CARVANA CO. Q3 FY2024 earnings call

• The third quarter was exceptional with record net income, operating income, and adjusted EBITDA. Carvana broke the record for the most profitable quarter among automotive public retailers in a challenging industry.
• Key growth drivers include continuously improving the customer offering, increasing brand awareness with moderate advertising spend, and scaling inventory selection.
• Integrations with ADESA sites are going well, unlocking reconditioning capabilities, reducing shipping distances, and improving delivery times.
• Announced a thank you cash bonus to employees, impacting adjusted EBITDA by approximately $10 million in Q4.

In the third quarter, Carvana had record financial performance. Retail units sold totaled 108,651, an increase of 34%, and revenue was $3.655 billion, up 32%. Non-GAAP retail GPU was $3,617, an increase of $740 (sixth sequential quarter of a new company record). Non-GAAP wholesale GPU was $1,123, an increase of $172. Non-GAAP other GPU was $2,945, an increase of $377. Adjusted EBITDA was $429 million in Q3, an increase of $281 million, with an adjusted EBITDA margin of 11.7%, a new company record.

• Expect a sequential increase in the year-over-year growth rate of retail units sold in Q4.
• Adjusted EBITDA is significantly above the high end of the previously communicated range of $1.0 billion to $1.2 billion for the full year 2024.

• Seasonality in used car demand, with Q4 typically having lower demand and higher depreciation rates affecting GPU.
• Dependence on successful execution of integrations and scaling of reconditioning centers and inventory.
• Uncertainty in the effectiveness of increased advertising spend and market response to it.

Q: Talk about the ADESA integration and same-day delivery.

A: Ernie Garcia said integrations with ADESA sites are going well, unlocking reconditioning capabilities in a capital-light way, and same-day delivery is a small fraction currently but growing with plans to expand across geographies.

Q: Thoughts on inventory selection and marketing?

A: Ernie Garcia mentioned starting to grow inventory and planning to invest in marketing in Q4 to leverage the opportunity.

Q: Details on the 3P marketplace?

A: Mark Jenkins said retail marketplace fee revenue mostly shows up in retail revenue, and the program is expected to grow in Q4, leveraging ADESA and reconditioning center efficiencies.