and they're very think that been about there. the business good great they've general. so We a a plan. feel

for relates GPU, and apologize repeat those. not we give more of I frame blocks I'll back $X,XXX that are precise getting tried time it in being some building pretty to I we some big, just think to -- response, to but think as then, I'll And to so this the

the a kind kind of retail of to don't $XXX. obviously be get at item, If about with then you GPU which was we that and $X,XXX would up start expect allowance, you look you at recurring our that

same wholesale another that's you allowance, concept the exists If inventory, $XXX. in our is that which look at our wholesale

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So, that's there for others. And I opportunity us. big a think are

is there. So go executing all and We It's very we'll do, I think opportunity it. to clear. get have just the

And then, of comment of I like was on wondering if you in terms mix go-forward sort the inventory. also strategy of can

a going sense given tailor Can inventory? previously go-forward conditions. something plan on towards to basis -- just reduce a give of to had still price macro the plan I current inventory your on indicated you amid us think the that’s you going lower that the you

Sure. Yes, I can take that one.

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to out. patterns there's of say terms particular any In mix, I wouldn't call

balance demand QX shift doing from that's think of and reading out at I as be in we'll those. are points here evaluate best any time. I that our the worth right signals, continue particular this we the signals we now, I the just think think forward to look to two the -- But calling reading where don't supply to and

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

accelerated at if market do basically forward? more you share, run enough rate that you is, start Just pace wanted productive, Would back think think to in reductions take been again? have growing to just to would be when you there's lower need a you market guess, be SG&A quarter substantively be I third offense or it would kind made? when moving to share that a taking it potentially And to with you SG&A to ask, respect in muscle do of switch position could do the if could, I

Sure.

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don't exactly be. will that I so, know when And

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X bigger fewer gains but think of we've also seen for, the And projects operational months have or pushing what hoped of the than over probably our X so, direction I we are more kind having in is last sales. they're may of

of to where we shifted kind and and we so, bottom at the And a plan than months last we've catch toward that's level of aggressively smaller several sales in smaller inventory, rolling I imagined many, still do these ago. have have our out. even would six in there's probably months And backlog projects still we're that of to learning because think we many

answer think different company. obviously time. don't be to it's I growing time, has and we into question going the is. We're super that head that But exactly going is advantage growth into to the we a last into going that knows that head head to the time it more I company exactly to advantage company a infrastructure I We're We're long to has when had an So, infrastructure that. do we think think materially how growth, to than know were a grow what for don't much that efficient growth.

far keep is. know we're to exciting an the that think our not outlined. So, when I going will yet that I obviously that down heads think for exactly don't it And plan now, It's be on away, time. we we but

And could one if follow just other EBITDA. it. on quickly I was angle up Got

basically include So a slight decline $X year, to in burn upside expense. any like discussed you million of kind of was or didn't $XXX to any I of if EBITDA to downside $XXX could in on of billion or care $X,XXXs that total XXXX. loss if the for low drivers give to so for you've know And SG&A comment units, plus the like kind million that's interest GPU, range and in consider. key I cash getting this you'd improvements that

letter. reading suggest would our I shareholder

about lot I likely our near-term the some be a some light think about of trying profitability plan, think broader sort to near-term our of shed as will I on think that way and most well helpful for we a drivers talked to expectations. of as

question with Ron Josey next is from Citi. The

of just they're conversion how supply they're the simply about people wanted might I'm demand with wondering because and down for. sort more to trending? balance And I coming ask have you looking rates conversion and how not assuming what are rates? supply reductions this

there. so coming down, understand And is I on just wondering inventory conversion historically, just

the on investments. the question. maybe then, marketing Ernie, of And side the you've reduced flip seen marketing

talk about or awareness back you in maybe Just terms advertising. traffic any learned as us pull lessons to of on

just at talk of sort sort I that as think to need Maybe awareness inherent you, in as you market are. it positive much Carvana maintain guys. just of said didn't going you have don't of forward positive the -- sales a about Thank ROI. some that and they

Thank you.

Sure. Okay.

So let's the start question. first with

undoubtedly, inventory conversion. impacts think I

sales we And be all so constant. conversion expect to be as reduced inventory is also and reduced, to so reduced, else

and then think question of math a kind to effectively customer we what way we equation and is can is And we incremental of that of elasticity, two, larger and depreciation is reduce flow our the say, try estimates to second sales that what can given carrying inventory? that I a those is a those for of to kind going cost the about cost benefit inventory get that can of carrying to transactions. can compare into we inventory think larger basically the the acquisition a okay,

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lot feedback I think talked we the the the business. on way about up a positive in

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this to that true have are environment. we're We evaluate in things learning of

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the to I but on looks think Again, end what I of being wrong that, that's the reserve like right data kind up today.

us make as under well. that we've marketing. There that is made more opportunities were important be when like lower learned made the some rapidly fast changing that in marketing I think it's sense I previously growing choices there sure direction might that business have a far, that may different think context. think learning context. make to you pushed you contexts. what than And We're you're they and the general of has under decisions I is revisit And different under there made so looks been today's

is But building thing, it's important delicate which is to brand, because a build continue thing that again, very you that and brand. you're a very marketing a hard-to-measure

about those I it's, take so move talking an to of those more easier they And impact. have a direct channels And more way show think and we'll then people spend. in care. brand who They immediate move buy the you're will channels. about with be the quantitative a more as careful in down family a brand But general, up so it. have than conviction and in they terms I doing when transactions, still marketing impact to with their have and because brand and impact less of you in brand tell want careful testing lot ex we're because be we cars But of channels, think, definitely less friends brand total may we

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

thank how We've reminded for you huge are joining just This changes, fighters. for work of thank of and is Well, undoubtedly. massive in much been so team everyone a much huge the call. you you you guys doing. I'm has you care Perfect. and much always team Carvana, on To fight. how everyone tough the This pivot priorities, made year, a strides, a

been showing some still up. is fighting left It's we're it do to You do, got have hard, but to We've to going showing up. and keep it. fighting going

So, thanks guys you to all. We'll talk quarter. to next

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

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