Carvana Co.

Good day, and welcome to the Carvana Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Meg Kehan with Investor Relations. Please go ahead.

Thank you, Rocco. Good morning, ladies and gentlemen, and thank you for joining us on Carvana's second quarter 2023 earnings conference call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at investors.carvana.com. The second quarter shareholder letter is also posted to the IR website. Additionally, we posted a set of supplemental financial tables for Q2, which can be found on the events and presentations page of our IR website. Joining me on the call today are Ernie Garcia, Chief Executive Officer, and Mark Jenkins, Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including, but not limited to, Carvana's market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. A detailed discussion of the material factors that cause actual results to differ from forward-looking statements can be found in the risk factors section of Carvana's most recent Form 10-K and Form 10-Q. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Carvana assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Our commentary today will include non-GAAP financial metrics. Unless otherwise specified, all references to GPU and SG&A will be to the non-GAAP metrics, and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non-GAAP financial metrics for our reported results can be found in our shareholder letter issued today, a copy of which can be found on our IR website. And now with that said, I'd like to turn the call over to Ernie Garcia. Ernie?

Thanks Meg, and thanks everyone for joining the call on such short notice. Let me start with the most important takeaways from this quarter. It was a great quarter for Carvana, and we're nowhere near the end. We are making rapid progress because of the power of our customer offering, the strength of our business model, and the quality of our people. The fundamentals are what is making it possible. We're going to sustain the intensity the last 18 months by maintaining our operating focus for the foreseeable future and embedding it further into our culture. 18 months ago, we were positioned aggressively for growth. We were then hit with a combination of macroeconomic, industry, operational, and capital market impacts. that when combined, put us under considerable pressure and demanded a reprioritization of our efforts. So that's what we did. We reoriented the business with a simple three-step plan. Number one, drive the business to positive adjusted EBITDA. Number two, drive the business to significant positive unit economics. And number three, after completing steps one and two, return to growth. In the second quarter, we completed the first step. We are extremely proud of the speed of this progress. In the last year, we've taken $1.1 billion of annualized expenses out of the business. And this quarter, we set records in GPU and adjusted EBITDA margin with total adjusted EBITDA dollars over $150 million. These numbers benefited from significant non-recurring items that collectively added about $900 to GPU and $70 million to adjusted EBITDA. But even when controlling for these non-recurring items, the results were exceptional. Today the company is functioning better than it ever has. We're more efficient and we're improving at a faster pace than we ever have in the past. This improvement spans the entire business from customer facing improvements including the early testing of same-day delivery in a subset of markets that have inspection centers to product improvements that enable us to buy more cars from our customers more efficiently to process changes and developments that are making us more efficient across every operating group in the company and we plan to keep up our pace. With the results in capital structure changes being discussed today, a natural question is how does this change the plan? The short answer is that it doesn't. We plan to continue operating in the same way with the same urgency to continue to drive efficiencies that we expect will result in sustainable, significantly positive adjusted EBITDA. From there, we will once again turn our attention to growth as we did successfully for the first eight years of our history. Our opportunity is as great as it has ever been. Our customers love our offering and our business is efficient, highly differentiated, scalable, and extremely difficult to replicate. We remain firmly on the path to selling millions of cars per year and to becoming the largest and most profitable automotive retailer. The march continues. Mark.