Carvana Co at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bradley Erickson - RBC Capital Markets - Analyst : So let's start with demand. Things have changed a little bit in the last 6 to 12 to 18 months. I think that question number one is, like, okay, so you guys are clearly in this moment of acceleration, right? And I think -- you're aware of this. One of the questions we get a lot is just how and why has this occurred? Like what are the events that have led to this at this point? And we'll dig into it more, obviously. But at a high level, like, we've gone to the 30%, 40%, maybe 50% growth. I know you're not endorsing those numbers but third-party party, et cetera. What has led us here?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Okay. And then I think at times in the last, call it, 12 months or so, as you were kind of working on the operational rigor and efficiency of the company, I think you were pretty clear like you were throttling -- full on throttling inventory from a supply perspective. And so obviously, that was going to impact demand. What exactly were you doing during that period that was actually going on? And then secondarily, how much is that change? Is that a part of this strategy? And you mentioned lines like the inventory pools and obviously plays into ADESA. Can you kind of explain what that means?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Okay. And then on that third, staffing or whatever, is that literally like production lines that that will start to scale up? Is that what you mean by that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 1:00PM, CVNA.N - Carvana Co at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Bradley Erickson - RBC Capital Markets - Analyst : Okay. No, that's clear. So I guess the question is, it's like, okay, you're running this -- sorry for staying focused on this one-third utilization essentially. So you start to staff that up tomorrow, right? Does demand just flow in from there? Is there anything else you need to do to drive demand once you start to do that? And then secondarily, like what will ultimately instruct you to start that process of filling in those lines more -- in a more heavily utilized way?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. And so as we've seen kind of the volume rise -- and we'll get into margins in a second -- I mean, is it fair to say that at each level -- you guys have this new playbook in terms of processes and software and those integrations. At each level, are you seeing the marginal contribution match what's already in place? Because you guys -- I feel like 18 months ago, you kind of ran stuff -- you shrunk things, right, to run it in a test tube, so to speak, and learn and figure out these processes knowing you would eventually scale. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 1:00PM, CVNA.N - Carvana Co at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference As this process has started happening, like what are the challenges you've run into? Have there been any challenges? Or you're just really -- you think you've got the playbook nailed now?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. Yeah. Got it. And then yeah, so leading to GPU on that question. Like I think when I go back -- god, this is five, six years ago, right? When you look at the targets you laid out, at least on an absolute dollar basis for GPU, you're running my math, not yours necessarily. I think you're running something on the order of 50% higher than what we might have originally thought. I don't want to ask why your modeling was so off because it's a good thing. But like why are we so far ahead than what we used to think for an absolute dollar perspective on GPU?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. Got it. Okay. So yeah, let's dig into that a little bit. So again, with the inventory coming online. Maybe with ADESA, right, obviously, that integration is clearly occurring. Talk about the mix of where you're getting your cars from and has ADESA sort of changed any of that? Yeah, start there, if you could.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Okay. Okay. And then just on the retail margin portion of GPU. I mean, I think you talked a lot about sort of kind of subcomponents of, I think, non-vehicle retail -- or cost of revenue, I should say, that have improved. And yet I think every quarter, you and Ernie get on the call and talk about more opportunities. Where are those opportunities you can still squeeze sort of more juice out of?

Question: Bradley Erickson - RBC Capital Markets - Analyst : And so is -- given that -- like I said, it seems like every quarter, right, we hear that message of like, hey, there's more to go. There's more to go. Is that instructing or affecting -- having you guys like throttle any of your demand at this point? Like meaning do you want to get it to a level where you feel like, hey, we're finally really optimized maximizing from a GPU efficiency standpoint, let's go on demand? Or do you kind of view it more REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 1:00PM, CVNA.N - Carvana Co at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference as like, at this point, you've got enough in place in terms of the operations now, operational efficiency and you're kind of letting both things go at the same time? Which of those would you say it is?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Okay. And then lastly on GPU. Is there anything going on under the hood right now, whether it's in the financing component or any parts of GPU really that are maybe a little bit of an anomaly or benefiting from something unique at the moment in the cycle that we're in? Anything going on there that's maybe a little bit better than you might see sort of under normal circumstances?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. Yeah. Got it. Okay. And then again, several years ago, we used to talk about -- we used to dig into the cohort curves, right? And we kind of knew the markets you've rolled out in years one through seven or eight or whatever of the company. And it was just -- it was an incredibly predictable set of lines, right? We don't talk about those anymore. Obviously, COVID sort of changed everything. But as we think about the cohort activity you've gotten back to seeing, maybe just talk about has that predictability generally returned? And then secondarily, you used to talk about spending sort of market by market, right? The brand was new. You had to sort of grow it up in each market. Eventually, you would get to some more national campaigns. We'll set [Pickleball] aside for a second. What can you do with advertising here as you look to maybe stoke demand here going forward at some point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 1:00PM, CVNA.N - Carvana Co at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. And one follow-up there. This is random. What -- when you think about the markets, Atlanta is the easy one, but Phoenix, I don't know, Nashville, Charlotte, places you were sort of early on. When you over index in those markets, market share-wise, right -- because that, again, like you guys have shown that to be through at times over the years -- what's the characteristic of that market as you start to weigh over index, so going from, say, like low single digits or approaching mid-single digits, for example? Is it just dealers going out of business? Or are you just stealing volume? Like what's the characteristic there that's enabling the share gains or reflective of the share gains?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. Got it. Okay. And then just lastly, a cash flow question. Obviously, EBITDA has exploded here recently. Obviously, as you ramp stuff up, you're going to have to make some investments here and there. What are the -- what are sort of the abnormalities we might see in terms of the cash flow statement, operating cash flows, et cetera, as you ramp the business? So I think everybody can understand, like, okay, the EBITDA margins are expanding, and you guys have been doing that really REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 1:00PM, CVNA.N - Carvana Co at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference measurably and mindfully. Anything that may come up quarter to quarter from a cash outflow that we should be thinking about, that's just a function of sort of ramping things up? So why wouldn't the cash flow sort of match EBITDA to some degree?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. Got it. I didn't leave a lot of time. Any questions from the audience? Yeah. Unidentified Participant So you talked about awareness. I think I remember a stat, you guys had shared back in the day with unaided brand awareness was somewhere in like the teens. I could be wrong but sort of vaguely remember that. Has that grown over time? And then as -- maybe talk about the last year or two if that growth has kind of contributed to market cohort growth as well?

Question: Bradley Erickson - RBC Capital Markets - Analyst : So unfortunately, we are out of time. Mark Jenkins, thank you very much for being here. That was great.