Carvana Co. · NYSE:CVNA
Carvana — William Blair 42nd Annual Growth Stock Conference 2022
20 slides from Carvana's conference presentation, Jun 7, 2022
Slide 1: William Blair 42nd Annual Growth Stock Conference
Slide 2: Safe Harbor
@CARVANA 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 thing
Slide 3: Essential questions to create a path to success since 2012
Since our founding in 2012 we have needed to answer several essential questions to create a path to success: 1. Do people want to buy cars online at all? 2. Will it require such a discount that it won't work economically? 3. Can we monetize the rest of the transaction in a way that enables high qual
Slide 4: Three financial objectives since our IPO in 2017
Since our IPO in 2017, we have focused on three financial objectives: 1. Grow retail units and revenue 2. Increase total gross profit per unit (GPU) 3. Demonstrate operating leverage We have made significant progress on the first two objectives, while making progress, albeit more slowly, on the thir
Slide 5: Elevating SG&A leverage, profitability, and positive free cash flow
In light of the current industry, macroeconomic, and financial market environment, we are elevating SG&A leverage, profitability, and positive free cash flow as priorities for managing the business. Our financial objectives currently are twofold: 1. Rapidly reduce SG&A expense per retail unit sold w
Slide 6: Pro forma liquidity and core free cash flow
Unless otherwise noted, all references to GPU, SG&A, EBITDA, and Adjusted EBITDA are for Carvana only and exclude ADESA operations. Following the ADESA U.S. (“ADESA”) transactions, we had ~$4.9 billion in pro forma total liquidity resources, including ~$3 billion in cash and revolving availability,
Slide 7: SG&A per retail unit needed for positive free cash flow
The GPU and SG&A per unit amounts in the table below refer to Carvana only and do not include gross profit or SG&A from ADESA in the numerator. We currently believe SG&A per unit is the most important driver of free cash flow. In what follows, we show a range of scenarios that demonstrate the level
Slide 8: Expected leverage of SG&A per retail unit over coming quarters
Unless otherwise noted, all references to GPU, SG&A, EBITDA, and Adjusted EBITDA are for Carvana only and exclude ADESA operations. We expect to significantly lever SG&A per retail unit sold over the coming quarters, with a stretch goal of $4,000 SG&A per retail unit sold ex D&A and SBC in Q4 2022.
Slide 9: Near-term trajectory on SG&A per retail unit sold
Unless otherwise noted, all references to GPU, SG&A, EBITDA, and Adjusted EBITDA are for Carvana only and exclude ADESA operations. In the near-term, we expect the following trajectory on SG&A per retail unit sold: • We expect sequential reductions in SG&A per retail unit sold in Q2, Q3, and Q4, wit
Slide 10: Midterm goal of $3,000 SG&A per retail unit sold
Unless otherwise noted, all references to GPU, SG&A, EBITDA, and Adjusted EBITDA are for Carvana only and exclude ADESA operations. Similar to our midterm goal of $3,000 GPU in 2017, we are setting a midterm goal of $3,000 SG&A per retail unit sold, or $2,750 SG&A per retail unit sold ex D&A and SBC
Slide 11: Four key drivers of SG&A per unit leverage
There are four key drivers of our leverage on SG&A per unit over the near, mid, and long-term: • Balance expenses with current sales volumes • Internal Benchmarking • Scale • Process Automation and Efficiency Improvement 11
Slide 12: Internal benchmarking across locations and groups
Due to our rapid growth and youth as a company, we currently see considerable dispersion in controllable performance metrics across locations and groups within departments. We estimate that managing all locations and groups to the level of our stronger proven internal benchmarks is worth $200-300 of
Slide 13: Great success with growth in our brief history
In our brief history, we have had great success with growth. In just 8 years, we became the second largest seller of used vehicles in the U.S. and one of the fastest growing technology companies in history through our nationwide expansion and consistent market share gains. 13
Slide 14: Success increasing total GPU to meet goals
We have also had great success increasing total GPU to meet or exceed our midterm and long-term goals, leading to 8 straight years of total GPU gains to over $4,500 in 2021. Midterm Goal (Jun. 2017) • On our first earnings call in June 2017, we set a midterm goal of $3,000 total GPU. We had just com
Slide 15: Progress on net profit margins by cohort
We have demonstrated significant progress on net profit margins, driven by retail unit growth, increasing GPU, and SG&A leverage. However, our gains in SG&A leverage have been smaller than our gains in retail units and GPU, making SG&A our biggest opportunity. Older cohorts have higher EBITDA margin
Slide 16: Execution
There are three key areas that will determine the trajectory of our results in the near-term: • Macroeconomic Environment and Auto Affordability • Operational Effectiveness • Addressing issues in logistics and operations broadly • Integrating ADESA Execution • Internal Company Transition in Focus •
Slide 17: Q&A
OCARVANA Q&A
Slide 18: Appendix
OCARVANA Appendix
Slide 19: Non-GAAP financial measures
To supplement the financial measures prepared and presented in accordance with U.S. Generally accepted accounting principles (“gaap”),we also include non-gaap measures in this presentation, including EBITDA and EBITDA Margin. EBITDA and EBITDA Margin are supplemental measures of operating performanc
Slide 20: Non-GAAP Financial Reconciliation
OCARVANA Non-GAAP Financial Reconciliation Years Ended December 31, (dollars in millions) 2015 2016 2017 2018 2019 2020 2021 Net loss S$ G7) S$ (93) S$ (164) $ (255) S$ (365) $ (462) $ (287) Depreciation and amortization expense 3 5 12 24 41 74 105 Interest expense 1 3 a 25 81 131 176 Income tax pro
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