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Introduction to CarvanaMay 2020
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SAFE HARBORForward-Looking StatementsThis 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 DataThis 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.
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OUR MISSION IS TO CHANGE THE WAY PEOPLE BUY CARS.
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SUCCESSFUL EXECUTIONKEY OPERATING METRICS
( (*) GPU: 2018, 2019, and Q1 2020 include a $43, $31, and $10 impact from the 100K Milestone Gift, respectively ; EBITDA MARGIN: 2018, 2019, and Q1 2020 include a 0.6%, 0.4%, and 0.0% impact from the 100K Milestone Gift, respectively
89% YoYGrowth
72% YoYGrowth
53% YoYGrowth
101% YoYGrowth
TOTAL MARKETS AT YEAR END
CAR VENDING MACHINES
RETAIL UNITS SOLD
TOTAL REVENUE ($M)
GROSS PROFIT PER UNIT
NET LOSS AND EBITDA MARGIN
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KEY INVESTMENT HIGHLIGHTS
MASSIVE, FRAGMENTED MARKETExceptionally large and inefficient used car market
VERTICAL INTEGRATION & FULFILLMENTPurpose-built vertically integrated platform
PROVEN GO-TO-MARKET STRATEGY
Robust financial model supports growth and margin expansionROBUST FINANCIAL MODEL
Demonstrated, capital-light market expansion playbook
SUPERIOR CUSTOMER EXPERIENCESimple, seamless and differentiated used car buying experience
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Auto is… Massive Fragmented & Ripe for Disruption
INDUSTRY OVERVIEW
$1.0 Tn
20%
$764 Bn
2.0%
1.8%
8.6%
81%
8%of U.S. Retail Economy (1)
in 2017 U.S. Used Car Sales (2)
2017 – 2022 CAGR (3)
U.S. Market Share of Largest Dealer Brand (2)
Aggregate Market Share of Top 100 Used Auto Retailers (4)
Consumers Do Not Enjoy the Car Buying Process (5)
Consumers Rated Car Salespeople Highly Trustworthy (6)
in 2018 U.S. Sales (1)
MASSIVE, FRAGMENTED MARKET
(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
43,000+Used Car
Dealerships (7)
% %
DIGITAL ECONOMY IS TRANSFORMING CAR BUYING
would consider purchasing a car online (2)
of customer purchases involve online research (1)
%
(1) Capgemini 2014 Cars Online report (2) Accenture 2015 Automotive Digital Survey (3) AutoTrader 2016 Car Buyer Journey report
test drive only one vehicle (3)
MASSIVE, FRAGMENTED MARKET
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$1k+ in average savings per vehicle compared to traditional dealers
As soon as Next Day car deliveries in select markets
CARVANA'S VISION IS FOCUSEDON PROVIDING OUR CUSTOMERS WITH:
Best Experience10 minutes – time in which purchase can be completed after vehicle selection
Best Value
SUPERIOR CUSTOMER EXPERIENCE
Note: 33,500+ vehicles available are as of March 31, 2020; $1k+ in average savings per vehicle vs. traditional dealers for full year 2019
33,500+cars available
Best Selection
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Vehicle Search & Discovery From Any
DeviceIntuitive vehicle search with 33,500+ vehicles available
online
Trade or Sell – All Online
Nearly instantaneous, firm, fullyautomated trade-in offers
Real-Time, Personalized Financing
Majority of customers havechosen to finance with Carvana
Seamless Transaction TechnologyBuy a car without
leaving your device
A SIMPLE AND SEAMLESS CAR BUYING EXPERIENCE
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SUPERIOR CUSTOMER EXPERIENCE
Note: 33,500+ vehicles available as of March 31, 2020
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A BETTER WAY TO SELL A CAR
SIMPLEThree step process:
1. Input license plate or VIN
2. Enter vehicle details, and
3. Answers a few questions
DATA-DRIVENOur vehicle data and valuation technology enables strong gross profit per unit
$422 Wholesale GPU *
231% y-o-y growth in vehicles acquired from customers *
CONVENIENTYou schedule at time that’s convenient for you
We pick up the car using our last-mile delivery network
We’ll review and hand you a check on the spot
AUTOMATEDOur artificial intelligence algorithms determine a real-time offer for the customer
No Haggling
Guaranteed for 7 days or 1,000 miles
Annual Wholesale Gross Profit per Wholesale Unit
SUPERIOR CUSTOMER EXPERIENCE
* For the year ended December 31, 2019
CREATING DIFFERENTIATEDFULFILLMENT EXPERIENCES
• 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
• 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
Carvana Delivery
Vending Machine
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SUPERIOR CUSTOMER EXPERIENCE
(1) As of May 6, 2020
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4.7Rating (1) Customer Reviews
on Carvana.com (1)
53,000+ 96%Would Recommend
To A Friend (2)
“ Carvana is the bomb!”“Carvana will
change the way cars are
sold. ”I never
thought carbuying couldbe enjoyable.“ ”
SUPERIOR CUSTOMER EXPERIENCE
DELIVERING SUPERIOR CUSTOMER EXPERIENCES
82Net Promoter Score
(NPS) (3)
(3) Survey performed by Bazaarvoice through March 31, 2020(2) Through March 31, 2020, based on respondents to the question(1) As of March 31, 2020
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PROVEN EXPANSION STRATEGYGROWING UNITS & REVENUE
Enabling Rapid Expansion of Operating Markets
Proven by Success in Our Markets
Repeatable Market Entry Playbook
CapEx Light Market Launch
Activate Team of Expansion Advocates
Connect to Logistics Network
Turn on Marketing Program
EST.
MA
RK
ET P
ENET
RA
TIO
N
Carvana Markets at End of Period
(1) As of December 31, 2019
MARKET PENETRATION BY COHORT (1)
0.46%0.35%
0.56%0.67%
0.98%
1.47%
2.09%
1 2 3 3 4 5 5 9 11 14 1621 23
3039
44
5665
7885
109
137146 146
161
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Q415
Q116
Q216
Q316
Q416
Q117
Q217
Q317
Q417
Q118
Q218
Q318
Q418
Q119
Q219
Q319
Q419
Q120
• Vehicle reporting
• Market data
• Carvana data (clickstream, historical sales)
SUPPORTED BY PROPRIETARY VEHICLEACQUISITION ALGORITHM
Auctions &Other Sources
Vehicle Inventory Acquisition• Manheim, Adesa, Smart Auction• Enterprise, Hertz• Customers
QualityScreening
Apply Data
Optimization
33,500+ Online cars available in all markets vs. 11-100 at typical dealers (1)
VERTICAL INTEGRATION & FULFILLMENT
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• Year, Mileage, No Reported Accidents
• Expected pricing, recon, and transport• Fit with existing inventory
Auctions Off-LeaseOff-Rental
CustomerVehicles
(1) 2016 NIADA Used Car Industry report based on 2015 dataNote: 33,500+ vehicles available as of March 31, 2020
IN-HOUSE INSPECTION, RECONDITIONING & MERCHANDIZING
• Robust processes and internal expertiseto set up future IRCs as needed
• Ability to buy all car types and reconditionthem to a consistent car quality
• Over 400k existing annual IRC capacity at full utilization*
Inspection and Reconditioning
• 360-degree, interactive exterior and interior virtual tour of each vehicle
• Patented imaging technology• Transparency to the customer through
annotation of material defects
Photography and Annotation
VERTICAL INTEGRATION & FULFILLMENT
15*Based on 8 IRCs in operation as of May 6, 2020
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BACKED BY IN-HOUSE LOGISTICS NETWORK
Carvana Logistics Network
Control over delivery times enables seamless customer experience
Speed of delivery drives conversion
Centralized inventory powers broad selection
PremiumFulfillment Capabilities
• Inspection & reconditioning centers• Hubs• Vending machinesConnected through the hub-and-spoke Carvana Logistics Network
Enables vehicle cost arbitrage across geographies
Lower cost than using third party shipping
Note: As of May 6, 2020.
VERTICAL INTEGRATION & FULFILLMENT
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$130
$365
RAPID SECULAR GROWTH
6,523 18,761
44,252
GROWING UNITS & REVENUE
Revenues ($M)
Retail Units Sold
$859
$1,95594,108
$3,940
177,549
Q115
Q215
Q315
Q415
Q116
Q216
Q316
Q416
Q117
Q217
Q317
Q417
Q118
Q218
Q318
Q418
Q119
Q219
Q319
Q419
Q120
Q115
Q215
Q315
Q415
Q116
Q216
Q316
Q416
Q117
Q217
Q317
Q417
Q118
Q218
Q318
Q418
Q119
Q219
Q319
Q419
Q120
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GROWTH LEVERAGING UNIT ECONOMICS
Gross Profit per Unit
EXPANDING GPU & OPERATING MARGINS
CarMax, Inc.Gross Profit
per Unit~$3,898 (1)
(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
Increase conversion of existing products
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
Scale provides cost of sales efficiencies
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GROWTH SHOWING OPERATING LEVERAGENET LOSS AND EBITDA MARGIN ADVERTISING EXPENSE PER UNIT SOLD (1)
CU
STO
MER
AC
QU
SITI
ON
CO
ST
EXPANDING GPU & OPERATING MARGINS
(*) 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
CUSTOMER ACQUISITION COST BY COHORT
$1,323 $1,488$1,034
$1,082 $1,050 $807 $709
INTEGRATION CREATES COMPETITIVE ADVANTAGES
COMPETITIVE ADVANTAGES
LEADING FULFILLMENT EXPERIENCE
NATIONAL CONSUMER FOCUSED BRAND
INTERNAL LOGISTICS NETWORK
PROPRIETARY FINANCING PLATFORM
FULLY TRANSACTABLE E-COMMERCE EXPERIENCE
LARGE SCALE RECONDITIONING
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SIGNIFICANT UPSIDEIN THE CURRENT MODEL
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CarvanaTotal U.S. Population Coverage
by Year
Add New Markets
CarvanaAtlanta Market Penetration
From 1st Quarter Launched to Q4 2019
Q4 2019 ATL YoY GrowthIncrease Penetration
2.09%
1.8%3.1%
9.7%
41.2%
2019 Revenue ($M)$3,940
Carvana2019 Market Penetration
Across146 Markets (1)
0.46%
2.09%
Carvana4Q19 Atlanta
Market Penetration (2)
Grow Current Markets
(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
19.7%
COMPETITIVE ADVANTAGES
58.6% 7.7%66.9%
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Long Term Target
PROGRESS TOWARDS OUR FINANCIAL OBJECTIVES
COMPETITIVE ADVANTAGES
FY 2017 FY 2018
(16.9%)
26.0%
135%
7.9%
6.5%
18.2%
1.3%
(10.5%)
21.7%
128%
5.7%
14.9%
1.2%
YoY Revenue Growth
SG&A Total as % of Revenue ‡
Gross Margin **
EBITDA Margin *
Advertising
D&A
SG&A ex. Advertising and D&A ‡
6 – 8%
1.0 – 1.5%
4.5 – 5.5%
0.5 – 1.0%
8 – 13.5%
15 – 19%10.1%
–
Net Loss Margin † (19.1)% (13.0)% –
101%
1.0%
5.2%
(6.2%)
Q1 2019
12.9%
20.0%
(9.3)%
13.7%
(23.2%)
29.8%
180%
5.3%
7.4%
21.1%
1.3%
(25.5)%
FY 2016 FY 2017 FY 2018 FY 2019
45%
1.4%
6.8%
(12.6%)
Q1 2019
12.6%
25.1%
16.9%
Q1 2020
(16.7)%
**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
SIGNIFICANT GROWTHOPPORTUNITIES
Drive Revenue Growth in Existing Markets
Enter New Key Geographical Markets
Innovate and Extend Technology Leadership
Develop New Products
Improve Brand Awareness
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COMPETITIVE ADVANTAGES
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Tom TairaEVP, Special Projects
Ram AkellaVP, Engineering
Paul McReynoldsDirector of Product, Mobile, and Customer Lifetime Value
Imran KaziVP of Technology Services
Christina KeiserVP of Strategy
Cem VardarSr. Director of DecisionSupport Systems
Jeff McLellanDirector of Predictive Modeling
Michael GranthamVP of Quantitative Marketing
Brian BoydVP of Inventory Strategy
Alex DevkarVP of Product Analytics
Richard BallVP of IRCs
Mike RennieSr. Director of IRC Execution
Scott WoodSr. Director of WholesaleOperations
Jeff MillerVP of Strategic Partnerships & Vehicle Merchandising
Paul KeisterChief Creative Officer
Teresa AragonSr. Director of Pre Sale Operations and Customer Experience
Jenni StanfordSr. Director of Market Operations & Expansion
Jessica QuerinSr. Director of OperationsStrategy and Analytics
Bret SassenbergSr. Director of Retail Development
eCommerce & Technology Data & Analytics Automotive & Supply Chain Brand & Customer Experience
Ernie GarciaCo-founder & Chief Executive Officer
Mark JenkinsChief Financial Officer
Ryan KeetonCo-founder &Chief Brand Officer
Ben HustonCo-founder &Chief Operating Officer
Dan GillChief Product Officer
Paul BreauxGeneral Counsel
FOUNDER-LED, DEEP & EXPERIENCED TEAM
Keith HastingsSr. Director, Product,Supply Chain
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KEY INVESTMENT HIGHLIGHTS$764B
2017 U.S. Used Car Sales (1)
1.8%Largest dealer brand
market share in US (1)
96%Customers who
would recommend to friend (5)
4.7/5.0Average Customer
Rating (3)
101%2019 YoY
Revenue Growth (2)
390K+Retail Units Sold
Since Inception (3)
MASSIVE, FRAGMENTED MARKETExceptionally large and inefficient used car market
8ExistingIRCs (4)
24Existing Vending
Machines (4)
VERTICAL INTEGRATION & FULFILLMENTPurpose-built vertically integrated platform
161Markets (4)
2.09%Market Penetration
in Atlanta (2)
PROVEN GO-TO-MARKET STRATEGY
Robust financial model supports growth and margin expansionROBUST FINANCIAL MODEL
Demonstrated, capital-light market expansion playbook
SUPERIOR CUSTOMER EXPERIENCESimple, seamless and differentiated used car buying experience
(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 question
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APPENDIX
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Non-GAAP MeasuresTo 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 GiftOn September 10, 2018, we announced a commitment by our Chief Executive Officer, Ernest Garcia III ("Mr. Garcia"), to contribute 165 shares of Class Acommon stock to us from his personal shareholdings for every one of our then-existing employees upon their satisfying certain employment tenurerequirements. 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.
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Non-GAAP Financial Reconciliation
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Non-GAAP Financial Reconciliation