Carvana (CVNA) 1 May 242024 Q1 Earnings call transcript

Hello, and welcome to the Carvana First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call to Meg Kehan, Investor Relations. Please go ahead.

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

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

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

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

I to securities the to, like discussed those that to but financial following start, and involve you we within Before here. results limited statements discussion would risks results future differ uncertainties meaning the materially remind Carvana's opportunities not contains laws, and that from forward-looking that actual market may federal of including, cause

conference detailed XX-Q. them, statements revise forward-looking as no most or and update material of or risks in from section statements that can results new result obligation Risk to actual developments Form Carvana call found are recent the XX-K today, of and of of forward-looking cause The Factors otherwise. on to in as Forms the assumes a differ be expectations Carvana's discussion whether current based A factors this and

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

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

My our thanks, quarter call. the Carvana highlights is long-term of an the for recent the from implications plan everyone, quarter reflection. to and is that QX Thanks, discuss then for was worthy share first of performance. the of and some Meg, and one incredible joining to

only the all-time quarter. in we X.X%. became the adjusted records, in new time. set achieved EBITDA the by having . In the quarter, expense, a not We retailer constrained EBITDA quarter interest decreasing in with the margin public for the significant U.S. of and year-over-year by growth, despite but completed We growing measure, first returned exceeding dollars company CapEx automotive retail X% our this XX% we By milestone inventory. marketing achieving First, highlights units first to margin. profitable adjusted we most this also QX, and

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and and overhead GPU. GPU our driven additional from also years our EBITDA see for our [ long-term adjusted put fundamental both we clearly expenses significant we gains These We combining expense to leverage, and with out additional in both X validated ago be ] path In will our a here. gains gains in that financial on fixed from financial opportunity operational improvements model and by large leverage here. costs margin

this and moving implications difficult of a automotive most backward volume. of achieved are the this in long-term when quarter We industry both a The significant. on are all in environment at economics time unit

retailer the which in experiences even offering of in with love. history. deliver that fastest-growing our last our growth, always has U.S. customer The has being to earned us continue the hiatus, honor X-year been We the apparent strength of customers our automotive

to and even loops. experiences us it has in we important Constantly always centrally future. been more customer improving bigger better get and centrally us, is feedback efficient, important important one experiences and most of we our the the deliver to As get will It simpler. remain

We are zoning here. difficult approvals. to is part The it to scale most and business is physical that our of requires grow from construction significant significantly space, positioned reconditioning because

current center current X.X our have inspection infrastructure, we over Xx per units year for capacity volume. and Across reconditioning our million

Beyond the to to and locations. a are to logistics of and ADESA this our our retail processes reconditioning capacity suite annually. bring to X ADESA a our increase that, production locations, total opportunity, have we we approximately unlock units million of full developing ability technology To playbook

and bigger of for is to we a decreasing and marketing and and software decreases recently better as conversion Reconditioning a Buffalo, an outbound We in units. which increasing gets story. our model York inbound a impacts New more costs. our proprietary it proprietary have leveraging over conversion Center, that Carli, Carvana Reconditioning ADESA ADESA site retail reduces at now unit per processes recondition site delivery part GPU and is sales completed first decreasing cars time positively to customers, believe that our of ADESA and of reconditioning locations key reducing our and this times cost We transportation, retail and SG&A transportation, gets

sit a the This just companies to to than own to scale, it build drive last have to position business to how and the of achieve Through a complex any us, do we unit have have customer few proven high-quality to a feedback is years those good at difficult deliver resoundingly also point and economics who experiences. experiences in it this history. to is various our loop. something in similar Competitively, we our better sought strong

competitive moat. Building a the very business hard Carvana like is is and hard ultimate

similar thousands opportunity. enormous dealers average There offering year. experiences on cars Our of with each addressable Carvana market models. similar of differentiated sold used to one business customers tens a another are an structure annualized our car are and a approximately and business a That model. XX million offers we bought EBITDA, in the remains differentiated supported billion its from model full just scale. potential of financial differentiated long by and delivered driving model are business cost differentiated $X a adjusted and experience, still way

this our strength the share market we market, positioned. of in the are day our extremely X% enormous, positioning is and fragmented Today exciting well an opportunity are size clear. just for Carvana, With of

Now it. sure make we most make it's our of the to job

Our team march Mark? ready, the is continues.

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

quarter of earnings EBITDA model. generated EBITDA GAAP achieved We was adjusted significant expenditures margin our online interest quarter a first and first EBITDA significantly capital records exceeded . that long-term income, the The and margin. adjusted the set power we adjusted adjusted retail proving and milestone We company We time. operating for drove on EBITDA industry-leading for expense.

time. details in on efficiency but opportunities our letter. significant we Our these provide see results improve scale gains margins We shareholder exceptional, additional opportunities over QX to with also in and were continued

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increased was it more teams on than have focus increased and basis. sold leverage year. on unit year-over-year Revenue on expenses. sequentially, we by XX% sequentially. XX% and units said, increased share responded market targeted, by Retail XX% operations and the demonstrating revenue given reflecting our handled That gains while also sales to year-over-year entering profitability and well year-over-year significant growth XX% and This sequential both continued our a initiatives

by there come. are We this believe and is to more excited

our Our inventory. growth in impacts QX multiple on has had

we can our metric. In be. demonstrated before was in results to March, efficient QX monthly all-time car only inventory nationally customers nearing for low XX being our pooled our sold on average days how purchased, website the First, visible on our this

selection in than currently our would inventory is less resulting we smaller available like, our customers. Second, to

respond, To country. more else production will selection volumes levels All we increasing optimal teams In to constant, across begun term, our is negatively this believe customers. today. for production our near our our focus to impacting have the on growing increase sales remain the

profitability in and strong meaningful QX driven were Our by fundamental in expenses. results SG&A GPU improvements

sequential was increase company first non-GAAP a $X,XXX quarter, ] retail [ versus new ] record. first a $X,XXX of and GPU in quarter the new QX, total was record. $X,XXX In GPU a Non-GAAP [ $X,XXX,

customer in and to retail QX. sourcing, driven including GPU strength be gains from nonvehicle performance consistent times was sales, turn $XXX inventory in continues Non-GAAP several revenues wholesale services. versus in by GPU cost areas, $X,XXX fundamental additional Our of and

first favorable pricing to QX. originations and changes other were spreads tightening driven versus in Sequential primarily Sequential volume more securitization $X,XXX were Non-GAAP $X,XXX credit changes GPU driven relative rates and by GPU was other primarily in credit sale wholesale in GPU and in seasonality. quarter loan scoring by depreciation lower credit QX. optimizations, normalized more and including

per expense QX $XXX less Non-GAAP units Retail to model was was an demonstrating million of $XXX than increased $XXX SG&A for in SG&A while reduction QX. a increased non-GAAP leading expenses. quarter exceptional SG&A the nearly our sold. sequentially, by XX% expenses leverage units in to million SG&A sold power by X%, expense versus retail

we significant scale. to time continue expense leverage for over as We SG&A see opportunities and

our Warrants Adjusted headwinds that company QX, $XXX than that important onetime a QX, million record. in also were our record. we result is operating note million small, a generated in tailwinds. value $XXX GAAP larger EBITDA. EBITDA, the EBITDA to fair company adjusted Root the quality not any impact It was does of in adjusted Demonstrating change income of onetime of new new included This

QX, interest and in exceeded As expense. generated that mentioned we EBITDA expenditures capital adjusted previously, significantly

annualized this after volume officially means we we to milestone interest goal XXXX goal May flow drive achieved we significant cash QX, in line XXX,XXX in Moreover, with This units expectations. out at that the achieved of set in positive our expense.

cash supporting on liquidity long-term time. our XXXX plan payment our plan and position and strong XXXX XXXX, both our dates and notes to operating semiannual senior in we currently interest delever to expense reducing over interest Given cash on results, pay secured

Turning second quarter now outlook. to our

stable, or increase We not on in outlook XXXX. long growth adjusted EBITDA. and units any as outlook to increase results in and rate expect material outlook anticipate expect year-over-year we the sold growth costs. environment a comfortably retail sold strong units retail of does QX remains as EBITDA With for onetime year-over-year This year sequential sequential deliver the our full for benefits following of in in adjusted and QX, our our a

margins. team's years as growth industry-leading EBITDA focused When more adjusted we execution of increased to $XXX profitability, X one focused pursue the well X companies has and When quarterly us positioned Fortune joined million by To catapulted on goals. strong conclude, we than financial fastest join under to we the to Meta and our in Google XXX. we Amazon, our our

profitable are phase driving and most on retailer now of selling profitable our largest the focused of our goal cars. millions and pursuing buying becoming of and We and auto growth long-term

Thank take you excited ahead. are attention. what's We'll now We for about your questions.

[Operator Instructions] from comes question JPMorgan. Rajat Gupta Today's with first

great quarter and on kudos lot congrats [indiscernible] improving a And that. Great. so on a of

by more and that XX% sequential like the first almost that And or supported in quarter just itself used the pickup? quarter, just curious market I'm you X better I comparing to you're industry growth question, There sequential unit, anything it changing I to can just deliveries? at driven first curious, saw in a faster growth if So all a had growth. in little the car was selection, relative quarter mean trends? follow-up. looking was that the that characterize that -- primarily fourth results have quick you what I seeing XX% greater-than-seasonal

Sure.

let me with I this. still down think mean, So moving I we're dollars. start marketing in

We XX clearly is customer right in days by put a they're our now. in being on our up constrained. shareholder it for letter to inventory average picked cars Our that up website, on make stat a

constrained. definitely we're So

best so one is levers And believe pulled. I that's of being the of growth these explanation don't

back most things return many sustainable going customers fast which they're think that consumer preferences prior. grew probably a a potentially they think I to migrating because most and X of love. were important explanation replicate for to extremely drove were, one, growth but kinds are growth deliver from hard the one toward. think for is on better there, to I There XXXX. It's years constantly we to highly it's experience that We things XXXX and of our many differentiated I the that

still. in 'XX two, pulling inherently. marketing as was think the I I shrinking there's and profitability. feedback are 'XX, in, X at we on think through I kind were we feedback business that shrinking we dollars, way the wins the And positive last And us wrong really focusing And of positive least years and and several quarters, think, our on inventory, going and gotten are we the have were that's last over over

think best I our explanation. that's And so probably

the In that, across countless business. improvements have been addition to there

You're the financial in numbers. seeing those many of

think little going they GPU can result you our You experiences expenses work up. a our operating down, see customer see going and of from made lot of the I that focus we're and conversion drives of that gains what over over on just That's years. can efficiency several drives teams that of lot better last And higher and improvements think a where for seeing and all economics. is playing again today. drives we And better the into customer experience, it

prepared it. And Got from mentioned That's plan think then here. I it. clear. remarks, grow you Got EBITDA to in you that margins your

point should So was just is the to we whole think it a comment? an about that I But second does up. mean more some not even quarter. in fair of -- Or sequentially, X.X% on guidance the curious also EBITDA, how it's you've is obviously quarterly given assume mean basis? annualized also like and up that margins us that's just are naturally the curious,

that some then provided in the believe, provide dollars, think extrapolations guidance some so EBITDA extrapolations, with and relatively is results We useful we Well, stick a think things I the kind to letter up. QX can QX it X think But we're relatively we is we shareholder we we from provided, hope the color. also we where straightforward to of expect can that visibility Sure. table quantifies into for straightforward going . in go. give we our to I guidance provided -- go

versus ago have we our where expected And provided X loans our data great we be premium, marketing the We that X.X% our margin. to X.X% a expectation quarter then -- kind that in so the by sold model of X% two, a that sold EBITDA started adjusted gotten those between what X were, at we we put in would divided dollars point already would years did to to actually we in which that us was loans up where average quarter. that's revenue if those compares X%. and to changes pretty have we we long-term X.X%. be And And undersell number out would assume we loans one, similar quarter originated. with the

and we it if have end model to to our higher But at way spend, shares getting the our we And to tend oldest X%. clearly that to market down low of think time. was X down over look cohorts we the where marketing financial lower lights

overhead at so our on also quarter XX% the million. that basis, we that's And sequential held X.X%. expenses the saw terms given led in significant $XXX leverage a you in And growth. and approximately flat unit to then that dollar per

we we centers the grow we inspection across to if that have we we're so grow that And assume ready into. into infrastructure that business, the have

today. make over working on that where in very all to projects business they're driving significantly work have excess to think got across haulers still then of gains And years out teams we're that result leverage expenses gains, points as over also incredible all last these We continuing driving possible operations down the there. multicar that a GPU X up our hard to there's operations market exciting and all that the path the growth. We We've the support couple leaves fundamental over of hubs the have on done have last work more X of years. this the

at I frankly, all optimistic So medium and about excited, extremely and look we we're that, term. think the extremely

make of I do value, all think but to do that we're it. work lot we working sure hard we that got to a to unlock

the with question from BNP next is Bottiglieri Paribas. Chris

I I'll mute. again, was sorry on start about that. Sorry, over

that Curious at it sacrifice you seen. sustaining a highest that drive you GPU we've have of have there level balance? unit you say, lower? think impressive like the So mean could think elasticity of right -- I obviously, units. to you reinvestment. the ever Is how And what why this retail the GPU, Curious that some in versus this it and X,XXX-plus how about think higher versus, when amongst looked is really taking if retail economics you level

And Sure. call after this we've quarters. X Well, a great think first, that got company as is public. our done XXth being now Rajat, after we've I

Your first ambiguous. was comment

So a would great as we qualify quarter, no? that

You that list. could me on add

not very for inventory, we're we I great I for think in seeing spoken just that constrained, We've quarters, say, positioning would today, also been I several gains driving we've what but yet, the bit is think today. have most are that we're growth a We're I in as a on think do last focused excited. we economic spot. been the about right? notably

plan an part been a of cycle in that's annual up that kind June. of that And has is

of of it teams to our forward kind similar that has So growth us of the basically then absent focused been really from has pulling been operating most up have focused not -- on kind on staying They've been kind and customers. responding just at demand been showing a spot of all. in

to today we been start for And business We've on up to catch so time. have think working are over the trying on is we to where growth I position inventory.

in ago, interesting year-over-year business we we hidden we pulling year-over-year XX%, to sales and somewhat flat a that XX%, are that inventory is up so have roughly and inventory shrinking line. back an trying is think I that's year because our were last because much though our inventory up capability in even the cars because the really stat we on are and closer were reconditioned down get shrink our to year, were

retail seeing has that muscle So that to and of working while business the they're that begun support results and see that's hard grow that today to part you're happening GPU XX% the in growth you year-over-year. flex

a has of little to on business inventory. and do, the behind we're of rest The bit work also

I clear adjustments supposed catch with normal think We're think we of pretty supposed what up, we're work make market and I be. the up, go. to is hard to move to our until we it's catch as supposed kind to

to make we additional capacity, to we're that We we if we're than once cars to think call think that that EBITDA. clearly leading make, there had time. constrained, up, clearly more build and selling we moves more cars have would that and would may we'll be we but be catch can sell it other think more I we at be

with . The William next question Zackfia comes from Sharon Blair.

with going you to showering I'm complement. keep not

to going end just here. that's So

So I guess, X questions.

recon On And And give work very I per the reconditioning, Carli, think have you've can any ago is to maybe comments. GPU, it's on good. prepared of Can in in in several you you mentioned lot efficiencies and much today of done all us of on harvest very, more obviously a follow-up. there? car know how a I kind you relative where your then years terms you insight

Yes. I can hit that.

I So significant the we've places one is think Recon where very gains. made of

talked think dollars before to of some relative the And hundreds in a about gains XXXX. of are we bit we to year I we've were XXXX. full down there, where relative

So there's economy per would in I and and note, wage cost to gains led a higher That been has some unit overall costs. reduction around that's meaningful cost, the while generally there. significant industry is, inflation inflation

And over efficiency gains, just the technology-driven gains and of efficiency years. that's result made a the that couple of really so process-driven efforts a last we've of lot the

So I that's about, about seeing now are that I a good retail really of to stat GPU. not costs we're think, we're feeling production and And absolutely on, really up. we think the is respond ramping that, we great also in Ernie tick feel those hit which part strength demand. to

of and quality teams also I reconditioning so and the to And inspection the technology, quality something think speaks of the that's the those in out centers. that management the

I that we've are on so where some And where think and been. commentary we

drive to we can costs. down reconditioning see go, further opportunities unit where terms In we of per absolutely

takes think I a forms. that couple of

through and think And improvements. efficiencies One technology continue process pursue we to I opportunities is there. see simply further

the we of it that leverage That's of there hope opportunities we the side the some cost scale in also well. to we infrastructure as opportunities business, see to sales not large this as think SG&A to as some as as into get on fixed I cost we part to but nearly as the relates see achieve well cost Recon. some leverage fixed start

for commentary maybe just guess the is in faced XX letter, obviously deferred vision months. your shareholder a bit, cash the I there, the the given follow-up and was a lot to of ADESA there that last was original which reality you XX around

in fruition start start to So mean to kind efficiencies vision how see of more coming to sites can you will we harvest meaningful that something do timing? we ADESA convert think terms I from of where about when them. to

with want Well, that take And me I Sure. start one. to this. let

do. that to a that's business of is of up. I of important do of network network very all large underneath the it's and to success of something kind think kind reconditioning of we best-in-industry network things the them cars quarter today a pick and long-haul the EBITDA network centers, achieving logistics that mile the a this logistics, last margins to we deliver That's it's to customers have

And and playing delivering locations XX customers. buying those making to we've got customers have last-mile is very a the locations locations, role going cars the we that business. ADESA kind so dropping important are we haulers logistics there. country including got of them multicar run logistics, customers X able to through And XX their have where us a them then across these already from up, cars of of ADESA we've as off, efficient where routes picking sometimes more

nationwide. And also sites million begun of the reconditioning out approximately playbook that we're excited that's we across adding units which capacity then unlocks to we Buffalo those think very as now Carvana because of that at roll X about this something reconditioning ADESA site, develop we've

distance difficult I it's doesn't lot but our at think enough large very and and is right? like time. business and get get so of foundational, It are hard hard, takes that's located to the that's sound very And sites across something to scale it's from appropriately a to them very a that zoned that run maybe many country

fees for of buy and being at also vertical then from them sell the more to mutually customers us of us. able the so positive think a very And results. and the auction that of feedback then is core going we're the then has And cars already business I auction think the And think up kind Carvana ADESA, their the removes locations for wholesale also benefiting it's integration job. also business in is I well. I ADESA great from And team which business doing showing

And do because story I without a forward to great move there's large there. that's stuff very results hard kind that business a our it big lot powers part very we a think like So underneath is this delivers it's of happening network a think as it of of it. build I in that this financial time

comes Needham. Pierce with Chris from question next The

up about Just repeatable out there kind you on that are Is Like Buffalo anything sites specific there? of you ADESA to the one other that. of following these to? pop that the is ] the site how allowed Like playbook network could to how you that strengthen many first. XX that pick with [ mini that spoke IRCs up

number Carvana's a was ADESA want dive of all to reasons start I a to into pick site. and And felt I is detail. across we good to ADESA that the But think absolute those of majority know repeatable that is both needs. side. it There's in the we we that relating belief don't reasons number a place if like of to for

follow-up, adding cars already there what like you're then what Or growth you -- look here? from a need that really -- second anything about you shift? site. or a does more have or more like just Like just And just what from you're literally you production, need here? you're to of cars excess using which like, growth know you of? capacity more kind is look more buying increasing more But get Do technicians? as from do on does the need talking I Okay. like customers means like

last meant year-over-year is, kind to at units we that are them -- time customer and we very out even year, these Well, quickly. were going were as going overlay the of we we're large XXX% We teams, were we do scaling the we to very, as we concrete the doing operational to on out doing all to our . And that that At we're all were land, in construction capabilities and were each able what teams. get think doing we maybe getting in to improvements fast centers, the at grow as kind and finding during in so and were land, very from of larger a different the grow XXXX. very like that And helpful doing possible, building with pretty were Obviously, gets make and but it's quickly, we hard grew growth I XXXX. verifications work, period, answer that we we that. it done. we zoned, And getting we're care you and I of scale, growing and able were time, XXXX that were out. the questions this growth doing operating entire and have let's that we we normal purchasing that are registration, reconditioning groups, same it all were then hiring and had logistics to customer all to training reconditioning. We're we the rates think

and kind speak long we'll first near to of today, medium sit in term, we then and the speak where think term. I

optimistic reasons I to what's pretty be there's about think possible.

this in we that now it I business. when effort more our gains the fundamental operations, efficient speaks growth also XXXX. to paired, And sale A per driving we of are think an we market the made business XX% perspective, the was materially is than couple from useful. have just through back roughly stats of In activities were are means that bunch which to that it's they That's they capability of out a else, teams, to a requires valuable to from back, advocate a capability. of a up but stop it relatively drive customer a they somewhere complicated when customer, before different pick drive car loads bought build customer we back. a a and come a car

XX%. even less was a ago, that And than year

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less drive logistics that's a So work transaction. to

up that a than ago. per are efficient efficient That's we're title we XX% twice year-over-year. That In we're as there more means advocate as per business. a year registration, sales a big number. were Our person more as

grow best we've we to build the clearly we're Today, place been. shelf. required we've I In a have we infrastructure in in we're as the perspective, So an infrastructure work infrastructure the we think perspective, went. sitting been. ever ever From had to place from the best just past, on

that's So great.

margin. I here than ever think per of we been. growth financial a by We're unit overhead more are years better the expense than with sitting had back impacts significant in growth the they've

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And of then a from finance I risk of a think I those combination all it's things. good. perspective, So of sort think is

put saw and the I interest XXXX risk fast and a us think think that well clearly is a at in and and went positioned it's we is to we said prices car When all a positive all at That I of end our spot, not and going to done story, going up be up, what very went of great being tough tough. was story. up but large part scale. of together up showed part our rates were growth rates

for what proud we're it, of And like but looks risk there. I saw of the think making most the extremely team so we

economics, is of kind Given likely it's financial our the the risk of where less. we are position business unit in the and

to here, reasons there's be from So I I growth think like optimistic. said,

We term of of transition period. coined kind also a this

of driving we do business what they're every gains about meaningful lot on had through group we still still think every part year, are each last operating And be focusing in to and X we've projects exciting the a go with in I on. of can work and next had the the to over success talk there group, when years, efficiency.

run, the advantage also this that because we think to obvious we more that's serve of that And so going making see long take continue progress we by payoff in purpose in to we want sure the even growth. our efficient. make make But and to there very

we the And so want start is think, that balance. and considerations. to to to finding -- into have that we're about us those balancing going transition right to I start period, so lean And

exactly as growth and also the quality We an levels we'll we different we've decision to always the We're that move, can an been period transition So speed to make ambitious this people. we of ambitious that. going about we push is. people. us right But purposefully enable highest group recognize what moving of observing through remain group

So about with from [ next I it can several question Bashan The quarters, look Wedbush the over we that to we're Securities. Seth excited next figure but had ] what think is out like.

outstanding on Congrats results. the

like you say, it to appreciate but we Sounds . anyway. for

It's absolutely. so. No, can is just here. increased X well quarter the The last conversion conversion that Is you that's X or point driving deserved. this things really or to popping over there

loops a better XX% per to that call just as than in, the tried that, have we they way and I in, more of we touch this many faster. is they I think moving [indiscernible], is the ago. faster think had year less simplest background experiences it the that to where What in are say in feedback is we they more and the get sales so call from customer we When explanation to don't for also get to right? more get customer as points, One back perspective kind get remarks prepared that experience information, if means and quickly the that things a need forth.. of better, a point simpler is in and the call cost first we our fewer they has they're Advocate likely

simpler. that think the just I so And is business getting

XX seen a X linearly for in over is had pretty we've months, lot expense of have years last pretty And improvements think last I go that the exciting. these NPS simplicity customer experience. driven also up which the so We've

And that. again, feedback period negative inventory we with were in a helpful. some And so been I But has as the were we then the to . And that think to on it's answer I for we that. that push and first dealing X-year question, stabilizing going just gave shrinking marketing. we're do think going to continue I even back think shrinking

margins. perspective. helpful just And my then follow-up, That's gross on

even obviously, drive the that higher margins You you than talked some XX.X% time? them gross being over to at about that think sustain goal range. or long-term And but you long-term there's do can seasonality,

take I'll that Sure, one.

number opportunities unit fundamental in we So see of out places or gross we lay profit for gross shareholder in the a letter, gains where margin. per

think is, done of those on forms. definitely take number different gains think we a we're I costs. One don't

due question . meaningful scale efficiency to due opportunities and driven technology in components. here, for earlier, reconditioning response to see costs reductions to from well in both some as as So I process Sharon's gains

inbound that, some shipping to more costs. this inbound you costs miles Ernie transport locations, on I with adding That think and reduces addition further in touched to which therefore, inbound see opportunities production time. more your commentary your ADESA. at about make we on gains over shipping of his centers, gives reconditioning including

business. on those to of cost our In the side. see areas, absolutely the opportunities to we drive vehicle continue wholesale some other So are

are We one through are I products talk well. them finance won't see working here. there. We opportunities fundamental that gains in and outlined shareholder single in of every ancillary have letter. the teams on as That

have those had opportunities same and grinding teams over see where are been look today. we areas. success focused we've And those where more really those out gains on teams the years, we in But with as just more forward areas from fundamental

So all even see for areas different fundamental be of pursue. to though that to going we're gains the experiencing across exceptional those results, opportunities working teams still we are

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response, that you'll a expectations that point address your With long-term mean time? does at later in margin

adjusted So we out we the we're had making long-term QX. since it's our the laid with obviously, that years progress toward almost margin Day, time model X at X.X% EBITDA great in been Analyst

future. in the any some given the something for could at time haven't We I Day an think Analyst we in point plans that's in future, that but pursue .

comes Montani next Evercore from The ISI. with question Michael

at down raise just the the could I wanted stack. I If capital if in EBITDA an the about . sheet should then Just And stage, this delevering way? separate gradually had improving there's if more One here around ask coming and around a surprised things. it's the pipe? vehicle Or you X that question to we equity was on think pricing. if be balance

Sure. Yes.

interest for how very was there then the our adjusted dividends, in with from in years, response about EBITDA our we've significant key and capital QX EBITDA driving that paid focus. adjusted in and significant say That EBITDA and expense. talking here record QX focused focus expenditures I'd very meaningfully EBITDA has adjusted questions . adjusted on number And So structure, big operating to couple driving first a positive capital exceeds obviously the about been last results. of

continue to for drive And your more look adjusted better goal drive so structure EBITDA, operating time as and adjusted those a absolutely you as -- business more better EBITDA. the you And all drive be results. metrics to will and continue to of capital over your

our So be focus. #X that's to certainly going

out eligible aspects did of remarks we in structure, prepared notes. In notes XXXX capital the interest secured cash Those X that in are of for my our plan do to and terms XXXX. senior financial we are of interest that call cash more pay on XXXX sets the

That those pay debt So XXXX. interest long-term reduces and cash reduces notes to we in also plan cash expense. outstanding of overall both on interest

that And call. so we earlier did this out in call

noticing to own And surveys, GPU, more million-plus push you. I'm potential just to front. more think on just website unit the you cars I at more consider opportunity to at you I times, wanted just about aggressive either wondering potentially units to pricing my the you're with in buying to bid KBB and with your or I'm bit fair when Got if that above And up target, GPUs Okay. when flexing then guys respect the units look to above a potentially offers would on quickly? see little get how the to do pricing. you with pricing growth guys sense

let's Sure. this. with What start I would --

across keep I vehicles generally we the some very years, all websites been stable of of several versus I think time. just that over our -- last sure And sense offering different millions competitors. our of across market think listed also then that have it the have of compares. good make our a the of time cars both pricing over larger many And track how are and to against the we

generally pretty consistent. held that we've So

I from question there. there's not the think on constraints. gains, we now. especially order make opportunities something think right right no here time, that's as that's there's I given . continue planning the as we're assumption well, that Over that But to

. next Adam comes The with question Morgan from Stanley. Jonas

I would you see work everything We told Ernie, out.

us, doubted appreciate never . we [indiscernible] it.

you're Never, of a CarMax never twice doing like their your and for are volume. X/X margins I like minute. mean

So it's start. It's a good start. a good

Michael Montani's of So stagflation [ talk like Question ] the their seems hand have uncertainty. way. overplayed I'm different still time. little Fed There's going and just economic might of It and a ask uncertain lot a to an

for And think remind the wondering, targets do feel how enough just equity So longer-term the you us now? you you maybe that I'm business. have in leverage about business right

can take that Sure. I one.

I ample strong today. business the So is of think the we the first answer is, I that flow EBITDA very simple and cash have question part generating to liquidity think and

great we about So think feel I structure. that

talked As earlier, intend delever we over to about I do time.

on notes is of I reduces do cash that, call paying think XXXX. that a expense. we overall in about both long-term of plan pay component and in eligible to reduces kind talked also to earlier, sets relative the on interest debt that outstanding cash expense we interest And

couple we call, about towards from EBITDA interest. the throughout And about exceeding opportunities a we opportunity then customer past relates big for quarter customer as we've as think offering I dollars in outlook So But for $XXX over we're an people meaningfully capacity those see think of capital so looking this about see of points including ones the time. asking at think in an and where we it that I CapEx talked ahead million from ahead. that mean, QX. excess were And resoundingly our many our questions. structure repositions to a positioned I product adjusted increase earlier questions that lot an EBITDA, us as and of been there's talked demand years, serious perspective, perspective, pretty adjusted I now

that think we are today. where I . really feel so great we about And

goes out an can? think near-death of appreciate are I to kill . are in make for stronger. the things evidence And And thank, tell All and a that way at complacent what keep that. they you're long maybe that you're are But keeping right. want night you now growing be on, humble things seems and things looking say, you get a doesn't eye that what or Mark. terms now this good. in you you it's also you What what what does And that. doesn't Ernie, a more us, control experience, returning And I that [indiscernible] then you growth, to don't as whether that some you of -- up follow-up, that wiser. you stable but can quarter to things after of

want to we beginning, listen, a ton of first better, obviously require question, great the do to go back experiences, If Well, deliver do? economics. was build we're customer extremely of We an very to that not all, say, true, but assumption is of give thought experience would and you them simpler industry-leading excited, what which right? [indiscernible] drive to we'll a made work wanted a going to we that business we

And to to think, to as answer, be big here from e well build I positioned where back And feel possibly to the I going now argument that can. a made do think get it checked, we to are like and incredibly thing the growth is as very spot this feels that. those really land to be in there's a to do be boxes and strong are we our promised to good job

of forward terms the cleared the it's going wrong from perspective, field absolutely of think and 'XX, an in but happen well we're quite good. to what us they also have last -- have been in really brutal, and so a and infrastructure 'XX couple it bit positioned growth as competitive was a very I of years result getting looks

us several that opportunity I be quarters. we'll -- about and extremely be we think I something enormous well. between continue next to And the execute that that out balance over we internally the transition figuring period will sure think is making that debating that

to different think outcomes we'll be I pretty we're trying that I room right. that think the different voices But as get think that think good it versions will of out. in sure figure And as picking we between I long make I it's execute. that we something

I that. we're so excited about And think

In terms I places a like think being of ourselves. a fear, internal -- for think would team give on credit pressure our I of that to I team do lot

no external together we've that But bunch that's I the that apparent think work there's substitute XX there think pressure. hopefully, for sum in of years. that question I over done a that no the is of the last

even the come and done. over to every [ in pressure And not said a trying I just and a little that were head put put on less than dumb we have world the we think remember say that sure than pressure you thing we're but keep in to to easier much we value decides a we can years think if ago. easy as and way an try the pressure I we to when under very is it ] And again, that down a of day internally over world that is that's easy of something make thing we your might possibly feel grind and cannot good, just that thought to couple of can, as much that were on do. working ourselves maybe yourself. That's you that even on we're things pretty

can. internally, best working to So cement to we're try that I as think we hard culture

people have the to it. I think we do right

But first step. the in that fear we're I I the we me I think to that, good because want acknowledging is made think biggest on that's we're a important right position is to now. and the think in stay path, it better, us

the Partners. Research next question is . from Doug Arthur with Huber

the but guided you lot a in of quarter. in units slightly you to guys Ernie, sort answered this of different up being ways,

Your very contained. marketing was well expense

surprises. about . better units, a but talked follow-up. big of were upside which drove, conversion, sort I've got what what upside the drove you a in So

despite the think So executing our starts with not And than things. very do I anticipated. it's I units think we completed that direction, demand moving then came series in the with it. a of there's that, stronger team in I and think I that well think anticipating

you're cars a in getting so number inventory to hotter there's than expected there's there and lead no the -- long time And of shrinking because buying comes of reconditioning. when that kind around you're little demand

I and a a of adjustments team saw volume the position saw in And we And operating quick bit, that but teams think of handle made very we get even so inventory better then relatively the rest shrink started also kind quickly. well. the very, to

well that, us, that despite that think I handle growth growth anyway. so for well being not pretty positioned And super enabled to

I about. to for But growth think well. is the what We we're that, that. and about at transition into have work get we so think high that's business we period really -- to the excited And bodes do position that think sustained a all levels,

year-over-year sequential just Mark, to super here seeing then, growth in our your in of you're rate in clear terms retail units. a And be the guidance, Excellent. increase

slightly But know, QX lot don't will units the up first flat jumped QX. I you seasonally, rate it's you're quarter. mean so mean be a over growth have the saying around over generally I So down from I to -- time.

rate to will and be sequentially. quarter also in compared the growth the first, correct. That's do EBITDA more second year-over-year we'll up adjusted The

question The is with from Ron next Citi. Josey

of around pretty of specifically? of percentage expense revenue was I back come good sources X% and wanted to the leverage the ask cohorts you're achieving growth the a telling, little here. seeing a Because just pretty X bit more advertising advertising in about I especially oldest thought as letter commentary as

bit forward and one. thoughts little missed to brand of awareness as think That's I go which wanted sort I've recognition another be easier, about of think the strategically? might about and question earlier. I got spend have get do as sort So going how just one, a of might just you you advertising forward Carvana, your

and units goal. about ago But the X many million however for about units I X.X think Analyst year I IRCs that years back heard I ADESA Day, X% go per Mark, across to capacity annually. million share the

I on ones.? or maybe capacity be did Or efficient more that might have We their way enough hear now. more IRCs just

Sure.

spend. So with start marketing let's

X from directions. spend here, are that there think on different I marketing point in forces

can the that, of think website, would be down. like likely as as and that we already we of see to constrained, we And on down were And inventory can to gains, constrained make older markets, of that then age see higher continue cohorts dollars I fundamental that more we there's our act marketing and that markets continue also well. we reasons down think drive drive cohorts we likely we why driven newer conversion do specifically as believe we'd not customers today. the if were think

think So of profit customers actively much be is incremental we're clearly higher gross and also additive And would variable incremental be be incremental to average believe than it that that customer is on would also costs I at our there's going minus true would those we number lower of be the working that advertising forces spend positive that we much additive. today acquire CAC could it that think costs. today. I CAC therefore, come push likely at EBITDA would customers to than a down. that acquisition

we that And acquisition as a up. up that cost would be so of curve, incremental march customer would that force kind it push

I that those going want forces, and don't of shot a we think is forward call think to yet. balancing X just I our

we the also think I that out go something that's period. figuring we'll through be transition as

required $X.X way of that size would X.X have we the to billion, approximately inspection about and unlock that land Those footprint million then that some make be do unlock would the on top capacity But for ADESA to in need order total. million clear. just be that's the centers, at side, which units, our On CapEx of what approximately existing sites, think the we additional potential. the a that reconditioning at is you the to CapEx sites on $X of capacity. sure At get ADESA acquisition to We it. add good time probably still to

Citizens is The with next question from Nick JMP. Jones

Great.

of if were to you points which sorry some you through, rapidly. On kind But always be hit need that. in you would I this. to might able really you work do missed And the tend choke that and to growing past, occasionally,

the about out past? we think and Or in accelerates? growth of mentioned those still should that as we some think that I through choke about may the mean As points you're infrastructure are where how be things Ernie, have kind you out seen kind growth I accelerates of [indiscernible] there that feel good here, is. potentially there

the yes. think is short answer I

tried position in is from outline here in many than ways, hard. growing better why in very well were I growth and positioned think think an for we're for we to always the future we give the past. We

execute So hopefully, and course, there back be always we hopefully, But there will through we that growing that's difficulty head of then are. be into push we will somewhat as and helpful. there pains. growth, those well pains And

fundamental of lot them. a have to gains We offset

it. of in work opportunity I the think of -- going that's feel we that about of have we to And front real-world course, do. think hard. point course, I extremely there dealing us, of we'll be what But front running over there's is good of a But with business one these in in the us. terms explaining where And to work at be calls in of we're be years, will time any because

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

it. for everyone, of the much. Carvana so the you, X thank say at call. end team, you these of every joining Well, to calls, guys we Great. appreciate really this but the We thank And

think probably incredible a absolutely to years I foresee to really this impossible And from an done one ago. quarter hardest foresee. You've virtually is was of the job. the couple perspective This

us a tough there couple good think of been be lot days. in bad together, I and days undoubtedly think of through of will front we've times I and a

days. I the cannot when way how we we see of be those I lot we days to have last bad And to the good going thank enough. more that days, keep you a think grinded know face just couple grinding years, And bad there's and guys them. we if over

us job. incredible proud that's it's got Please here. your keep and put an and done because fighting You've like everyone. Thanks, what please then head XXXX be down .

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

and line, your great disconnect now may evening. have You a