Carvana (CVNA) 2 Nov 232023 Q3 Earnings call transcript

Good day, and welcome to the Carvana Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I will turn the conference over to Meg Kehan, Investor Relations. Please go ahead.

Thank you, Vash. Good afternoon, ladies and gentlemen, and thank you for joining us on Carvana's Third Quarter 2023 Earnings Conference Call. call of simultaneously at the this Investor on investors.carvana.com. that section Relations company's note will webcast be the Please corporate website

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

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

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

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

said, which our Garcia. EBITDA shareholder GPU to references copy reported over turn found Our references be our commentary issued non-GAAP letter today between today, IR I'd can can will Ernie? be specified, the and GAAP metrics. to and found EBITDA. of SG&A Ernie Reconciliations be all to call be will non-GAAP our Unless for include like all to on non-GAAP results website. With that metrics a in financial to the and metrics otherwise adjusted to will

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

efficiency time, we've we Over clear while third we the by out of has continued of business, another transport inbound $X.X billion annualized in combined about which months that had reconditioning efforts driven expenses annualized, have up plan These expenses XX reducing ago. for and also effect. was powerful momentum great Carvana million our The a which the period $XXX improved annualized our dramatically quarter SG&A out since our quarter GPU. that cut have has rolled COGS

a cars X of of Over excluding the model. Since clear the long-term have that, goal $XXX public EBITDA, nonrecurring of of clear went and important last $XXX items. business numbers. to to the are sell power have These we a quarters, message send in generated million million They the message XXXX, about become been adjusted that we our about clear about send high is our we ago millions clear the belief become our a largest was the at team profitable. general send and very retailer. there in XX automotive months executing They one. the plan a laid our level. ago, years right questions our our but profitable that ability most to to was And remained be most importantly, out team about large, Two a message most they ability

of when rapidly utilization our with our the The progress takeaways our very began lot well. In and we continuing following: time. provide scale the retailer components making automotive of path step over we most operational our until successfully letter, significant and in milestones, providing shareholder clear evidence our cross answered definitively to becoming quarters are one, actually per current Two, the rightsized three, business be as are our of won't questions with unit step cost X the is step significant today's unit. advantage. leverage our X expenses are competitive significant one, clear both the and low, overhead significant our last expenses the turn profitable of a efficiency in we a operational in those that X a fixed economics And we this be of gains ultimately While both plan. operational cost from will providing breakouts belief to [indiscernible] data we two

are Our we plan going is to working, see and it through.

tempting various before our we to believe to growth, disciplined unquestionably gains on is us the expect we attention and quarter, harvesting front to see moving it gains of comprise to in continue to focus While continue to better a turn long-term is back X. efficiency fourth it decision fundamental we remain step X. shifting through In our projects step that making the organizational

us cause quarters. seasonality expect with to this, But reduce we lead produce dynamics volumes expect X and another normal than the as to industry-wide potential step operate coupled X. adjusted rates in unit of to these lower quarter. QXs, we continue for volume, range depreciation in relative due last observed also lower X to target softening we the The in have past to to We industry achieved to past over QX great some expect higher Despite industry-wide EBITDA weeks. our

in for our are it, that Looking excited. we come together have best we the us. wasn't of do XXXX Through forward, we doesn't it our The mean to but path beginning, how work. difficulty imagined wasn't good

the of learned have focus. We power

We discipline. have appreciation gained new a for

result, us that sense has a differentiated change, is And greater our to made now We same. competitively a economics. XXXX exactly have better. And learned remains added have that while urgency. unit a the an we of has there's It arsenal. even as lot

ambitious group still care. who people an of are We

hard to our roll up We work still achieve are the sleeves to goals. our do and willing

delivering still and gets it replicate business still are is to gets selling that people to We difficult incredibly mechanically better love. We as a then buying and bigger. they model experiences new cars have that

and of player the largest the are market to Mark? automotive in largest retail march in continues. most selling We a we still on and are path world, cars still the the becoming just small and retailer. The profitable millions

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

EBITDA, for without nonrecurring profitability. to quarter set both on records path highlighted Our the our third adjusted progress and sustainable have We third company we quarter with and benefits. GPU significant and made total

summarizing cost materials, our As I'll structure. of detailed plan results, look part of the into provide start QX a our key earnings takeaways. X our components our by X-step and we

last X quarters, despite the QX, this and which million and our the retail industry that vehicle generated EBITDA, approximately backdrop. carrying infrastructure QX profitability unit million business of difficult despite than of of demonstrated we In adjusted $XXX model. in items. costs did includes $XXX used we clearly more have supports a Xx an First, of We growth nonrecurring online

fundamental per non-vehicle just retail have here. the by further last retail from step gains in unit significant of is economic our cost efficiency particular Of opportunities on quarters, Second, unit focus we X driving see we reduced sales X operating expenses $X,XXX in note, operations and generating gains. for and

profitable multiples support Third, we capacity have in our growth. existing infrastructure significant excess to of

We paired significant leverage expect with leverage be to this we underutilized our operating as overhead growth costs.

XX% Moving the decrease X% units decrease to sequentially. XX,XXX, of increase In billion, of decrease Total of retail and sequentially. of quarter a totaled XX% quarter, third sold revenue and our a third a year-over-year X% year-over-year an results. $X.XXX was

set $X,XXX wholesale impacted wholesale market as QX well our in to which which remarks were vehicle Total QX. favorable were by focused primarily nonrecurring profit and previous retail watermark estimate discussed, of nonrecurring cost higher we more Sequential retail profit, seasonal $XXX line compared goal, by we customer sales service by offset retail wholesale $XXX, wholesale total in QX. Notably, We In smaller goal, a decrease benefit was previous retail partially GPU on items. GPU long-term benefits, benefit that as other in significant compared gross our SG&A in normalized As from GPU to to of driving outlook our higher on in current changes $XX smaller impacted services. Non-GAAP quarter, goal in long-term GPU wider compared on in $XXX to and by between XXXX, fundamental free reconditioning was spreads of inputs benefits a non-vehicle team to other and below impacted volume. Non-GAAP as of of this QX. GAAP changes depreciation prices, higher of marketplace and remains flow. retail GPU financial environment, high versus QX. GPU higher positively business primarily a adjustment near are our was market additional our and outlook of benefits metrics. being non-GAAP gross was Sequential lower rates a units driven costs, continues in $X,XXX, positively non-GAAP a GPU driven $X,XXX the approximately wholesale held described changes we and previously and $XXX QX, in $XXX a negatively rates, $XXX QX. Non-GAAP average QX. financial other in this allowance GPU in higher transport of our versus QX in inventory reduction days non-GAAP strength detail volume net was increased a the with term, things wholesale several volume as compared FY end compared management our sequential the and cash loans into is in in by in of generate in in focus approximately income retail sold depreciation sale, revenue and expense from by progress including sourcing approximately including versus well In of non-GAAP QX range to our XX-day wholesale key that sequential reduction remaining will these improvements in a retail sold to EBITDA. Due nature in the a driven adjusted inbound equal, $X,XXX than be for by GPU metrics changes third of dynamic to $X,XXX $XXX rate

benchmark additional make units million in of breakdown other $XXX was origination expense credit non-GAAP by SG&A Notably, continue variable and overhead reducing relative reduced are lowering unit spreads. In and the rates, retail addition, impacted a by provide SG&A by retail by expenses, offset non-GAAP nature. expense sold accompanying more more letter progress are rates than to GPU more QX, while our in SG&A lower materials, which expense, $X we components lower growing nature, expenses, we on which operations to primarily by X%. In in including per sequentially our partially SG&A In QX of details fixed we expenses, sequentially. interest shareholder

was next The debt the items previously September noteholders as component X.X% well impact in and expenses maturities decreasing the for positive EBITDA leverage total by cash Our XX, billion X closed significant total cap million we was to $XXX secured our as was by corporate the to in reducing unsecured On exchange billion $XXX cash debt in our for of years. On described September interest in aggregate offer and we of or continued notes, announced $X.X exchange operating in $X.XX beneficial EBITDA payments revenue. fixed and by QX required secured than sequential under in liquidity resources facilities year approximately of of availability with extending of XX.X% cost nonrecurring per approximately in new million billion improvement leverage billion $X.X structure. Adjusted the interests. driven capacity revolving $XX agreeing QX $X.XXX operational unpledged and debt $XX previously over million. adjusted had more notes and including billion, both XXXX, X,

Turning outlook. fourth now to our quarter

total the for stable. consecutive the Non-GAAP industry XXXX, driven EBITDA retail in industry consecutive environment be uncertain, toward quarter primarily as remains by continues and the and decline third we macroeconomic long positive the fourth X,XXX sold, following as sequential expect GPU While the third for to quarter and units the quarter. of adjusted seasonal environment patterns. above A looking

Looking the year. consecutive adjusted drive for to significant GPU EBITDA and towards expect we second XXXX, total

to our for continued the about forward now We'll path attention. making the and are and becoming profitable on, toward largest goal take excited we retailer. Thank you are most questions. progress we We auto of your look

Our Needham. Instructions] comes Pierce question with from [Operator first Chris

to Non-GAAP growth? on go down to number continue guiding QX SG&A can't, per be turn a would the that lower you're unit, of in on can if units it for? And it internally signal

pushed say our down over see pretty we've would I spend several consistently you quarters. last that the dollar Sure. can

additional dollar the $XXX a expense basically we reduction units came kind form I that quarter-over-quarter. last of saw quarter by offset think that in of being the we're per unit this with happy X,XXX extremely that roughly and saving operational

making clearly gains significant we're there. So pretty

additional think be absolutely I to we have step that that we X, made. through believe gains

disclosure, to the gains across operational as we're expenses I think board, in detailed far of with corporate in and those to kind expect stick But we've as guidance the expenses. our that provided. both We going be

it or like growth turning car? then growth something So are of turning more higher to the had And cars broadly, -- Okay. of would sourcing in to have kind those just the different sell to advertising geographies how greater you what go we car curious to I'm to at would conversations. mean that a on just be the you've about Or is consumers? -- sell get because you it cars number be extent a rate? increasing

Sure.

start let So start let -- think we with me with where me are. -- I

we I goals ago the that we Catapult. of operational think bombards roughly plan, ticked of year. of to this in use years internally Many hit. every basically everyone called weekly marching Project across this QX targets we a were with group aiming series basically, had And off X.X most of that that they to them with them through were business

groups. next also of We We of then off. is our the kicked series across Operation one every operational XXX, goals our which call

through of the targets most year. monthly clear next of weekly QX them very has also We and of

gains. I making we occasions think sure discipline excellence of we've had of at company. focus across level operational the performing led That tremendous are that we're company, that in all the across the of in to of the has level locations that best that maintaining clearly

I very, been valuable. have led very think to that tremendous benefits. clearly think And folks it I

just So will on to time that to goals. thing is I do it reset think turn and Step to focus and the company important growth growth the we entire most X

how going on experience on think we to as growth, position you grow. all how how being to get efficient better, customer on So even company I'm how business. incentive to more we focused going drive additional in a do focused do I the efficiency are those we focus being Instead having the everyone drive targets

so I X is that Step thing will And we #X that think move when Step we the to switch X. from

that are gains significant. we're I very seeing the still think

so makes longer. And bit sense in it believe to for Step stick to a we X

equation. advertising big think inventory very is parts time absolutely X I when that grow, think it I to are of

grew QX from QX approximately through XXXX think I XX% CAGR. 'XX, we at

to During pretty increased That quickly. inventory that leading was entire time, growing we were clearly conversion.

pretty We advertising growing are quickly.

think those that and was our was result inventory, customers as of converted partially a I extra because more even that brand efficiently building.

feedback And so that positive period. from entire we benefited throughout

has the Over the months, XX last been true. opposite

And in last XX%. we grow XX by expect we direction. shrunk grow advertising we've and to by the that's inventory we bit inventory, it's pushed to opposite grow, expect XX%, months, Over again advertising. But the clearly again time shrunk when a to

will off we elements as that there think think we I that part a big other feedback are drive of positive well. And expect to of that that, kick growth.

Michael question The next comes from Baker with D.A. Davidson.

also it have advantage? we should just I way I'd structure another there unrelated. And that a to say a means lower does is heard second advantage. you up? maybe as structure So weaker. a get that interpret win X you lower Is competitive cost means to said it? a question, a to that like competitive Or right in call is weeks cost been last follow-up think being share. price it the back me, How can the way aggressive that To as show you about a

just trends and into through quarter the early talk quarter? about fourth the you could the If

Sure.

with So I think that. me let start

I as think view advantage. competitive unit we a economics,

cost extend moment, So GPU. just not I think hit would in structure, which but also the I that to will the

QX able than well. of think I had others had the much in been huge order quality, very those QX to GPU GPU up a are of experience, integration. many the just customers that vertical in the clearly $X,XXX. And GPU. think We and industry We our very record as that showing model very our we're advantage on I of across as benefits to a time simple result vertical record business able our of a more integration. give high all We're has experience monetize

there, economics able those discounts largest customers So industry. unit I players and the GPU despite think of many giving we're our achieve to start significant versus this in

that's think of think, I of model. point, So I our the starting the power

expenses $XXX operational account proud quite expenses give place not we've $XXX there's if gains and do, QX operational but clearly holding good, been $XXX, take follow QX. by extremely thing where expenses, our to a actually those flat. I that lower we at super it versus now in that. 'XX lower That's but like the they to dropped than by the of were you bit or better are it's QX. to We're time. QX doesn't that. QX We've before from sound obviously we're over from progress, about where incredible think made a now a We into take, into operational you of in inflation I see of think by fact it's easy that when That's much kind dropped especially QX while can And that volumes expenses.

think our on speaking, data, that can generally that increases on Where by other that average has progress best the we're SG&A over per based compare labor approximately we to several Bureau to I over time of automotive unit XX% that hundred of job do dollars up Labor in we period. been period. of seeing retailers,

that then think we us ultimately powerful will been years ways several the an options, in I in the pretty second things, And in to we That we've would a unique. sure have And options. On think, unit us sum that lot made exactly up are I your undoubtedly the express that a adds I'm last been future. gains we say which very not so gives sure position. lot but our has those economics. And just of question, that of -- it us then those the significant. I options incredibly do are puts think gives of the

saw precisely of in I in in We We think that bit going quite in 'XX. 'XX. things a prices saw the made we of distortions up harder a bit. going up have forecast. quite little there's saw Last a market fourth quarter kind ton rates the bit been year, to a

of is definitely, softer, So unique hard seasonality. can or degree a kind probably bit all data data. industry-wide think a out little merits expect the ton what sources like not It been to I we to last the of direction. weeks, things X a it's I know think do exactly been have see bit given that's of the have, over that I but think we to a looks that attention,

all be goes. seasonality And the it's bit exactly think little see even Like over of now that right where given couple a I so should we've out changes said, hard years. to seen we'll last figure I what the

question with Basham Seth Our comes from Securities. Wedbush next

pivot question cost the couple of my growth So is in think result? leverage that, staffing, quarters when you do you for your will growth the vehicle to support that to operational with of more acquisition could that excess offset and than you terms first that your that capacity do inefficiencies associated advertising,

So let me with me with with point your Well, think history. I start expectations. let -- let start our start me to

expect our think we down to Our corporate we over operational expectations expenses per expenses absolutely time, down from we go we they as can unit to and here. our expect are that over go grow. and go time, growing down despite

we QX at In back provided, do are per data a through looking to -- period kind expectations. those QX all the our a of XXXX. our gave expense is And useful. the somewhat QX XXXX the I going way operational from in think So 'XX that time we we chart out breaks provided unit

building XX% and were many, have of and many, We hold into, were many were we Carvana to flat. not We centers. able those growth capacity adding going to continually the grow we did supporting were inspection markets. we excess adding we roughly expenses machine we were as period, were that During annualized many

seasonal COVID look And some data of were kind gains if flat. that in see the there's as see we were you'll headed hundred tune of into well. outlier they relatively But you'll of of at to the a hit. couple also think general, then point an better I you the them, year as as there variation dollars, even parts

infrastructure. clear went. a high in very evidence infrastructure We've we've more growing grown done that I existing that building weren't and before. supported difficult because we've So into were that's is this We rates pretty way growth, we we as of think

expect don't we we in be leverage. turn we line to to overall, think need be there that meaningful obvious there increases significant that So And or expense absolutely it's items as these to expenses growth.

a when I between think very just for things, you lot growth beneficial in GPUs that's room operational and very be financially. of gap look in our expenses, clear to those clear the at extremely our X there's

on the If case, a respect that's operational the but the opportunity to decision I continue efficiency, then on leaving focusing lot table. of

later? pivot why growth not than rather to So sooner

Sure.

I think near term, that likely choice. financially would in right be the the

from quarters. of I be scale the next the think that right that the economic think of would benefits unit over growth, likely the come would I couple choice

headed into kind long that. of However, of kind

months the business. think X we beneficial, time, longer metrics yet I Those it you on underlying look be entire right and XX which ago. tremendously is a been over off gains Project focused ago you Catapult, approximately be walked believe fixed different off the there we at kicked to company are with operational And when a period driving entire through months long-term kicked I that had. XXX, to are has goals of focus is cost many which there direction. and in projects where the reorienting

of the of had And million. but for ago, of we kind to consensus more that the to even kind be clear And I the the of We been turn getting go the be goals I EBITDA I so we I think obviously this again, one, keep of quarters, mean What average clear, don't in discipline lower the do, setting to marching than to a that think is when even suggest, on on get that direction math, think on last with difference. million months discipline we we should gains we think $XXX we're back us in it's I answer expectation $XXX mean, time, just I those people turn defensive of was then points the and the I them. But expectation longer should of toward That's over think X efficient if we should on be growth. even gains. a us. growth. negative think X over tremendous costs. order today was of a that this And we'll period and year. demonstrates positive value basically position I harvest that let's would math of And time, that think

next comes with from Our question Ron Josey Citi.

I ask please. the Mark, wanted of investor to the letter, unit per X, were helpful. presentation the insights super in

about think ask we step we I As in to about when step, just staying move wanted to or do X specifically.

I a think we saw inboard transport last on costs declined XX $XXX over months basis. unit the per

now or hear positioned whenever X for results for Would how would inbound what might to would gains. I you to we delivery. same-day then, I with hear go, just the just interesting. to insights delivery states that drove love your thoughts those in, just just really is more support to love network we transport maybe ways is love So overall? like next hear same-day early getting And cities, think, peak cost, to about the I to driving that's how rates preparing ourselves conversion are that think X there's but assume but away any and super step not be think as greater just do would love there. And how far Ernie, to is, efficiency, something and on

start me let Sure, question. first Ron. your Well, with

costs what I by about XX reduced $XXX. months, you're the inbound we last is transport our referring in plus So think to reconditioning have

progress about in about significant very thinking we're I very the a excited think we're we're when one that win of and making points progress X. the Step that's that

the start think I some of single focusing In-sourcing biggest driver. drivers were that? what think So was on we I of probably reconditioning. the

centers parties by the control services in of and and them provided saves process. ourselves. the obviously to better that us taking them previously been and costs doing So reconditioning taking that basically in-house had third inspection have And allow and

a win. I So big been that's think

I at inventory better making gains In and some in-sourcing management including our at processes, system. levels. our in inspection standardizing properly fully center software, reconditioning sure gotten staffing addition, we've big normalized think We proprietary made we're

parts I are think allows processes win improvement and allows the really executed again, on a control that's and standards that to better a us big and that clear big much process us have, games over is that car It single also process. used highly a manual made facilities. We've variable highly -- a every automating procurement. process drilling than to the it and be today. more through

think made the big there. department. I we've development wins so And software in proprietary

So real see in gains we've do for gains recon. reconditioning those a places unit. gains few see don't made I that per in for those in note would we think we're pointed I the We that are further cost do to areas We further of reconditioning. opportunities opportunities in where done. just

inbound Moving transport. to

gains getting I logistics as think a having miles. there lower couple of sources are of utilization at better network as inbound well

both led things, those I so And declines of inbound costs. in have also transport think, to

was focused the in I talked to did think thing question one Now on just there's I note. about and $XXX of gains out I improvements call want is your sales. retail actually two $XXX cost that are of

our also detail general accompanying significant However, expenses. the some broken out well we and we've in of on administrative that's as And our as gains additional materials. -- letter shareholder $XXX an selling, in have operational that

gains total, more those components. in that in cost in so about words the has gains, second $XXX I If of few just say I think very $X,XXX that total of a that's variable broad-based. gains also And been

some So that better QX around the staffing logistics being in since that some technology economics of which in activity made houses those made improvements would and operations, for network and very And automation, care operational cars second in that significant moves and scheduling, one cost terms would example, last our gains our include areas as logistics software. pairing we've It departments, gains for network. centers. and process cost which delivery We've driven market proprietary in well. us. processes route transportation in our driven is improvements logistics Those have cost $XXX our both customer include improvements, management unit of It that have would that by include improved been of improvements and real XXXX. mile

variable more on $X,XXX of I structure. all about very components excited unit So per we're in obviously, that. the reductions and a cost think, the basis

great in it's think transition something return reason the we it's capacity of about. our here of excess take to so to about doing really we're I before what part and And that feel excited X advantage we're we profitable growth. Step

cutting And well Yes. jump same-day before gains. delivery. would also very to gains. Those a I'm say heading on then high-quality is are second I going that for What -- aren't those to gains as corner

During warranty this example, we've go claims, down. period, seen for

about the So scheduling actually making the cars frequency expenses. we've delivering go of customer reconditioning The claims we've that cost experience warranty down better. seen driving we're down benefits logistics lot while faster. A are is savings Mark talking of in means been that

pushes when or advocate X/X doubled XX% per benefits sorry, We've down very seen across year-over-year. customers registration. efficiency board year-over-year are calls per advocates, calling as approximately have fewer time increase in title have increase hour the per calls in work sales in year-over-year. We've of -- registration, We're are seeing and per significant We sale well, seen advocate change XX% quarter-over-quarter.

better. go So we've seen just of the things period, a up NPS customer experience making as that during a are lot result. these also And

example these is I a think we're executing can little we've all, both. the that fundamental fuzzy real in that projects trade-off I The or delivery, of extremely to in that a X gains. them. Heading it's excited markets. working not is of what is of delivery role gains, about Step small we've very that So good of same-day think of on a been a as said, X. And goal are in They're these to internally of play deep Step one been you subset date, way is same-day and clearly, sort first terms it so ultimate

we've or There don't spot The slots. their excited customers when for those been gains. same-day on it this they too, we in to I efficiency date. delivery booked, date customer. to not empty that they've that change cancel executing just and of yet. So been to are way we're everyone one kind delivery, can previously book a times More aimed able By fill get at another adding want too

been would otherwise do so more can efficiently fill delivery our customers, we it have And to offer also in time we because faster can that we and wasted.

from rolled they to website, we've car, customers same-day customers their the for to can process out. from bring had of hour our well, We've a can go just a they they X one they on actually We're and get getting machines. that car of vending kind can how in being generally us. website that as so check And their on test also order purchasing that's our from value into where drop to as us and beginning off -- complete of the car

working on things. are we So those

to do staffing I exciting certainly at think are it just could Today, for those models. implications In at think they efficiency aimed tomorrow, be some that, order I things. our have would aimed growth. they're

of I super whenever think costs and very decide use and to excess to don't fundamental trade-off delivery how fundamental head as the of you're always will high, focus, be into offer rapid kind trying they But we sort step-free. those to just and expect those efficiency between require is there times, time. we'll we but capacity gains

with Rajat from Gupta The next JPMorgan. question comes

Great.

bigger the a to, seasonality, had experiences. saw pickup, industry better normal what I seems the units than a was guided expecting. third were guess, what The quarter it little we It you

refocus Step that pickup what to operations? purely I moving were Is as again and just -- Was the Or pressures like anything curious aided think here just there? why facing? fourth you're internally a quick the just more it is it is on that follow-up. have by reversing And industry quarter? you Step it in why like a industry X X? And is drove you the about or from that So the experimenting

Sure.

the simplest kind we're to of way is industry otherwise. be Step X X, up about setting think during whether to or company changes, volume I neutral that's the seasonality that effectively to think Step

great I perspective. think unit a was QX And from so

seasonality. other stuff largely by but growth. have was was there driven that that may we some of think I There don't we had, from doing quarter. that specific some of aimed a ton projects at benefits that the were at been think growth in I were aimed gains were there was the

settings kind to remaining move of fairly neutral. industry because I of the Step X, heading the expect the business think with we QX, keeping roughly we in are and we're into again

think normally, seasonal decrease QX. I a So in there's

that's We over we've several range seen X. last reasonable with for expect a occur. power line gains Step we very most of make and unit through is get unit Again, X expect much as for that that think that, range quarters, kind Step continue what think the to I to in we and importantly, the we to us ready

X Understood. a and financing quick That's just helpful. And the on just markets. the ABS

We a cleared. you that change a to believe from have have needs still a bit widen monetization this I spreads year does gone bit. seen quarter? that around in the be thinking backlog like of earlier How benchmark rates have your fourth up.

think maybe to You thoughts expect talked should XQ. we we just XQ finance forward. this or on to residuals already? that mean how quarter GPU about something just should on seeing going And from holding start about the other is to I more like broader

Sure.

I financial certainly that, last I choppiness, There's are months. all in up markets spreads. shown the you some think over And showing been the kind I across many changes reasonable. up all pointed there's that's of think in to benchmarks, think,

would on we be that do we and to As have we in others consumers, would the same. expect to expect the past, passing to

speaking, different that generally have we don't I tremendously there. So expectations think

And to I absolutely for terms that think plan had a been funds our our last the we we this time, has think had unit of The general we we kind area economics. very in cost same. significant achieving effective with in if first of expect there securitizations pretty good best And industry quarter, securitizations. plan, we Even of cost have another think period be our of that monetization in and over be those plans improve improvements our of funds, there, order, very place we've I remain X to I happy long time. of still kind room case. that in that we where the were were would have would

gains to a then I in think importantly, Most we're And improvement seeing last way we're we quite led across the X quarters. the also that of the is that the are clearly operating we've the while. in been is. position it capital the EBITDA in in business business that a over million that position by different capital $XXX led good liquidity a with the position than

that see exactly what open future. So I time. more we the that We'll will in communicating form to are maintaining be we now takes think that residuals over

very we view of that I these they offer as pretty lots general, think the assets, those a many handsomely residuals are high-quality the increases are there paid well. In pretty industry and as true expected returns. to auto that very They an forms in for it. losses. for are I opportunity loans think take, tried strategy residuals can and And significant but maintain get of we And generate. robust to it's

that So an right start maintain like the interesting we to time. would will opportunity, to that's think flexibly to we over do explore we

-- that be change. but So a may

comes from Chris BNP Bottiglieri Paribas. next question Our with

a had I question.

-- kind to want other on exposure clarify just new I disclosure So the want to the overhead of expense.

you're growth deck stuff the the expenses of the framing a at customer that other restructured. of of So scale. is million this to $XXX $XXX occupancy, guess, to the in shows corporate $XXX majority the you commentary core excluding expenses define variable, it when that is frame million other Like it you expenses it's much D&A like this services, of it's IT, that it? fixed, the could it, versus the correct unique actually sounds vast correct Is sounds largely cut in it's D&A your fixed that like million, professional are Q way P&L.? just warty variable? it this plus $XX -- the swag, like it's in Because some look million. losses, of credit I supplemental way same the insurance, bucket and it's I past, Is you as And way sounds and the how the the some it's limited

you're that a going how versus from bucket about forward? variable So fixed thinking [indiscernible] sense perspective of

Sure, that I'll one. take

expenses the the same expenses the both benefits overhead overhead dollar to other slide as fixed unit per components I other of million new very not terms historically more and as intended fixed simply, to SG&A are and components expenses SG&A are on So well reported. hit as expenses. we've $XXX They that question the capture the of of is that think more also in compensation --

compensation in that would so oriented legal, that the general what your of And some also to of some sense administrative is benefits, teams, would be technology teams. more your just and teams. It corporate give be corporate and accounting,

expenses in you data be So benefits that their overhead think engineering, included to non-payroll and also the would new measure SG&A some those expense administrative provided. and expenses. expenses historical then expense some that our overhead science, slide other new underlie in move would this include would be other component, that some expenses. the When other we and compensation expenses include then of product, technology would facilities it It general SG&A would include that included

sense. is new that's your most And is that, give a And that not proxy clarify respect setup so of just importantly, the the a to SG&A. a measure other not with question, for or that overhead to expense -- parallel

are over we are us why technology a some may overhead may just those fixed And what question, certain fixed. semi-variable ability expenses those But significantly heavily somewhat vary as lever the units. primarily give expenses most expenses So leverage component on There are utilization. really view in somewhat vary component terms point, we in that are those apartments more -- bit of that the time. our fixed with the with to few variable? the we the capacity components, Now front excited we and corporate example, little one units, have and expenses for expenses, color existing last we reasons very of of think are a of what is about to opportunity for see part, the

more significantly not built corporate or inspection reconditioning materials, as accompanying you have the we capacity, corporate own significantly our currently letter so the customer the than utilizing are in of sort increase to more probably expenses centers even opportunity And or gives logistics meaningfully it us but office in think office capacity significantly We it's an saw space. levering our care own and whether while more we We in and volume those unit today. network. Even retail overhead process. center shareholder our that

you. Got

Okay. That's helpful.

think know XX I the points. bit follow-up. is it's But mean guidance how I leasing depressed, do like willing you're like market point dependent. But related growth. little growth? at a of for our to not mean So growth shoes, from it, kind about sounds this we much a XX, it call give I very

costs? you that's X, years. there's next you the this mean you from Like to these does X, gets probably shoes, X do better Alice beyond what XX%, need like you that what get our gets like unit what prime some to how that? drivers I supply that, are you you -- for model cause And growth delivery, investor? think an scarcity XXX% we tangible growth fixed get do But share market the lever like how lose XX% but to your Like over that that to there? that have comfortable

let So one. me say that

with until start ours. Let expectation me I I really and all decide their mean, conceptual kind to I'll they what start -- of with is, won't grow are to think arguments, we I have what start believe but and these

versus we goal are the ask very first years answer that I I grow answer as think what we grew how -- it's has here. really is that sell X it from going it the as is to our We absolute very, where life question hard our to to that time harder to is quickly millions to since or That across answer question to that beginning, of our than expect because that question been of cars. is is and think a has expectation changed our

a brand. of we It long time. It was preferences that rates Carvana parts business were for positive many our of but our inherent of building most think During triple-digit in a people's a migration the took forms took feedback the early e-commerce. model. It life, grew exciting And basically toward at the was a forms. I very --

gets model business better gets it as are that a bigger. We

costs up, down. true when goes it conversion we inventory, advertising goes is And go conversion selection that up, When goes your so up. grow

on And That more carry advertising, several more you that of sell spend inventory. as more You to examples cars. there's you well. allows other

changed. out clearly take the I So we an anything in grow of -- years, trend over we've fundamental and I X-year think that current we has think to distorted bit the has a same on don't then -- think a think read efficient makes we extend growth over as think little And harder ourselves those kind the it And that's us more to last of and to exactly put that inventory the a that getting multiples those use back of our just have But those XX things months gone spend we pressure through lot marketing how drivers over XX%. lines environment. led and on them. focused terms, meaning XX%, persistent trump by we form figure we've to of primary time. And selection been last is And down period customers by to fed taken negatively. our I on pulled X.X and by back highly

that we our way the it before. same when think received will time engine, offering was the it's I that be restart to So expect

expect expect feedback us lead We the some of again selling of up. millions we things future. show to cars positive And those in the again to once will

sale unclear. past potential we things extrapolate in for I earlier car we've to XX months think that And of looking and it last be conceptual for think huge many approximately that, and was months, last is I the car think X-year-old chain that a our the sold time has useful fundamental we've supply periods. Pre-pandemic, different $XX,XXX. situation. of think we're the More in dramatically years can a car frame be we been was there It going sold many, a X.X that disruption I bit the on average else approximately XX more case the on the how the That's But I was same XX% recently, up today. average at One is car, buying should statistic market is we for Most the and a should everything car distortions there that carbon buying. was kind over they at that. really the to looking the changed that about cars, spoken of obviously reasons XX% long-term sold and think sound as $XX,XXX. disruption. prices a relates that remains I today have think to that of And they're huge been the to by it's they're old, for the car spending spending that goods. more consumers supply were about other order approximately chain relative than They're the pre-pandemic. for to led per month there's

impact. have of gotten that, affordable has and very cars So large a course, relatively less

cost expect. the some we at long cars big a Our had similar that's would a point period future, will very relative in as have probably they to expectation time of supply too And be goods a before. in other chains resolved, for not would get as difference very that that

years lease the car and of average years supply spot. is the off-lease if were have X.X ago. I roughly, largely in think evaporated is years, that distortions the that was versus there also ready for assume Three of to, years are that one coming portions different entire an ago, reasons we completely written portion last that of is back driven supply, why a to And those is have other the that old, price are we that because today, because give access access which to old car X all over that that maybe we the that off average used by increases X leases have useful it's we're that XX were reason off rental lease years of prices months, the were were note leases selling used X today to or ready the cars take. the to

being thousands of as completely their very to expected the the from up handsomely of so dealer value unit cars smartly tune those a showing And of And where cars and per those on up are picking are all landing today, returned returned every cars lot. different cars is cars spot. benefiting was those being dollars those in are that

off And auction OEMs rental because today. not that flowing just are basically, through have And these been through have few so the very cars are flowing constrained, auction today. cars there been

over the market arguments I accessing persist that expect any I the to lead that that continue. And there don't up change of seen period we recently. meaningful that that have So those to pick depreciation strong of time. see some distortions a little to early a love think are of think in there meaningful should that We've more normalization. bit we been are portion are big, already signs Would big

there think or where with lead to close the I will were prices market than car they historically the is back even coming into quickly normalization more to of were. line that they nothing where historically

customers or And so mind to up we I years But that and we're X likely have look everyone in the that offering more than least before for think back an we think in unwind, belief you'll and can world, at much is world I love. we forward make those scenario own their very that. distortions were our as --

have differentiated model. We a highly

We have a we can into. grow ton of infrastructure that

bigger. a that business have it We as gets better gets

XX hospital that to the last over that to of is and hustled it always hit it's it's have We but fast, is a changed fast team direction back, the our hustling and months, going go and we're goals. change ready

when exactly to going So look to I ready provide are we think know yet growth We rates don't not forward. the that. be. We're what

they macro do versus to are I industry expectations considerable, to But depend were factors, future for think our it all sorts it's what of and on before. our factors, the we unchanged factors, absolutely execution. going be expect

Michael question next from with ISI. The Montani Evercore comes

then of Just relatively terms market, October if both in any some and you what could wanted to saw referenced volumes, you if spreads that to there's wide front. the think, that and wholesale between you with could, discuss on into little bit also, ask the I wholesale update respect I retail but a of

Right. I one. could take that

So in customers consideration order to it and wholesale were adjust wholesale margins we what we're market into in a volume to increase take also through eligible, the flow QX. that depreciation through business, expectations. seeing our way think we experience where if the wholesale depreciation that push updated more do we I an to in saw certainly buying flows that then can QX cars to depreciation, impacts little that are in relative do tends on I think bit from GPU, that

on that's that's pattern so the And we would then -- most in business. QX the impact say important had our that probably that it saw I and

level saw if would that back actually that you in in third I based to our on quarter depreciation the the was I XXXX. we retail think going also seen -- it least I market, of the QX say move guess through retail retail highest the depreciation data, at we've

for retail it a somewhat depreciation. quarter was really So unusual

an so And on that GPU. our definitely had impact retail

that particularly pleased our feel light in with year we retail retail the fact we GPU in many think I quarter. the saw depreciation highs in of

to And so -- just that color. more was a a add bit little

was dynamic QX depreciation. saw that in elevated elevated Another to retail depreciation we wholesale addition in

levels That's interest of into opportunity just much guess, over urgent the potentially, eating the a the start great. some of avoid some payments years of years And kind the on -- follow-up commentary see a potentially Mark, how do How of profitability. focusing debt I out? couple to or on next to how higher X stack of enhancing you about

of tremendous important operations improving has the business. for about and think And obviously, most we've this I many running the we been So important most our priority, the years now thought there. made priorities is way our gains

last couple million the pointed onetime $XXX leads out, of a initiatives. items, X we we as still of over our of over on As order with, million XXX unit was which on but adjusted the EBITDA for of that with just EBITDA, generated opportunities adjusted generation continue of Step the significant quarters, quarters economics improvement we to last of believe very further couple in

strength is the I progress Step our in improve economics going I to to excess to think fundamental we're growth significant focus when advantage profitable on And while time believe that the think levering expenses. also on leads unit very Step efficiently the And think to of And to to be being X, continue we then return capacity about. it's -- business, our combination taking make so X. that growth grow of I excited to overhead significantly continuing

with Imbro question Daniel comes next Our from Stephens.

inventory. on just follow-ups X ask to first wanted Maybe efficiencies. Maybe on inventory

can that inventory is GPU, to of I Like Do inventory efficient back hand build callers growth? of XX benefiting near guess, or days growth? more to return Carvana days to will return we less can kind we fewer be depreciation. keep we with as we to carrying have on that before retail this just from So partially unit you having learned need think

the prior to the operated even low we So I high growth pandemic, very during would perspectives average quarters mid-XXs, ticked sales in XXs. day some down in offer years of a on I that. think One, to significant some couple to

sale So so growth I of very rates. while we in executing for years, range high think feel of done days comfortable operating indeed and have average this very many

that be, would the yes, question. that think important I So most on particular point

Got it.

maybe Okay. a follow-up then inventory. And on

As on generated. we the is if availability, units returning a XX period months, we're think you were talked were up supply. average about But lease about and fewer Ernie, sold to where leases off-lease just about come fewer

years, And that other growth? so support can if into we guess, couple don't get back to lean of to you pre-pandemic off I lease sources for a what

Sure.

So yes.

you're right. So think first all, I of

were I beginning lease half of percentage table, what to think car through rates sales rates you by they at were still prior I end least 'XX, it's of new And drops headed relatively the of as like the about as So set think lease consistent 'XX. through a the then 'XX.

those so reason the is And will because not head is 'XX, making to lease been have a That foremost off, number cars we off-lease view decrease. as And us. and into first as of positive. the it correct. We coming cars that

over years it think that last to first cars has has off-lease X. roughly been effective the way access to the So been order, our about X.X

-- a that happens of over of we as have I head dimension head periods start from think another were cars and kind lease is period in we those 'XX, we coming prices benefited to where thing existence comp as off into comp not another the we so higher. to And car

So the were expected value higher. of those cars

most And to valuable those therefore, and of likely that higher, and dealers' so be up cars just were likely held value they the by are cars expected less lots, residual of less are therefore, relative on to kind expectations showing dealers.

will they to us. so downstream And flow to start probably

that additional it we us access inventory. because So view a to as gives definite I positive think

that either We a or channel which better which a we've dynamic that priced cars is also something was been same a of there's think that, headwind at auction of over probably us customers, competitive just been been that other of materially has for sourcing single cars. market, competitive in because time than channels buying cars from were all buying is where

think kind And also from headwind being that's pulled that with us, of away so positive. we competitive

that. to forward look we So

I move rates of dynamics I point entire you is the that things. to away XXXX. fewer that industry, lease the But across correct cars change independent of think to the Carvana coming think industry. those were impacts will may specific mind, or some point still the impacts down cars dealer in in change specific of sum from the just keep have If that sold back going kind we

Just a or were proportion loan sold larger with with a of them cash.

general, so the next what years, want get instead used making And kind between to ends happening decision they of of a still their customers do about X of customer will, you instead course, swap car And return that a have a cars. to when time. But car then have desire scheduled having of over car. in to in market distribution that a is

of a And the expect industry level the maybe cars we distribution time. at wider with ultimately come market back just into as do to little so those well,

the access in couple I occur who next that about retail to years to may extended of the they market. out and these we or cars dealers us because for just time. used sales over So again, are actually correct an to of lease believe the effectively impacts of summarize kind reductions new that sum the those been other over -- volumes. to those the in think reductions period the of of points We market are that to believe have independent benefits of sum locked of car

headwind. and that, view So a forward competitive it to of we look alleviation we as the

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

Great. or Well, thank I To it. thanks, for repeating quarter. to keep joining call. is Said already, everyone, want forums you. another different Carvana This incredible team, but the

I progress from that we more incredible of was stayed heads we done, because of it's kind XX we see because and XX the made incredibly us be we've our And down, perspective of work last anybody that the to you've kept months couldn't months the think that's making the over focused, because grateful. it ago.

let's you. it, ourselves just all sure quarter. into keep the we learn doing XX guys We'll the lessons we of a make learned that last Thank again over that months sure you version better make become and we talk to next perpetuity. Let's

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

now all may disconnect. You