Carvana Co Q1 2025 Earnings Call Summary

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

Question: Ronald Victor Josey - Citigroup Inc - Analyst : I have two. Ernie, I wanted to -- in the letter, we talked about a lot of things in the letter, but specifically, you talked about very clear visibility to continued financial performance and I wanted to -- the first part of this question is talk to us a little bit about macro about how tariffs fit in very short term, I know, and I know you just gave long-term guidance, but I wanted to hear your thoughts on the here now and how things are going, how we should -- how you're thinking about the impact? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:30PM, CVNA.N - Q1 2025 Carvana Co Earnings Call And then the second question is more on pricing and on GPUs. And just wondering, when you're managing the business, and do you manage the business chain retail GPUs and total GPUs, meaning that as you can benefit from improving retail GPUs, does that go into lower pricing, maybe impacting the retail GPU, but yet financing GPUs are better. So I'm trying to understand how we're taking these efficiencies, pushing it to greater growth and now how that rolls up to overall profitability of the company. Hopefully, that makes sense.

Question: Brian Nagel - Oppenheimer & Co. - Analyst : First off, congratulations. I mean another very nice quarter. So congrats.

Question: Brian Nagel - Oppenheimer & Co. - Analyst : Two questions. I'll put them together. I mean first off, as part of their superior performance, you've been managing your retail GPU very well. I guess the question I have is if you look at it from here, how should we think about, from your standpoint, the trajectory there kind of the puts and takes both near and maybe longer term on the retail GPU? And then my second question, the longer term nature, you introduced today the kind of new longer-term financial goals for the company. So as we think of -- been recognizing the numbers you put out there over a long period of time, but what type of incremental investment are you starting to think about just sort of -- in the business to support those type of volumes? And when will we start to see that newer capacity so that come online?

Question: Rajat Gupta - JPMorgan Securities LLC - Analyst : Great. I have one question just on the macro and you have several questions being asked over the last few months around how is Carvana positioned to tackle another recession, maybe a severe recession. Could you help us understand like what's different now in the business versus '21, '22? How should we think about the challenges you might face in the lending market, gain on sale margins, et cetera. If you could just walk us through like some of maybe two or three top aspects that are very different from 2022, which puts in a better position to navigate a downtrend. And I have a quick follow-up.

Question: Rajat Gupta - JPMorgan Securities LLC - Analyst : Both.

Question: Rajat Gupta - JPMorgan Securities LLC - Analyst : Got it. And just a follow-up on just like the lending backdrop. You added like a new partner last year. Curious where you are in discussions, potentially adding more partners? Do you see yourself having more partners or additional partners this year? Where are we in those discussions today.

Question: Christopher Bottiglieri - BNP Paribas Securities Corp - Analyst : First one, I'm not sure I heard you correctly, but it sounded like you recast the TAM to the $40 million used plus new, and now you're 1% of that TAM. So just in context of acquiring that small dealership that you bought in the franchise space, just currently thinking, wanted to hear how you're thinking about the new vehicle opportunity.

Question: Christopher Bottiglieri - BNP Paribas Securities Corp - Analyst : Okay. That's fair. And then I was hoping to dig in on the ramp, like you provided some interesting context in the shareholder letter, like you can get to 3 million, 5 years versus 10, and what that implies for like the weekly production capacity. I mean you do it in five, you'd have to almost probably start this year or this coming year to do that. But I guess, what are the steps you do differently to hit it in 5 years versus 10? Like how does that change your capacity needs it's the same facilities, but I guess what do you do differently to do it in 5 versus 10? Is it more demand based? Or is it more like how you approach investment and scale it up more quickly?

Question: Sharon Zackfia - William Blair & Co. LLC - Analyst : I feel a lot of pressure to say congratulations. So I will do so, because I know you're keeping.

Question: Sharon Zackfia - William Blair & Co. LLC - Analyst : Still is a little worse. It's a long day. It's long out here. So I guess I wanted to kind of back into the idea of reinvesting the gains with your customers in the future. I want to level set that means future gains, and we're not expecting kind of a retrenchment in GPU anytime soon because I'm getting pinged on that. So just if you could clarify that. And then secondarily, as you think about reinvesting kind of further gains with the consumer, how are you prioritizing where to reinvest that? I mean is it -- are there certain areas where there's just a really quick ROI that you know will catalyze conversion or catalyze traffic? Are there areas where you have like certain return thresholds that you're thinking about when you're thinking about this reinvestment? I think it's just a whole construct, and I'd love to know what -- I think you said reasonable margin ranges. I need you to define reasonable for me, Ernie? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:30PM, CVNA.N - Q1 2025 Carvana Co Earnings Call

Question: Sharon Zackfia - William Blair & Co. LLC - Analyst : Can I follow up on that? Is that as you're starting to kind of embark on these kinds of investments, are those things you're going to outline to us on the Street, so that we're aware of kind of where you're prioritizing that investment?

Question: Michael Montani - Evercore Group LLC - Analyst : Just wanted to ask if I could about some of the work that you all have been doing with respect to third-party marketplace selling, if you could give us an update on that and how it's going? And then also, if there's anything that we should be keeping in mind as we build out models and so forth with respect to the potential for ancillary revenue streams, whether it's third-party logistics or reconditioning. So that was the question I had.

Question: Jeff Lick - Stephens Inc - Analyst : I'll add my congratulations and through really a tremendous in for the quarter.

Question: Jeff Lick - Stephens Inc - Analyst : No problem. I'm always trying to be a trend setter. A question for Mark. And then, Mark, I was wondering if you could just -- something in the data this quarter that surprised you? And then for Ernie, we're really only call it, four years into past-COVID where you mentioned recurring customers. We see all these tremendous volumes that you're putting up. But the reality is people really don't know you that well yet. I mean, we're still all operating under this pretense over the last 40 to 50 years that you buy cars at a dealership. And so it still feels like you're very early in the adoption. And I could -- I'd be curious to know how you think about that and things that you're looking at in the data that says, hey, well, maybe we're whether -- where we are in the adoption curve.

Question: Jeff Lick - Stephens Inc - Analyst : Well, just as a quick follow-up. In your advertising, you never really lead into just how much better the experience is over the status quo. And then to your point about quality you really haven't ever shown people just how these cars are reconditioned relative to what they might be buying. So I'm curious why you haven't done that.

Question: Jeff Lick - Stephens Inc - Analyst : Awesome. Well, congrats on the stock is still up. So we'll talk to you soon.

Question: Daniela Haigian - Morgan Stanley & Co. LLC - Analyst : On the financing side, I appreciate your comments on the additional whole loan buyers added to the platform. In that vein, can you comment on gain on sale. It looks like it increased sequentially to over 11% of receivables sold this quarter, impressive considering the market backdrop, can you speak to your various loan monetization channels, profitability across each, what's driving the higher gain?

Question: Alexander Potter - Piper Sandler - Analyst : Perfect. Great quarter. Wow. It actually was a very good quarter. I don't want to be

Question: Alexander Potter - Piper Sandler - Analyst : Yes. So I'll just keep it to one question here. Obviously, it's exciting to see this new framework. Once you get into the millions of units, presumably, you're going to be reaching down market in terms of pricing. Obviously, if it's a 15- or a 20-year-old car that's selling for a couple of thousand dollars on Craigslist or something that counts as a transaction, but presumably the economics aren't as attractive or might be less sort of ancillary finance BSC type stuff and more pure retail GPU. So if you can comment on how you expect your own economics to evolve over time as you reach down into those lower price points, that would be very interesting.

Question: Michael McGovern - Bank of America Corporation - Analyst : I have two. First, do you expect any impact from the auto part tariffs on your reconditioning costs or on retail GPU? And then second, I guess, more broadly, do you still expect similar seasonality this year in retail GPU to what we've seen in the past where you might have Q4 and then Q1 be a little bit lower and then have some normal seasonal uplift in Q2.

Question: John Colantuoni - Jefferies LLC - Analyst : Great. I wanted to ask a high-level question. So if I look at the 3 million target, it implies 250,000 to 500,000 incremental units each year, which is at the high end, about three times more incremental units than you've ever added historically. I'm curious how you plan to unlock that much incremental consumer demand for your offering? And also how you can expand units that much without inefficiencies popping back up into the business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:30PM, CVNA.N - Q1 2025 Carvana Co Earnings Call