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Carvana — Presentation Nov 29, 2018 (company IR deck)
Carvana (CVNA) · 92 slides · Filed Oct 20, 2026
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Slide 1 — Welcome To Carvana’s Analyst Day
Welcome To Carvana’s Analyst Day
Slide 2 — 2
2 SAFE HARBOR FY 2017 YTD 2018 Long Term Target Forward -Looking Statements This presentation contains forward -looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 . These forward - looking statements reflect Carvana’s current expectations and projections with respect to, among other things, our financial conditio n, results of operations, plans, objectives, future performance, and business. These statements may be preceded by, followed by or include the words "aim," "a nti cipate," "believe," "estimate," "expect," "forecast," "intend," "likely," "outlook," "plan," "potential," "project," "projection," "seek," "can," "could," "m ay, " "should," "would," "will," the negatives thereof and other words and terms of similar meaning.Forward -looking statements include all statements that are not historical facts. Such forward -looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from tho se indicated in these statements. Among these factors are risks related to the “Risk Factors” identified in the Carvana’s Annual Report on Form 10 -K for 2017 and Quarterly Report on Form 10 - Q for Q3 2018.There is no assurance that any forward -looking statements will materialize. You are cautioned not to place undue reliance on for ward -looking statements, which reflect expectations only as of this date. Carvana does not undertake any obligation to publicly update or review any forward - lo oking statement, whether as a result of new information, future developments, or otherwise. Market and Industry DataThis presentation includes information concerning economic conditions, the Company’s industry, the Company’s markets and the Com pany’s competitive position that is based on a variety of sources, including information from independent industry analysts and publications, as we ll as Carvana’s own estimates and research. Carvana’s estimates are derived from publicly available information released by third party sources, as well as dat a f rom its internal research, and are based on such data and the Company’s knowledge of its industry, which the Company believes to be reasonable. The independent ind ustry publications used in this presentation were not prepared on the Company’s behalf. While the Company is not aware of any misstatements regarding an y i nformation in this presentation, forecasts, assumptions, expectations, beliefs, estimates and projects involve risk and uncertainties and are su bje ct to change based on various factors.
Slide 3 — INTRO TO ANALYST DAYErnie Garcia, CEO
INTRO TO ANALYST DAYErnie Garcia, CEO
Slide 4 — RETAIL UNITS SOLD
4 WHERE WERE WE AT IPO? RETAIL UNITS SOLD TOTAL GROSS PROFIT PER UNIT EBITDA MARGIN
Slide 5 — (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018.
5 WHERE ARE WE NOW? RETAIL UNITS SOLD TOTAL GROSS PROFIT PER UNIT EBITDA MARGIN (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018. (1) (1)
Slide 6 — 6
6 CARVANA ANALYST DAY 2018 Dan GillChief Product Officer Mark JenkinsChief Financial Officer Ernie GarciaChief Executive Officer
Slide 7 — 7
7 CARVANA ANALYST DAY 2018 WE ALWAYS START WITH THE CUSTOMER WE HAVE THE OPPORTUNITY TO BUILD AN ENORMOUS & VERY PROFITABLE BUSINESS WE ARE AN AMBITIOUS COMPANY WE HAVE GREAT PEOPLE TAKEAWAYS FROM THE DAY:
Slide 8 — LEADING WITH TECHNOLOGY Dan Gill, CPO
LEADING WITH TECHNOLOGY Dan Gill, CPO
Slide 9 — 9
9 STANDING OUT IN RETAIL Experience Selection Value
Slide 10 — 10
10 OEM compliance hurdles DIFFERENTIATION IN AUTO RETAIL IS HARD The same: means the same experience, selection, and value. labor/cost structure vehicle sources merchandising/fulfillment 3rd party software/systems 3 rd party lending
Slide 11 — All of these capabilities are unlocked and scaled via technology
11 Integrated Lending Self - service E - Commerce Proprietary, Vertically Integrated Tech Data Driven THE NEW WAY TO BUY AND SELL A CAR All of these capabilities are unlocked and scaled via technology Centralized InventoryNationwide Logistics Real Estate LightFree Delivery/Pick - up Makes it possible to have the Best Experience, Best Selection, and Best Value simultaneously .Customer Obsession
Slide 12 — competitors may attempt to copy products, it's difficult for them to copy
12 BEST EXPERIENCE Creating the right experiences, and then integrating around them to solve a job, is critical for competitive advantage. That's because while competitors may attempt to copy products, it's difficult for them to copy experiences that are well integrated into your company's processes. Clayton Christensen Competing Against Luck (2018)
Slide 13 — 13
13 TRANSPARENCY & SIMPLICITYBest Experience means: •Intuitive, transparent, simple, fast, self - service tools
Slide 14 — 14
14 SURPRISE AND DELIGHTBest Experience means: •Intuitive, transparent, simple, fast, self - service tools •Shareable moments that inspire people to tell their friends
Slide 15 — 15
15 ENABLING EXCEPTIONAL SERVICEBest Experience means: •Intuitive, transparent, simple, fast, self - service tools •Shareable moments that inspire people to tell their friends • No -pressure driveway deliveries where we can sell cars, without being car salesmen
Slide 16 — • BEST EXPERIENCE
16 • BEST EXPERIENCE
Slide 17 — • BEST EXPERIENCE
17 • BEST EXPERIENCE
Slide 18 — 18
18 BEST SELECTIONWhat was the reason you purchased a car at a dealership and not Carvana ? I did not understand what Carvana does I did not find the car I was looking for I was not happy with my f inancing terms I was not happy with my trade - in value I am not comfortable buying a car online
Slide 19 — • 14,000+ cars to choose from, available
19 TECH -ENABLED NATIONWIDE LOGISTICS Best Selection means: • 14,000+ cars to choose from, available in a timely, predictable manner. Days, not weeks. Inventory available on-site as of November 26, 2018.
Slide 20 — • 14,000+ cars to choose from, available in
20 LOW RISK FOR CUSTOMER Best Selection means: • 14,000+ cars to choose from, available in a timely, predictable manner. Days, not weeks. • Brought to you, protected by a 7 day test-own, and no penalties or restocking fees. Inventory available on-site as of November 26, 2018.
Slide 21 — easy to compare.
21 FINDING THE IDEAL CAR Best Selection means: • 14,000+ cars to choose from, available in a timely, predictable manner. Days, not weeks. • Brought to you, protected by a 7 day test-own, and no penalties or restocking fees • Accurately described and easy to compare. Inventory available on-site as of November 26, 2018.
Slide 22 — 22
22 THE SPEARFISHERMAN
Slide 23 — 23
23 REAL -TIME PERSONALIZATION
Slide 24 — 24
24 BEST VALUE Purchasing Car buyer (often in - lane) Automated, Centralized Machine learning, Algo decisioning Transport Third - party First - party Algorithmic decisioning, Vertical integration Reconditioning Service Department Centralized 12 software systems, Owned & licensed Photography Sales Consultant Centralized Patented studio, Proprietary processing Merchandising Sales Consultant Automated, Centralized Full stack ecommerce Vehicle Journey Dealership Carvana Enabling Technology Marketing Advertising/Marketing Mgr Automated, Centralized Machine learning, Proprietary attribution Vehicle Discovery Sales Consultant Self -service, Centralized Full stack ecommerce Customer Service Sales Consultant Self -service, Centralized A.I., Custom systems for Advocates Financing F&I Director/Producer Self -service, Centralized Full stack finance platform Ancillary Products F&I Director/Producer Self -service, Centralized Proprietary systems and integrated finance Trade - ins Car Buyer Self -service, Centralized 97% automated, ML - driven Vehicle Delivery Sales Consultant Vehicle Transporter/Delivery Adv. Algorithmic decisioning , vertical integration Title & Registration Clerical Staff: AP/AR/Title Automated, Centralized Automation, Custom tooling Dealership Carvana Enabling Technology Customer Journey S elf -service transactions, and centralization of labor means our variable cost structure can be significantly lower at scale. While integrated financing and ancillary products create significant gross profit opportunities.
Slide 25 — costs via self-service tooling,
25 AI -POWERED SERVICE Best Value means: • Intense focus on reducing variable costs via self-service tooling, automation, and data obsession
Slide 26 — costs via self-service tooling,
26 OPEN 24/7 Best Value means: • Intense focus on reducing variable costs via self-service tooling, automation, and data obsession • Vertically integrated financing and ancillary products to generate incremental GPU
Slide 27 — via self-service tooling, automation, and
27 TECH ENABLED CUSTOMER ACQUISITION Best Value means: • Intense focus on reducing variable costs via self-service tooling, automation, and data obsession • Vertically integrated financing and ancillary products to generate incremental GPU • Scalable customer acquisition via a national brand and Online 2 Online capabilities
Slide 28 — via self-service tooling, automation, and
28 TECH ENABLED CUSTOMER ACQUISITION Best Value means: • Intense focus on reducing variable costs via self-service tooling, automation, and data obsession • Vertically integrated financing and ancillary products to generate incremental GPU • Scalable customer acquisition via a national brand and Online 2 Online capabilities
Slide 29 — via self-service tooling, automation, and
29 TECH ENABLED CUSTOMER ACQUISITION Best Value means: • Intense focus on reducing variable costs via self-service tooling, automation, and data obsession • Vertically integrated financing and ancillary products to generate incremental GPU • Scalable customer acquisition via a national brand and Online 2 Online capabilities
Slide 30 — via self-service tooling, automation, and
30 TECH ENABLED CUSTOMER ACQUISITION Best Value means: • Intense focus on reducing variable costs via self-service tooling, automation, and data obsession • Vertically integrated financing and ancillary products to generate incremental GPU • Scalable customer acquisition via a national brand and Online 2 Online capabilities • The sum is that we are able to share some of our structural advantages with our customers in the form of lower prices, while still expecting to reach our profit targets
Slide 31 — 31
31 • 32+ Technology Teams, each with defined missions, systems ownership, isolated KPIs, and resources needed to autonomously pursue their goals • 11 former Founder/CEOs • All mildly embarrassed by the current state of things with a roadmap many years long... EXPERIENCED, ENTREPRENEURIAL TEAMS
Slide 32 — LONG
LONG - TERM MODELMark Jenkins, CFO
Slide 33 — 33
33 QUESTIONQ: Does Carvana want to be the largest automotive retailer or the most profitable? A: Both. E - Commerce New Opportunities
Slide 34 — 34
34 GOALS FOR TODAY Long -term total GPU goals • Deep dive on buying from customers • Deep dive on financing opportunities • Other opportunities Long -term cost structure goals •Key drivers for compensation & benefits, advertising, logistics & market occupancy, and other SG&A Long - term financial goals • Combine long -term total GPU and cost structure into EBITDA margin goals
Slide 35 — 35
35 LONG -TERM GPU GOALS 1. Buying cars from customers 2. Financing opportunities 3. Other GPU opportunities
Slide 36 — 36
36 A BETTER WAY TO SELL A CAR SimpleCustomer inputs license plate or VIN and answers a few questionsAutomatedOur artificial intelligence algorithms determine offer for the customer in real - time ConvenientWe pick up the car the car using our last -mile delivery network Data - DrivenOur vehicle data and valuation technology enable strong profit per unit
Slide 37 — Acquisition Channels
37 BUYING CARS FROM CUSTOMERS Trade - InsVehicles acquired from customers as part of a retail transactionSell to CarvanaVehicles acquired from customers without a retail transaction Retail SalesVehicles that meet our retail parameters are reconditioned and sold on the websiteWholesale SalesVehicles that do not meet our retail parameters are sold at wholesale auctions Acquisition Channels Disposition Channels Both retail and wholesale sales channels present significant GPU opportunities
Slide 38 — 38 – 52%
38 RETAIL SOURCING Used Industry Leader 38 – 52% of Retail Units Sourced from Customers Profit per Unit Goal $500 – 1,000 vs. auction -sourced vehicles Total GPU Contribution Goal $200 – 500 vs. sourcing vehicles exclusively from wholesale auctions
Slide 39 — 55 – 65%
39 WHOLESALE SALES Used Industry Leader 55 – 65% Ratio of Wholesale Units to Retail Units Profit per Unit Goal $500 – 1,000 per wholesale unit sold Total GPU Contribution Goal $250 – 650 per retail unit sold
Slide 40 — Website testing and optimization
40 GROWTH DRIVERS Increased customer awareness Scalable technology and processes Vehicle data and bidding optimization Website testing and optimization Disposition process optimization
Slide 41 — 41
41 LONG -TERM GPU GOALS 1. Buying cars from customers 2. Financing opportunities 3. Other GPU opportunities
Slide 42 — 1. Dealers
42 1. Dealers • Acquire the customer; ensure vehicle quality; collect loan information and documentation for lenders 2. Lenders (Banks, Credit Unions, Finance Companies) • Underwrite the loan with credit scoring, pricing, and verifications algorithms; service the loan; arrange funding by investors 3. Investors (Banks, Credit Unions, Fixed Income Investors) • Hold loan instruments to earn a risk-adjusted fixed income return THREE PRIMARY PLAYERS
Slide 43 — Lender
43 INDIRECT MODEL (MOST DEALERS) Dealer Lender Lender Lender Investor Investor Investor Lender Investor This diagram is an illustrative simplification. In some cases, lenders may also play the role of investors by holding their loans until maturity, as is often the case with banks and credit unions. In other cases, lenders may retain a portion of the loans they sell to investors, also making them partial investors themselves.
Slide 44 — Lender
44 HYBRID MODEL (CARMAX) Dealer In-House Lender Lender Lender Investor Investor Investor Investor This diagram is an illustrative simplification. In some cases, lenders may also play the role of investors by holding their loans until maturity, as is often the case with banks and credit unions. In other cases, lenders, including a captive lender, may retain a portion of the loans they sell to investors, also making them partial investors themselves.
Slide 45 — Vertically-Integrated Dealer
45 VERTICALLY -INTEGRATED MODEL (CARVANA) Vertically-Integrated Dealer and Lending Platform Investor Investor Investor Investor This diagram is an illustrative simplification. In some cases, a vertically-integrated dealer-lender may also play the role of investor by retaining a portion of the loans they sell to investors.
Slide 46 — 46
46 A BETTER WAY TO FINANCE A CAR SimpleCustomer fills out a short application form o n our websiteAutomatedWe leverage state - of - the -art data and artificial intelligence algorithmsTransparentCustomer views terms on every vehicle in inventory nearly instantaneously
Slide 47 — Lower Costs
47 FINANCING BENEFITS OF VERTICAL INTEGRATION No Dealer Management CostsVertical integration reduces sales and management overhead costsAutomation of Underwriting TasksSingle technology platform and process facilitates automation Certified Vehicle Quality150 -point inspection and 100 -day warranty provide certainty about the vehicleControlled EnvironmentSingle lender reduces adverse selection and facilitates pricing optimization Longer -Term Commitments Longer -term commitments vs. loan - by - loan underwriting increases flexibility Lower Costs Better Loans
Slide 48 — Lower retail prices Lower loan-to-value ratios (LTV)
48 FINANCING BENEFITS OF THE ONLINE RETAIL MODEL Lower retail prices Lower monthly payments Lower retail prices Lower loan-to-value ratios (LTV) Lower monthly payments + Lower LTVs Better Performance
Slide 49 — 49
49 BETTER MODEL BETTER PERFORMANCE Securitization Market Transactions Carvana Each black dot in the chart represents an automotive securitization market transaction completed in 2018. The black line is a best-fit line of the individual transactions in the chart. The blue line represents the historical and current best estimates of future performance for all loans originated on Carvana’s website.
Slide 50 — Long-term goal:
50 FUNDING COST VS SEASONED ISSUERS Both seasoned issuer cost of funds based on weighted average cost of debt from 2018 securitization transactions and estimated cost of equity from public filings. Spreads are over the applicable benchmark rate at the time of each deal. Carvana cost of funds based on internal best estimates of life-of-loan performance and actual realized premiums for loans sold in the nine months ending September 30, 2018, including financing monetization fee revenue. Estimated Funding Cost (spread over benchmark) Long-term goal: Reduce cost of funds by 175 to 250 bps
Slide 51 — Example impact of a 100 bps improvement in cost of funds:
51 EXAMPLE LOAN MATH Example impact of a 100 bps improvement in cost of funds: • Example loan size = $18,000 • Example weighted average life of loan = 2.3 years • Increase in loan value = 18,000 x 2.3 x 1.0% = $414/loan • Improvement in total GPU = $414/loan x 70-75% = $290-310/unit
Slide 52 — 52
52 LONG -TERM GPU GOALS 1. Buying cars from customers 2. Financing opportunities 3. Other GPU opportunities
Slide 53 — Reduce average days to sale
53 114 109 107 95 97 105 85 83 93 92 89 93 105 97 72 70 66 63 45 55 65 75 85 95 105 115 125ADDITIONAL GPU DRIVERS Reduce average days to sale Improve utilization of IRCs and logistics network Increase attachment of VSC and GAP products Add new ancillary products Quarterly Average Days to Sale
Slide 54 — (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018.
54 GPU OPPORTUNITY Increase conversion o f existing product s Addition of new products and services Key Drivers of GrossProfit Expansion Increase retail cars sourced from customers Reduce average days to sale Increase wholesale cars sold Lower cost of funds on financing Potential Impact:$1,250 - $2,550 $150 - $450 $100 - $200 $200 - $600 $100 - $200 $100 - $200+ Scale provides cost of sales efficiencies $100 - $200 $500 - $700 (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018. (1)
Slide 55 — We believe our online model has a lower long-term cost
55 LONG -TERM COST STRUCTURE We believe our online model has a lower long-term cost structure than the traditional brick-and-mortar model Customer self-service Automation Centralization Vertical integration Real estate efficiency Scale
Slide 56 — Long-term goal: 2.25 – 2.75% of revenue
56 COMPENSATION & BENEFITS Key Drivers Fulfillment & Customer Service (~4/5th in LT) Leverage in logistics and last-mile delivery network and automation of manual tasks Technology & Corporate (~1/5th in LT) Leverage technology investment and corporate overhead across more retail units sold Long-term goal: 2.25 – 2.75% of revenue (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018. YTD 2018 numbers are for the nine months ending September 30, 2018. (1) 10.2% 8.9% 6.5% FY 2016 FY 2017 YTD 2018 LONG- TERM 2.25 – 2.75%
Slide 57 — Long-term goal: 1.0 – 1.5% of revenue
57 ADVERTISING Key Drivers Leverage in existing markets AdEx per unit has historically declined in existing markets with accumulated awareness and word of mouth Lower AdEx per unit in new markets Newer market cohorts are launching with lower AdEx per unit than previous market cohorts Long-term goal: 1.0 – 1.5% of revenue Data as of 12/31/2017.
Slide 58 — Long-term goal: 1.0 – 1.5% of revenue
58 0 50 100 150 200 250 300 350 Long-term goal: 1.0 – 1.5% of revenue LOGISTICS & MARKET OCCUPANCY Simulation Time Key Drivers Average Distance Adding IRC’s over time reduces the distance between our cars and our customers Retail Utilization As new markets scale, utilization of the network increases Market Occupancy (~1/5th in LT) More units create leverage in existing markets as they scale Simulated Average Miles to Nearest IRC Simulated impact of adding more IRCs over time
Slide 59 — Long-term goal: 1.75 – 2.25% of revenue
59 9.4% 8.2% 6.4% FY 2016 FY 2017 YTD 2018 LONG- TERM OTHER SG&A Key Drivers Technology & Corporate (~1/2 in LT) Operating leverage in IT and software, non-market occupancy, professional services, and other general and admin expenses Transaction & Customer Benefits (~1/2 in LT) Efficiency gains through automation, in-sourcing, and process improvements Long-term goal: 1.75 – 2.25% of revenue (1) YTD 2018 numbers are for the nine months ending September 30, 2018. 1.75 – 2.25%
Slide 60 — (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018. YTD 2018 numbers are for the nine months ending September 30, 2018.
60 LONG TERM FINANCIAL GOALS FY 2017 YTD 2018 Long Term Target ( 16.9% ) 2 6.0 % 136 % 7.9 % 6.5 % 1 8.2 % 1.3 % ( 9.6 %) (1) 2 1.0 % ( 1) 131% 5.8 % 14.0 % (1) 1. 2 % YoY Revenue Growth SG&A Total as % of Revenue Gross Margin EBITDA Margin Advertising D&ASG&A exc. Advertising and D&A 6 – 8% 1.0 – 1.5% 4.5 – 5.5% 0.5 – 1.0% 8 – 1 3.5% 1 5 – 1 9 % 10. 3% (1) – (1) Excludes the CEO’s 100K Milestone Gift in Q3 2018. YTD 2018 numbers are for the nine months ending September 30, 2018.
Slide 61 — WHERE WE’RE HEADEDErnie Garcia, CEO
WHERE WE’RE HEADEDErnie Garcia, CEO
Slide 62 — Source: National Automobile Dealers Association for 2017; Figures may not sum due to rounding
62 MARKET SIZE Franchise Private Party Independent ~15m ~14m ~12m ~40m units Sold annually in U.S. Source: National Automobile Dealers Association for 2017; Figures may not sum due to rounding
Slide 63 — Source: IHS Markit Registrations, Experian
63 CUSTOMER DEMOGRAPHICS AREN’T LIMITING Carvana Used Market 781 to 850 300 to 500 661 to 780 601 to 660 501 to 600 CREDIT DISTRIBUTION CUSTOMER AGE DISTRIBUTION Carvana Used Vehicle Sales in the U.S. 18 - 24 75+ 25 - 34 35 - 44 45 - 54 55 - 64 65 - 74 Source: IHS Markit Registrations, Experian
Slide 64 — 64
64 SELLING A BROAD AND BROADENING MIX OF CARS 9 Total Retail Sales Customer Sourced Sales 0 1 2 3 4 5 6 7 8 DISTRIBUTION OF CARVANA SALES BY VEHICLE AGE 0 2 4 6 8 1 3 5 7 9 STAR RATINGS BY VEHICLE AGE 0 4 3 1 2 5
Slide 65 — Source: IHS Markit Registrations
65 WHERE DOES 40M UNITS COME FROM? ~270m Cars in the U.S. 40m used transactions a year = 6.75 YEARSbetween transactions Source: IHS Markit Registrations
Slide 66 — 66
66 Time betweenTransactions ( yrs ) Marke t Size Marke t Growth WHY DON’T PEOPLE SWITCH MORE OFTEN 6.75 YEARSbetween transactions 3 125% 90m 4 68 % 67m 5 3 5% 54m 6 12.5% 45m Cost frictionsExperience frictionsNegative equity
Slide 67 — $1,023B
67 $1,023B $692B $639B $545B $333B $326B $191B $97B $90B $83B $61B $56B Automobile dealers General merchandise stores Grocery stores Electronic shopping and mail-order houses Health and personal care stores Building mat. and supplies dealers Clothing stores Electronics and appliance stores Auto parts, accessories, and tire stores Sporting goods, hobby, music, and book stores Furniture stores Home furnishings stores 2017 Industry Sales in $Billions HOW BIG CAN WE BE? Automotive retail is thelargest consumer retail vertical Source: 2017 US Census Monthly Retail Trade Survey, Annual Retail Trade Survey, and administrative records. Includes ten largest 4 -digit NAICS codes plu s health and personal care stores and electronics and appliances stores. Other general merchandise stores and department stor es included together as general merchandise stores.
Slide 68 — 10%
68 2% 54% 18% 19% 25% 28% 14% 40% 11% 10% 10% 22% Automobile dealers General merchandise stores Grocery stores Electronic shopping and mail-order houses Health and personal care stores Building mat. and supplies dealers Clothing stores Electronics and appliance stores Auto parts, accessories, and tire stores Sporting goods, hobby, music, and book stores Furniture stores Home furnishings stores Market Share of Largest Firm HOW BIG CAN WE BE? Yet the largestPlayers are much smaller thanother industry leaders Source: 2017 US Census Monthly Retail Trade Survey, Annual Retail Trade Survey, and administrative records. Public company filings.
Slide 69 — Largest Player
69 31% 17% 7% 4% Largest Player #2 Player #3 Player #4 Player 12M 7M 3M 2M Largest Player #2 Player #3 Player #4 Player HOW BIG CAN WE BE? MARKET SHARE OF TOP 4 PLAYERS If auto had the same structure of other retail verticals, the largest player wouldsell 12M+ cars per year IMPLIED NUMBER OF USED CAR SALES Notes: Market share of Top 4 players includes 5 largest retail verticals, excluding electronic shopping and mail order houses. Implied number of used car sales assumes 40M total units sold per year.
Slide 70 — Data as of 12/31/2017.
70 SIMPLE GROWTH MODEL Market Penetration MARKET PENETRATION BY COHORT Open new marketsNew markets catching up to older marketsOlder markets continue to grow Data as of 12/31/2017.
Slide 71 — 71
71 DRIVERS OF MARKET SHARE GAINS INCREASING UNDERLYING DEMAND INCREASING CONVERSION OF DEMAND THAT IS ALREADY PRESENT
Slide 72 — 72
72 GROWTH IN UNDERLYING DEMAND Marketing, word of mouth, website communication, advocatesCustomer preference migrationGreat customer experience, word of mouth, advocates Marketing, word of mouth AWARENESS UNDERSTANDING OPEN MIND CREDIBILITY
Slide 73 — 73
73 SIGNIFICANT ROOM TO GROW TRAFFIC Atlanta Web Traffic 2013 2014 2015 2016 2017
Slide 74 — Source: Scaled player traffic based on US web traffic from competitive set of automotive listing sites and dealers in the US with an estimation for Atlanta specific traffic
74 SIGNIFICANT ROOM TO GROW TRAFFIC Atlanta Web Traffic 2013 2014 2015 2016 2017 3x - 6x Potential vs. Scaled Players Source: Scaled player traffic based on US web traffic from competitive set of automotive listing sites and dealers in the US with an estimation for Atlanta specific traffic
Slide 75 — 75
75 GROWTH THROUGH CONVERSION GAINS Increasing Inventory S ize Decreasing Delivery Times
Slide 76 — 76
76 Atlanta Market Share @ 90% Population CoverageCONVERSION GROWTH THROUGH EXECUTION x x 540k sales means more inventory on site @ 540k sales requires more IRC’s ÷ Per IRC / Per Year 11IRC’s Cars Are Closer To Customers Faster Delivery Times 1.54 % ATL Q4 2017Market Share 40 m Annual U.S. Sales 90 % Pop. Coverage 540 k Sales/Year 540 k Sales/Year 45 day Turn time 30 days On Site 45 k cars onCarvana.com 540 k Sales/Year 50 k Units IRC’s 11
Slide 77 — 77
77 CONVERSION GROWTH THROUGH EXECUTION What does 5.5x more cars onsite and shorter delivery times do to market share? Inventory: IRC’s : Q4 2017 8 k 3 Extrapolation 45 k 11 Change 5.5 x+8
Slide 78 — 78
78 POWERFUL NETWORK EFFORTS SHORTERDELIVERY TIMES MORE SALES MOREINVENTORY MOREIRC’S CARS CLOSER TO CUSTOMERS
Slide 79 — Largest Player
79 HOW BIG CAN WE BE? $1,023B $692B $639B $545B $333B $326B $191B $97B $90B $83B $61B $56B Automobile dealers General merchandise stores Grocery stores Electronic shopping and mail-order houses Health and personal care stores Building mat. and supplies dealers Clothing stores Electronics and appliance stores Auto parts, accessories, and tire stores Sporting goods, hobby, music, and book stores Furniture stores Home furnishings stores 2017 Industry Sales in $Billions 2% 54% 18% 19% 25% 28% 14% 40% 11% 10% 10% 22% Automobile dealers General merchandise stores Grocery stores Electronic shopping and mail-order houses Health and personal care stores Building mat. and supplies dealers Clothing stores Electronics and appliance stores Auto parts, accessories, and tire stores Sporting goods, hobby, music, and book stores Furniture stores Home furnishings stores Market Share of Largest Firm Atlanta Web Traffic 2013 2014 2015 2016 2017 3x - 6x Potential vs. Scaled Players 31% 17% 7% 4% Largest Player #2 Player #3 Player #4 Player 12M 7M 3M 2M Largest Player #2 Player #3 Player #4 Player Source s cited in preceding pages
Slide 80 — 80
80 2+ million Units per year
Slide 81 — TOTAL NUMBER OF DEALER VEHICLES FOR SALE IN CARVANA’S AVERAGE MARKET
81 TOTAL NUMBER OF DEALER VEHICLES FOR SALE IN CARVANA’S AVERAGE MARKET ESTIMATED CARVANA INVENTORY BY MILES AWAY FROM AVERAGE CUSTOMER
Slide 82 — TOTAL NUMBER OF DEALER VEHICLES FOR SALE IN CARVANA’S AVERAGE MARKET
82 TOTAL NUMBER OF DEALER VEHICLES FOR SALE IN CARVANA’S AVERAGE MARKET ESTIMATED CARVANA INVENTORY BY MILES AWAY FROM AVERAGE CUSTOMER
Slide 83 — DISTANCE TO THE NEAREST IRC FOR AVERAGE CARVANA CUSTOMER
83 DISTANCE TO THE NEAREST IRC FOR AVERAGE CARVANA CUSTOMER DISTANCE TO THE AVERAGE IRC FOR AVERAGE CARVANA CUSTOMER
Slide 84 — DISTANCE TO THE NEAREST IRC FOR AVERAGE CARVANA CUSTOMER
84 DISTANCE TO THE NEAREST IRC FOR AVERAGE CARVANA CUSTOMER DISTANCE TO THE AVERAGE IRC FOR AVERAGE CARVANA CUSTOMER
Slide 85 — 85
85 OUR MISSION IS TO CHANGE THE WAY PEOPLE BUY CARS. 5 5
Slide 86 — APPENDIX
APPENDIX
Slide 87 — 87
87 NON -GAAP MEASURES FY 2017 YTD 2018 Long Term Target This presentation contains financial measures which are not recognized under U.S. Generally Accepted Accounting Principles (“ GAA P”) — Gross Profit ex - Gift and Gross Profit per Unit ex -Gift; Gross Margin ex -Gift; and EBITDA ex -Gift and EBITDA Margin ex -Gift. These are described below . None of these should be considered as a substitute for other measures of financial performance reported in accordance with GAAP. In addition, the Com pan y’s definitions of these non - GAAP financial measures may not be comparable to similarly titled measures of other companies. A reconciliation of each of th ese non -GAAP measures to the most directly comparable GAAP financial measure can be found at the end of this presentation.Gross Profit ex -Gift and Gross Profit per Unit ex - Gift Gross Profit ex -Gift and Gross Profit per Unit ex - Gift are non -GAAP supplemental measures of operating performance that do not r epresent and should not be considered an alternative to gross profit, as determined by GAAP. Gross Profit ex -Gift is defined as gross profit before compens ation expense related to the 100k Milestone Gift included in cost of sales. Gross Profit per Unit ex -Gift is Gross Profit ex -Gift divided by units sold. We u se Gross Profit ex -Gift to measure the operating performance of our business and Gross Profit per Unit ex -Gift to measure our operating performance relative to our units sold. Carvana believes that Gross Profit ex -Gift and Gross Profit per Unit ex -Gift are useful measures to investors because they exclu de the expense associated with the 100k Milestone Gift recognized in cost of sales. We expect the 100k Milestone Gift to be a one -time award program for which we will recognize varying amounts of expense through the first half of 2020, and therefore believe the related expense does not reflect our core operat ion s, is not included in our past operations, and may not be indicative of our future operations. Additionally, the shares issued to settle the 100k Milestone Gif t are offset by share contributions from Mr. Garcia to Carvana, therefore we expect the impact on shares outstanding to be zero. We believe that excluding it ena ble s us to more effectively evaluate our performance period - over -period and relative to our competitors. Gross Profit ex -Gift and Gross Profit per Unit ex -Gift have limitations as an analytical tool and you should not consider these measures either in isolation or as a substitute for gross profit and gross profit per unit or other methods of analyzing the Company’s results as reported under G AAP .
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88 NON -GAAP MEASURES FY 2017 YTD 2018 Long Term Target Gross Margin ex - Gift Gross Margin ex - Gift is a non -GAAP supplemental measures of operating performance that does not represent and should not be cons idered an alternative to gross margin, as determined by GAAP. Gross Margin ex -Gift is defined as gross margin before compensation expense related to the 100k Milestone Gift included in cost of sales. We use Gross Margin ex -Gift to measure the operating performance of our business relative to our tota l revenues. Carvana believes that Gross Margin ex -Gift is a useful measures to investors because they exclude the expense associated with th e 100k Milestone Gift recognized in cost of sales. We expect the 100k Milestone Gift to be a one -time award program for which we will recognize varyin g amounts of expense through the first half of 2020, and therefore believe the related expense does not reflect our core operations, is not included in ou r p ast operations, and may not be indicative of our future operations. Additionally, the shares issued to settle the 100k Milestone Gift are offset by share co ntr ibutions from Mr. Garcia to Carvana, therefore we expect the impact on shares outstanding to be zero. We believe that excluding it enables us to more effectively eva luate our performance period - over -period and relative to our competitors. Gross Margin ex -Gift has limitations as an analytical tool and you should not consider this measure either in isolation or as a substitute for gross margin or other methods of analyzing the Company’s results as reported under GAAP.
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89 NON -GAAP MEASURES FY 2017 YTD 2018 Long Term Target EBITDA ex -Gift and EBITDA Margin ex - Gift EBITDA ex -Gift and EBITDA Margin ex - Gift are non -GAAP supplemental measures of operating performance that do not represent and s hould not be considered an alternative to net loss or cash flow from operations, as determined by GAAP. EBITDA ex -Gift is defined as net loss before interest expense, income tax expense, depreciation and amortization expense, and the expense related to the 100k Milestone Gift. EBITDA Margin ex -Gift is EBITDA ex - Gift as a percentage of total revenues. We use EBITDA ex -Gift to measure the operating performance of our business and EBITDA Margin ex - Gi ft to measure our operating performance relative to our total revenues. Carvana believes that EBITDA ex -Gift and EBITDA Margin ex -Gift provide useful information to investors about the Company and its financial condition and results of operations for the following reasons: ( i) EBITDA is among the measures used by the Company’s management team to evaluate its financial and operating performance and make day - to -day financial and operating decisions; (ii) EBITDA is frequently used by securities analys ts, investors and other interested parties as common performance measures to compare results or estimate valuations across companies in the Company’s in dustry, and (iii) they exclude certain financial and capital structure items and the expense associated with the 100k Milestone Gift, that we do not be lieve directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within ou r industry independent of the performance of our core operations. In particular, we expect the 100k Milestone Gift to be a one -time award program for which we will recognize varying amounts of expense through the first half of 2020, and therefore we believe the related expense does not reflect our core ope rat ions, is not included in our past operations, and may not be indicative of our future operations. Additionally, the shares issued to settle the 100k Milestone Gif t are offset by share contributions from Mr. Garcia to the Company, therefore we expect the impact on shares outstanding to be zero. We believe that excluding th ese items enables us to more effectively evaluate our performance period - over -period and relative to our competitors. EBITDA ex -Gift and EBITDA Margin ex -Gift have limitations as an analytical tool, and you should not consider either measure in i solation or as a substitute for gross margin or other methods of analyzing the Company’s results as reported under GAAP.
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90 EBITDA RECONCILIATION Net Loss EBITDA ex - Gift Interest Expense D&A Total Revenues Net Loss MarginEBITDA Margin ex - Gift 2015 ($36,780) ($32,568) $1,412 $2,800 $130,392 (28.2%) (25.0%) 2016 ($93,112) ($84,867) $3,587 $4,658 $365,148 (25.5%) (23.2%) 2017 ($164,316) ($145,089) $7,659 $11,568 $858,870 (19.1%) (16.9%) Q2 2018 ($51,250) ($41,828) $4,165 $5,257 $475,286 (10.8%) (8.8%) 2014 ($15,238) ($13,424) $108 $1,706 $41,679 (36.6%) (32.2%) Q1 2018 ($52,672) ($44,526) $3,541 $4,605 $360,422 (14.6%) (12.4%) Q3 2018 ($64,419) ($44,570) $5,649 $6,439 $534,921 (12.0%) (8.3%) 100k Milestone Gift $7,761
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91 Non -GAAP Financial Reconciliation
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92 Non -GAAP Financial Reconciliation