Carvana Co. J.P. Morgan Automotive Conference

Yeah, it's great to be here. Rajat mentioned that it's our sixth consecutive year at the conference, so always great to be here and happy to be speaking with you all. Okay, so I thought today I would start with just a few slides about what's happening in the business today, where are we from a growth perspective, and what are some of the key drivers of that growth? It will be a relatively short discussion, and then we will hand it over to Rajat for Q&A. That's the typical safe harbor on the first slide. Okay. So we're having a very strong growth year so far. I think there's a few different ways to look at our growth performance. I think I can start just by comparing our growth within our industry.

We're now at the scale where we're selling around 800,000 used vehicles per year, just under that run rate in Q2, and we're growing at 38% year-over-year. So that's very significant growth at very significant scale within our industry. Moreover, we achieved that growth in Q2 of 38% retail units sold growth year-over-year in an industry that was down low to mid-single digits year-over-year. So we're really making very significant share gains. We have a model that's built to scale, and we're growing very quickly. Taking a look outside our industry, we're also performing very well. Our offering is resonating with customers, and we're growing very quickly, even if you look across multiple industries.

I called out, in my prepared remarks on our earnings call based on organic growth in the most recent quarter, we're in the top 5% of companies within the S&P 500 index. So we're growing very quickly, looking across a broad base of companies and industries. Finally, adding a little bit more context for that. We think at this scale, the $20 billion revenue scale, we got here very quickly. One of the faster companies to achieve the $20 billion revenue scale when we look out across similar e-commerce or other disruptors. Today growing at the $20 billion, moving to $30 billion revenue scale, continuing to grow at very strong rates. Most important message I think so far this year is this offering that we have, buying and selling used cars online, it's really resonating with customers.

We have a model that is built to scale and can scale very effectively, even at very significant unit and revenue levels, and we're growing very quickly. Now, a natural question from that might be, what is driving this outsized growth 40 points faster than industry, one of the leading growth companies in the S&P 500 index, and performing well against some very meaningful historical benchmarks? Well, I think it starts with the customer experience. We have a truly online customer experience for buying and selling a used car. It starts with the shopping experience. These are mobile images up here because you can do all this from the palm of your hand. It starts with searching through many tens of thousands of cars from the palm of your hand.

You can pick one and do further research on it, taking advantage of our proprietary 360-degree photobooth technology to really get to know the car before you order it and have it shipped to you. You can do all aspects of the used car transaction, whether it's getting a trade in, attaching financing or ancillary products, completing the entire transaction, all the way through signing contracts with your thumb on your phone. You can do this all in a true e-commerce experience while sitting in your living room watching TV. That's a great experience. After you order the car, we deliver it to you using our proprietary logistics network. It's a first-party logistics network that's backed with our own first-party technology to ensure that we can get the car to your door quickly, cost effectively, and reliably.

Then finally, we'll provide great customer care, whether you want to phone in chat or text with us. We'll provide great customer care to make sure that purchase is exactly what you're looking for. This is a full soup to nuts e-commerce experience and one that is resonating very strongly with customers. That's the first part of the story on where this growth is coming from. The second part of the story is our operational chain. I think in Q2, I think one of the things that I really appreciated about the data in Q2 is that it's showing very strong evidence that where we scale the business, we see the strongest growth. I think this chart on the left, this bar chart, shows production growth.

Production is basically where are we growing the process of inspecting, reconditioning, and putting cars up on the website. In the region, the top two regions, making up around a third of the country where we grew production the most, we also grew sales the most. Almost 55% growth in the Midwest and Northeast regions where we grew production. I think that what that illustrates is, hey, the model is really working. We scale the operational chain. That creates sources of positive feedback that drive very strong growth.

The fact that in a third of the country we are growing at 55% because we grew production around 55% or just over in that region, I think is a very powerful testament to the fact that there is very significant positive feedback and the model is performing very well from an operational and demand fulfillment perspective. Just say a little word about that. How does that positive feedback actually work functionally? I think there is a few key drivers. So one, when we add more production, we have more selection on the site. That increases conversion. When we add selection in more locations, that puts more cars closer to customers, which lowers the delivery time to those customers, which also increases conversion. Both of those things increase conversion to sales. In addition to that, as conversion increases, our marketing efficiency increases.

We can spend more on marketing in an efficient way that further drives sales, which in turn gives us more incentive to further add production lines and increase production. This positive feedback cycle is something that we have seen over the life of the business, but I think it was particularly evident in Q2 just with the really strong outsize growth that we saw in the regions, the Midwest and Northeast, where we grew production the most and saw the most powerful effects of this positive feedback cycle. A natural follow-on from that then is if production is demonstrating itself to be a key driver of sales growth, and again, this is sales growth that is happening at very high rates and at a very large scale. A natural question might be, okay, so how are you scaling production capacity?

We are executing a three-part plan today to scale production capacity. Part one is to increase the number of lines. So basically, you could think of our production facilities as factories where the traditional footprint facility has 8 different lines that we can run cars through at any given time, 4 lines wide by 2 shifts deep. Staffing existing facilities to add more production lines in existing facilities is lever number one for production growth. The second is integrating ADESA locations. ADESA is a large national wholesale auction business that we acquired in 2022, and one of the advantages of that ADESA business is that it has great real estate and the ability to add retail reconditioning capacity to the ADESA auction locations. That is something that we started doing in mid-2024. Since mid-2024, we have integrated 19 ADESA locations into the Carvana retail reconditioning network.

Integrating those locations primarily means adding software and Carvana management processes to deliver Carvana-style retail reconditioning. That has successfully helped us grow production, and is a strategy we will continue to pursue. Then finally is full build-outs of ADESA locations. Again, when we acquired ADESA in 2022, it came with 56 nationwide sites that have a significant real estate footprint and capacity for us to build more retail reconditioning facilities. We kicked off construction of the first full build-out of an ADESA facility in the second quarter. That will be a third component of our overall production growth plan. So three-part plan for continuing to grow production. Production, in turn, is a key driver of our sales growth, as I pointed to on the previous slide, but it is not the only driver.

As we scale production, we also need to scale the other three key parts of our operational chain, which is long-haul logistics, which connects our inspection and reconditioning centers out to customers' markets. Second, we need to scale our last-mile delivery network, which allows us to take those cars to the customer's door. Finally, we need to continue to scale our centralized customer care and transaction processing functions, which are based in Tempe. Scaling this operational chain is the key strategic focus for us at the moment. We are seeing strong evidence that when we scale the operational chain, we support very strong growth and differentiated customer experiences. The last point that I will make on this is I think we are very excited about where the business is today, but we view ourselves as very early in the overall story of selling cars online.

Just one data point on that we have talked about in past years and this year is the economy as a whole, the retail sector within the economy as a whole, now has around a 20% e-commerce penetration. Think of that as you can buy the good online and have it delivered to your door in a seamless, integrated experience. Auto retail is far earlier than that, in call it the low single digits of e-commerce penetration with Carvana being the primary experience where customers can get a true e-commerce experience. We view ourselves as just very early in the overall story, with a long runway for growth. We plan to pursue that growth by focusing on strong execution across the operations of the business and driving a very strong customer experience that I pointed to on the second slide.