Introduction to Carvana - May 2020 - Investor Relations | Carvana
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Introduction to
Carvana
May 2020
SAFE HARBOR
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
condition, results of operations, plans, objectives, future performance, and business. These statements may be preceded by, followed by or
include the words "aim," "anticipate," "believe," "estimate," "expect," "forecast," "intend," "likely," "outlook," "plan," "potential," "project,"
"projection," "seek," "can," "could," "may," "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
those indicated in these statements. Among these factors are risks related to the “Risk Factors” identified in Carvana’s Annual Report on
Form 10-K for 2019 and our Quarterly Report on Form 10-Q for Q1 2020.
There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking
statements, which reflect expectations only as of this date. Carvana does not undertake any obligation to publicly update or review any
forward-looking statement, whether as a result of new information, future developments, or otherwise.
Market and Industry Data
This presentation includes information concerning economic conditions, the Company’s industry, the Company’s markets and the Company’s
competitive position that is based on a variety of sources, including information from independent industry analysts and publications, as well
as Carvana’s own estimates and research. Carvana’s estimates are derived from publicly available information released by third party
sources, as well as data from 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 industry publications used in this presentation were not prepared on the Company’s
behalf. While the Company is not aware of any misstatements regarding any information in this presentation, forecasts, assumptions,
expectations, beliefs, estimates and projects involve risk and uncertainties and are subject to change based on various factors.
2
OUR MISSION IS
TO CHANGE THE WAY
PEOPLE BUY CARS.
5 5 3
KEY OPERATING METRICS
SUCCESSFUL EXECUTION
72% YoY
89% YoY
TOTAL MARKETS Growth RETAIL UNITS Growth
GROSS PROFIT
AT YEAR END SOLD PER UNIT
CAR VENDING TOTAL NET LOSS AND
MACHINES 53% YoY REVENUE ($M) 101% YoY EBITDA MARGIN
Growth
Growth
4
( (*) GPU: 2018, 2019, and Q1 2020 include a $43, $31, and $10 impact from the 100K Milestone Gift, respectively ; EBITDA MARGIN: 2018, 2019, and Q1 2020 include a 0.6%, 0.4%, and 0.0% impact from the 100K Milestone Gift, respectively
KEY INVESTMENT HIGHLIGHTS
MASSIVE, FRAGMENTED MARKET
Exceptionally large and inefficient used car market
SUPERIOR CUSTOMER EXPERIENCE
Simple, seamless and differentiated used car buying experience
PROVEN GO-TO-MARKET STRATEGY
Demonstrated, capital-light market expansion playbook
VERTICAL INTEGRATION & FULFILLMENT
Purpose-built vertically integrated platform
ROBUST FINANCIAL MODEL
Robust financial model supports growth and margin expansion
5
MASSIVE, FRAGMENTED MARKET
INDUSTRY OVERVIEW
Auto is… Massive Fragmented & Ripe for Disruption
43,000+
Used Car
Dealerships (7)
$1.0 Tn $764 Bn 1.8% 81%
in 2018 U.S. Sales (1) in 2017 U.S. Used Car Sales (2) U.S. Market Share of Consumers Do Not Enjoy
Largest Dealer Brand (2) the Car Buying Process (5)
20%
of U.S. Retail Economy (1)
2.0%
2017 – 2022 CAGR (3)
8.6%
Aggregate Market Share of
8%
Consumers Rated Car Salespeople
Top 100 Used Auto Retailers (4) Highly Trustworthy (6)
(1) NADA Data 2018 report (2) Edmunds.com 2018 Used Vehicle Market report and Publicly-listed dealership filings (3) Technavio 2017 U.S. Used Car Market report
(4) Publicly-listed dealership filings and Automotive News Top 100 Dealership Groups (5) DealerSocket 2016 Independent Dealership Action report – Represents North American consumers (6) 2015 Gallup Poll (7) Borrell Associates 6
MASSIVE, FRAGMENTED MARKET
DIGITAL ECONOMY IS
TRANSFORMING CAR BUYING
% % %
of customer would consider test drive
purchases purchasing only one
involve online a car online (2) vehicle (3)
research (1)
(1) Capgemini 2014 Cars Online report (2) Accenture 2015 Automotive Digital Survey (3) AutoTrader 2016 Car Buyer Journey report 7
SUPERIOR CUSTOMER EXPERIENCE
CARVANA'S VISION IS FOCUSED
ON PROVIDING OUR CUSTOMERS WITH:
Best
Experience Best
10 minutes – time in Value
which purchase can be $1k+ in average savings
completed after vehicle per vehicle compared
selection to traditional dealers
As soon as Next Day
car deliveries in select
markets
Best
Selection
33,500+
cars available
Note: 33,500+ vehicles available are as of March 31, 2020; $1k+ in average savings per vehicle vs. traditional dealers for full year 2019 8
SUPERIOR CUSTOMER EXPERIENCE
A SIMPLE AND SEAMLESS
CAR BUYING EXPERIENCE
Vehicle Search &
Discovery From Any
Device
Intuitive vehicle search with
33,500+ vehicles available
online
Trade or Sell – All
Online
Nearly instantaneous, firm, fully
automated trade-in offers
Real-Time,
Personalized Financing
Majority of customers have
chosen to finance with Carvana
Seamless Transaction
Technology
Buy a car without
leaving your device
Note: 33,500+ vehicles available as of March 31, 2020
9
SUPERIOR CUSTOMER EXPERIENCE
A BETTER WAY TO SELL A CAR
SIMPLE AUTOMATED
Three step process: Our artificial intelligence
algorithms determine a real-
1. Input license plate or VIN time offer for the customer
2. Enter vehicle details, and No Haggling
3. Answers a few questions Guaranteed for 7 days or
1,000 miles
Annual Wholesale Gross Profit
CONVENIENT DATA-DRIVEN per Wholesale Unit
You schedule at time that’s Our vehicle data and
convenient for you valuation technology enables
strong gross profit per unit
We pick up the car using our
last-mile delivery network $422 Wholesale GPU *
We’ll review and hand you a 231% y-o-y growth in vehicles
check on the spot acquired from customers *
* For the year ended December 31, 2019 10SUPERIOR CUSTOMER EXPERIENCE
CREATING DIFFERENTIATED
FULFILLMENT EXPERIENCES
Carvana Delivery
• Scheduled appointments with
delivery as soon as the next day
in our markets
• Delivered by Carvana-uniformed
employee in a branded, custom
single or two car hauler, in our
markets
Vending Machine
• Operational efficiencies combined
with strong branding
• 24 vending machines currently operational (1)
• 2x+ growth in Nashville market penetration
within two quarters after vending machine
launch
• Creates a unique video of the experience for
customers to share via social media
(1) As of May 6, 2020 11SUPERIOR CUSTOMER EXPERIENCE
DELIVERING SUPERIOR
CUSTOMER EXPERIENCES
4.7 53,000+ 96% 82
Customer Reviews Would Recommend Net Promoter Score
Rating (1)
on Carvana.com (1) To A Friend (2) (NPS) (3)
“ ” “ ”“ ”
Carvana will I never
change the Carvana thought car
way cars are is the bomb! buying could
sold. be enjoyable.
(1) As of March 31, 2020 (2) Through March 31, 2020, based on respondents to the question (3) Survey performed by Bazaarvoice through March 31, 2020 12GROWING UNITS & REVENUE
PROVEN EXPANSION STRATEGY
Repeatable Market Entry Enabling Rapid Expansion of Proven by Success in Our
Playbook Operating Markets Markets
Carvana Markets at End of Period MARKET PENETRATION BY COHORT (1)
2.09%
Activate Team of 161
Expansion Advocates
146 146
137
EST. MARKET PENETRATION
CapEx Light 109 1.47%
Market Launch
85
78
65 0.98%
Connect to 56
Logistics Network 44 0.56%
39 0.46% 0.67%
30
0.35%
21 23
14 16
11
Turn on Marketing 1 2 3 3 4 5 5
9
Program
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 20
(1) As of December 31, 2019 13VERTICAL INTEGRATION & FULFILLMENT
SUPPORTED BY PROPRIETARY VEHICLE
ACQUISITION ALGORITHM
Auctions Off-Lease Customer
Off-Rental Vehicles
Vehicle Inventory Acquisition
33,500+ Online cars available in all
Auctions & • Manheim, Adesa, Smart Auction
• Enterprise, Hertz markets vs. 11-100 at typical dealers (1)
Other Sources • Customers
Quality • Year, Mileage, No Reported Accidents
Screening
• Vehicle reporting
Apply Data • Market data
• Carvana data (clickstream, historical sales)
• Expected pricing, recon, and transport
Optimization • Fit with existing inventory
(1) 2016 NIADA Used Car Industry report based on 2015 data
Note: 33,500+ vehicles available as of March 31, 2020 14VERTICAL INTEGRATION & FULFILLMENT
IN-HOUSE INSPECTION,
RECONDITIONING & MERCHANDIZING
Inspection and Reconditioning Photography and Annotation
• Ability to buy all car types and recondition • 360-degree, interactive exterior and
them to a consistent car quality interior virtual tour of each vehicle
• Over 400k existing annual IRC capacity at full utilization* • Patented imaging technology
• Transparency to the customer through
• Robust processes and internal expertise annotation of material defects
to set up future IRCs as needed
*Based on 8 IRCs in operation as of May 6, 2020 15VERTICAL INTEGRATION & FULFILLMENT
BACKED BY IN-HOUSE LOGISTICS NETWORK
Premium
Fulfillment
Capabilities
Control over delivery
times enables seamless
customer experience
Speed of delivery
drives conversion
Centralized
Carvana inventory powers
broad selection
Logistics
Network Enables vehicle
• Inspection & reconditioning centers cost arbitrage
• Hubs across geographies
• Vending machines
Connected through the hub-and-spoke
Carvana Logistics Network Lower cost than using
third party shipping
Note: As of May 6, 2020. 16GROWING UNITS & REVENUE
RAPID SECULAR GROWTH
$3,940
Revenues Retail Units
($M) Sold 177,549
$1,955
94,108
$859
44,252
$365 18,761
$130 6,523
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
15 15 15 15 16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 20 15 15 15 15 16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 20
17EXPANDING GPU & OPERATING MARGINS
GROWTH LEVERAGING UNIT ECONOMICS
Gross Profit Key Drivers of Gross
per Unit Profit Expansion
Reduce average days to sale
Scale provides cost of sales
efficiencies
Increase retail cars sourced CarMax, Inc.
Gross Profit
from customers
Increase wholesale cars sold
per Unit
Increase conversion
of existing products ~$3,898 (1)
Lower cost of funds on
financing
Addition of new products and
services
(1) FY2019 Gross Profit plus CarMax Auto Finance net income divided by used vehicle units sold; Note: CarMax Gross Profit per Unit is not presented to imply that Carvana will achieve comparable results
(*) 2018, 2019, and Q1 2020 include a $43, $31, and $10 impact from the 100K Milestone Gift, respectively 18EXPANDING GPU & OPERATING MARGINS
GROWTH SHOWING OPERATING LEVERAGE
NET LOSS AND EBITDA MARGIN ADVERTISING EXPENSE PER UNIT SOLD (1)
CUSTOMER ACQUISITION COST BY COHORT
CUSTOMER ACQUSITION COST
$1,082 $1,050
$807 $709
$1,323 $1,488
$1,034
(*) 2018, 2019, and Q1 2020 include a 0.6%, 0.4%, and 0.0% impact from the 100K Milestone Gift, respectively (1) As of December 31, 2019 19COMPETITIVE ADVANTAGES
INTEGRATION CREATES COMPETITIVE
ADVANTAGES
NATIONAL CONSUMER
FOCUSED BRAND FULLY
LARGE SCALE TRANSACTABLE
RECONDITIONING E-COMMERCE
EXPERIENCE
INTERNAL LOGISTICS PROPRIETARY FINANCING
NETWORK PLATFORM
LEADING FULFILLMENT
EXPERIENCE
20COMPETITIVE ADVANTAGES
SIGNIFICANT UPSIDE
IN THE CURRENT MODEL
Grow Current Markets Add New Markets Increase Penetration
2019 Revenue ($M) 66.9% Q4 2019 ATL YoY Growth
2.09%
$3,940 58.6% 7.7%
2.09%
41.2%
19.7%
0.46% 9.7%
3.1%
1.8%
Carvana Carvana Carvana Carvana
2019 Market Penetration 4Q19 Total U.S. Population Coverage Atlanta Market Penetration
Across Atlanta by Year From 1st Quarter Launched to Q4 2019
146 Markets (1) Market Penetration (2)
(1) Market penetration for year ended Dec. 31, 2019 across 146 total markets open as of Dec. 31, 2019
(2) Market penetration of Atlanta for quarter ended December 31, 2019
21COMPETITIVE ADVANTAGES
PROGRESS TOWARDS OUR FINANCIAL Long Term
OBJECTIVES
Target
FY 2017 FY 2018 Q1 2019 Q1 2019
FY 2016 FY 2017 FY 2018 FY 2019 Q1 2020
–
YoY Revenue Growth 180% 135% 128% 101% 45%
Gross Margin ** 5.3% 7.9% 10.1% 12.9% 12.6% 15 – 19%
Advertising 7.4% 6.5% 5.7% 5.2% 6.8% 1.0 – 1.5%
SG&A ex. Advertising and D&A ‡ 21.1% 18.2% 14.9% 13.7% 16.9% 4.5 – 5.5%
D&A 1.3% 1.3% 1.2% 1.0% 1.4% 0.5 – 1.0%
SG&A Total as % of Revenue ‡ 29.8% 26.0% 21.7% 20.0% 25.1% 6 – 8%
(25.5)% (19.1)% (13.0)% (9.3)% (16.7)% –
Net Loss Margin †
EBITDA Margin * (23.2%) (16.9%) (10.5%) (6.2%) (12.6%) 8 – 13.5%
**Gift impact of 0.2%, 0.1% and 0.0% in 2018, 2019, and Q1 2020, respectively. ‡Gift impact of 0.4%, 0.2%, and 0.0% in 2018, 2019, and Q1 2020 respectively. †Gift impact of 0.6% ,0.4%, and 0.0% in 2018, 2019, and Q1 2020 respectively. * Gift impact
of 0.6%, 0.4%, 0.0% in 2018, 2019, and Q1 2020 respectively 22COMPETITIVE ADVANTAGES
SIGNIFICANT GROWTH
OPPORTUNITIES
Develop New
Products
Improve
Brand
Awareness
Innovate and
Extend
Technology
Enter New Leadership
Key
Geographical
Drive Revenue Markets
Growth in
Existing Markets
23FOUNDER-LED, DEEP & EXPERIENCED TEAM
Ernie Garcia Mark Jenkins
Co-founder & Chief Executive Officer Chief Financial Officer
Ryan Keeton Ben Huston Dan Gill Paul Breaux
Co-founder & Co-founder & Chief Product General Counsel
Chief Brand Officer Chief Operating Officer Officer
eCommerce & Technology Data & Analytics Automotive & Supply Chain Brand & Customer Experience
Tom Taira Cem Vardar Richard Ball Paul Keister
EVP, Special Projects Sr. Director of Decision VP of IRCs Chief Creative
Support Systems Officer
Ram Akella Jeff McLellan Mike Rennie Teresa Aragon
VP, Engineering Director of Sr. Director of IRC Sr. Director of Pre Sale
Predictive Modeling Execution Operations and Customer Experience
Paul McReynolds Michael Grantham Scott Wood Jenni Stanford
Director of Product, Mobile, VP of Quantitative Sr. Director of Wholesale Sr. Director of Market
and Customer Lifetime Value Marketing Operations Operations & Expansion
Imran Kazi Brian Boyd Jeff Miller Jessica Querin
VP of Technology VP of Inventory VP of Strategic Partnerships & Sr. Director of Operations
Services Strategy Vehicle Merchandising Strategy and Analytics
Christina Keiser Alex Devkar Keith Hastings Bret Sassenberg
VP of Strategy VP of Product Analytics Sr. Director, Product, Sr. Director of Retail
Supply Chain Development
24KEY INVESTMENT HIGHLIGHTS
MASSIVE, FRAGMENTED MARKET $764B
2017 U.S.
1.8%
Largest dealer brand
Exceptionally large and inefficient used car market Used Car Sales (1) market share in US (1)
SUPERIOR CUSTOMER EXPERIENCE 96%
Customers who
4.7/5.0
Average Customer
Simple, seamless and differentiated used car buying experience would recommend Rating (3)
to friend (5)
PROVEN GO-TO-MARKET STRATEGY
Demonstrated, capital-light market expansion playbook
161
Markets (4)
2.09%
Market Penetration
in Atlanta (2)
VERTICAL INTEGRATION & FULFILLMENT 8
Existing
24
Existing Vending
Purpose-built vertically integrated platform Machines (4)
IRCs (4)
ROBUST FINANCIAL MODEL
Robust financial model supports growth and margin expansion
101%
2019 YoY
390K+
Retail Units Sold
Revenue Growth (2) Since Inception (3)
(1) Edmunds.com 2017 Used Vehicle Market report and Publicly-listed dealership filings (2) Metrics as of December 31, 2019 (3) Metric as of March 31, 2020 (4) Metric through May 6, 2020 (5) Through, December 31, 2019, based on respondents to the question25APPENDIX
26Non-GAAP Measures
To supplement the financial measures prepared and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”),we also include non-
GAAP measures in this presentation. None of these should be considered as a substitute for other measures of financial performance reported in accordance
with GAAP. In addition, the Company’s definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other
companies. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found at the end of this
presentation.
100k Milestone Gift
On September 10, 2018, we announced a commitment by our Chief Executive Officer, Ernest Garcia III ("Mr. Garcia"), to contribute 165 shares of Class A
common stock to us from his personal shareholdings for every one of our then-existing employees upon their satisfying certain employment tenure
requirements. In connection with these contributions, we have made corresponding grants of 165 restricted stock units under our 2017 Omnibus Incentive Plan
to each employee who satisfied the requirements (the "100k Milestone Gift" or "Gift"). This program ended in 2019. Under U.S. GAAP, the 100k Milestone Gift
is treated as compensation expense, a portion of which relates to the production of our used vehicle inventory and is therefore capitalized to inventory and
subsequently recognized within costs of sales when the related inventory is sold.
In prior periods we calculated non-GAAP measures including Gross Profit ex-Gift, Gross Profit per Unit ex-Gift, EBITDA ex-Gift, EBITDA Margin ex-Gift,
Adjusted Net Loss and Adjusted Net Loss per Share, to exclude the impact of the 100k Milestone Gift program. As this program has concluded it is not material
to current or future years and the adjustment is no longer included within similar calculations. For the three months ended March 31, 2020, there was
approximately $0.5 million of stock based compensation related to the 100k Milestone Gift program within cost of sales, which would impact all measures. For
the three months ended March 31, 2019, there was approximately $3.0 million of stock based compensation related to the 100k Milestone Gift program
impacting the calculation of EBITDA ex-Gift, EBITDA Margin ex-Gift, Adjusted Net Loss, and Adjusted Net Loss per Share, including approximately $0.8
million within cost of sales impacting the calculation of Gross Profit ex-Gift and Gross Profit per Unit ex-Gift.
27Non-GAAP Financial Reconciliation
28Non-GAAP Financial Reconciliation
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