Carvana Co Q3 2024 Earnings Call Summary

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

Question: Sharon Zackfia - William Blair - Analyst : Hi, good afternoon. I wanted to talk about the ADESA integration because I remember, you know, when you bought ADESA, I think the CapEx for integrating IRC was like roughly a little under $20 million per site. It sounds like maybe that's coming in less than that. And then as a corollary, I know you, you guys have been excited about same day delivery kind of growing to address a greater part of the, of the population. What percent of your sales right now are same day delivery? And could you kind of contrast that maybe relevant to a year ago? Thanks.

Question: Sharon Zackfia - William Blair - Analyst : Okay, perfect. Thank you.

Question: Adam Jonas - Morgan Stanley - Analyst : Well, I am going to break my rule and congrats, it's outstanding execution so well done to the team. So other than the reasons that you, you mentioned, including the employee bonuses and others, is there any other reason why EBITDA margin doesn't hold or grow from 3Q to 4Q. Because just calculating the contribution from, from 2Q to 3Q, it was, it looked like, you know, over a 60% contribution of EBITDA margin. And I know that can vary quarter by quarter, but just want to give you a chance to point anything out because your guidance of above 1.2 is kind of obvious. Thanks.

Question: Adam Jonas - Morgan Stanley - Analyst : Thanks Mark. Just as a follow up on the integration of the ADESSA assets into the IRCS you mentioned in the letter, you're able to reduce the shipping distances by about 300 miles in the markets, you know, versus you know, from before you had the IRC, how much does it save? And what other savings would you call out? You know, like for like in the same market from pre to post IRCs converted center, would you highlight just to kind of gauge the pace of your productive capacity going forward?

Question: Adam Jonas - Morgan Stanley - Analyst : Thanks Ernie. Thank you.

Question: Jeff Lick - Stephens Inc - Analyst : Good evening guys. Congrats on a fantastic quarter.

Question: Jeff Lick - Stephens Inc - Analyst : I was wondering, you know, you, as we track the site, we can see that you've gone over the 40,000 units on the site. And I was just curious if you could come in as you, we start to get that marginal customer. Maybe, you know, beyond say the 30,000 a month units per month customer. Is there any difference in the behavior of this incremental customer in terms of the, you know, the offers, the pricing and whatnot that you have to offer them to entice a sailor. Is it still are we still the part of the demand curve where things are similar?

Question: Jeff Lick - Stephens Inc - Analyst : And just a quick follow up. On operations per unit was $1,730 which was a little sequential uptick from Q2. I was just curious, any read into that and you know how you feel about sequential or year over year movements down in any way in that metric? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:30PM, CVNA.N - Q3 2024 Carvana Co Earnings Call

Question: Jeff Lick - Stephens Inc - Analyst : Awesome. Well, congrats and congrats to the team on the cash bonus as well. That's pretty fantastic.

Question: Christopher Bottiglieri - BNP Paribas - Analyst : Hey, everybody take up the question, of course, been a couple of years since I asked this topic. 3Q marketplace seems like you're really turning the corner there. So just kind of like two questions relates to it. I guess one of the accounting are the, is the fee income showing in used revenue in GP or other with the first clerical question? And then second, can you just kind of elaborate? I think you're probably doing maybe single digits today. Penetration of units. It sounds like you expected to step up in Q4. Just curious kind of is this just expanding with her or other partners? Like are you expanding to other large partners or is it combination of smaller partners? Like what can you tell us about this growing three P marketplace?

Question: Christopher Bottiglieri - BNP Paribas - Analyst : That's okay. Thanks Mark very helpful.

Question: Michael McGovern - Bank of America - Analyst : Hey guys. Thanks for taking my question. Congrats on the quarter. I was just wondering if we could get your thoughts on kind of where inventory selection stands today in your view and what impact does that have on your marketing strategy or willingness to spend marketing dollars if inventory is where you want it to be, or it isn't? Thank you.

Question: Michael McGovern - Bank of America - Analyst : Thank you.

Question: Chris Pierce - Needham & Company Inc - Analyst : Hey, good afternoon, everyone. On other GPU it's $2,945 and then you call it $250 in tail wins this quarter $2700. That's on a regular, I guess. I just want to get a sense of how to model this line going forward because that would be well above kind of where you kind of guys were multiple years ago. I just want to get a sense of has something changed here or what's happening besides the onetime benefit you guys call out.

Question: Chris Pierce - Needham & Company Inc - Analyst : Okay, perfect. And then on the marketplace in the past, I believe you guys had other dealers in the marketplace, selling cars as well or listing inventory. Can you remind me, was that a thing that an avenue you went down or is that an avenue you would go down again in the future?

Question: Chris Pierce - Needham & Company Inc - Analyst : Okay, perfect. Thank you.

Question: Seth Basham - Wedbush Securities - Analyst : Thanks a lot. Good afternoon and my congrats as well. My first question is just on your advertising, comment planning on increasing advertising in the fourth quarter despite the fact that demand is still exceeding supply, just help us think through why it's time at the right time to lean into advertising despite that fact.

Question: Seth Basham - Wedbush Securities - Analyst : That's helpful color. And then as it relates to inventory sourcing, can you remind us where you are from self sufficiency standpoint? And it's one of your key objectives with the retail marketplace to be able to source more vehicles and support growth in the business when it's getting more difficult to do that by sourcing directly from retail customers.

Question: Seth Basham - Wedbush Securities - Analyst : Thank you very much, Ernie.

Question: Brian Nagel - Oppenheimer & Co - Analyst : Hi, good evening. Great quarter. Congratulations.

Question: Brian Nagel - Oppenheimer & Co - Analyst : So, I've got a couple of questions first. You know, as we look at the business and, you know, it's clearly revamping nicely here. You talked in the prepared comments about the, you know, the still the under the significantly underutilized capacity you have as far as recommissioning centers, but as the business continues to ramp, are there other expenses, you know, from a labor standpoint or elsewhere? They're, they're going to come in to support that growth.

Question: Brian Nagel - Oppenheimer & Co - Analyst : Well, thanks mark, that's very helpful. And then I guess the second question I have just with regard to the kind of the retail GPU again, you know, continues to climb nicely. But what are the, if you look at it, what are the sort of say the building blocks from here to drive it higher.

Question: Brian Nagel - Oppenheimer & Co - Analyst : I appreciate the color. Thank you.

Question: Rajat Gupta - JPMorgan - Analyst : Great. Thanks, for taking the question. I have a follow up question on the marketplace economics. You understand the accounting around the revenue reporting but just curious to, you know, is there, is the GPU, you know, the other GPU you know, like G&A unit, like how should we think about the different buckets of the economics for a marketplace sale versus the traditional retail sale. I know you mentioned like these are similar to auction source units. So in the past, I think you've said those are lower GPU than consumer source units. I'm just curious like how those trickle through, through the different line items. And you know, would you be like calling that out, you know, going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:30PM, CVNA.N - Q3 2024 Carvana Co Earnings Call I have a follow up then.

Question: Rajat Gupta - JPMorgan - Analyst : Got it, that's helpful. And just, you know, in terms of the impact this has on the standalone ADESA business. Is it essentially like using like just sourcing from those customers directly or the new customers. I know you've talked about parts in the past. I'm trying to understand like what this means for just the ADESA standalone EBITDA. I don't know, it's like pretty small in context of the overall EBITDA today but just curious like how that interplay would work, you know, between the supply base at ADESA which is what you're using for your marketplace business.

Question: Rajat Gupta - JPMorgan - Analyst : Got it. It makes complete sense. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:30PM, CVNA.N - Q3 2024 Carvana Co Earnings Call

Question: John Healy - Northcoast Research Partners - Analyst : Thank you. Ernie, I wanted to get your kind of thoughts, big picture. You know, obviously the growth this year has been amazing. The turnaround is, has been, you know, just even more amazing than the growth. But if you look at the growth rate of the business, like, what do you want to allow this business to grow? Because I feel like there's an interplay here, obviously, with the value you offer the consumer, how you source inventory, how much inventory you have. So like as you look at the model, you know, it is the growth rate like we saw this year, you know, can you replicate that in, you know, another year or two or do you look at it in terms of the amount of units you want to add kind of on a year over year basis? So I was just really hoping you could help us thinking about, you know, how you're going to govern growth in the business. And then ultimately, next year too, you know, just put your economist hat on and you know, let's just say interest rates are 100 basis points or, you know, lower year over year, next year. How much does that actually help the business? And a and your performance next year. Thanks.

Question: John Healy - Northcoast Research Partners - Analyst : Thank you guys.

Question: Nick Jones - Citizens JMP - Analyst : Great. Thanks for taking the questions. I guess I'd like to ask a bit more about the growth algorithm maybe a little bit differently. I mean, the average age of cars on the road is higher, the industry still isn't quite normalized. Carvana's gaining share, outperforming large competitors. I guess the question becomes if things do start normalizing and potentially the rapid pay, maybe as rates come down, is the business prepared to kind of handle the volume that could come? And then, you know, I guess that's the first question and the second question is, you know, you're going to do some advertising testing and seeing how you can, maybe drive growth further. I guess how, how much is the business potentially a coiled spring over the next few years to the extent that things normalize. And you've been able to perform quite well in a tough backdrop. Thanks.

Question: Nick Jones - Citizens JMP - Analyst : Thank you.