Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Sticking with earnings, Carvana out with its report overnight, and
Speaker 2: while the company had a strong fourth quarter and a
Speaker 2: rosy outlook, shares our down significantly. Today. Let's get some
Speaker 2: answers from CEO Ernie Garcia. Ernie, clearly, shares are reflecting
Speaker 2: some skepticism, and in particular, your gross profit per vehicle declined.
Speaker 2: What was behind that fall and do you expect it
Speaker 2: to rebound this year?
Speaker 3: Sure?
Speaker 1: Well, first of all, thanks for having us and to
Speaker 1: try to you'll briefly answer that question specifically, I think
Speaker 1: that their seasonality in retail GPU and we saw that
Speaker 1: a little bit this year. But I think there's a
Speaker 1: way bigger story going on that we're extremely proud of,
Speaker 1: and that's that we just had the most profitable year
Speaker 1: in automotive retail history, and we did it while growing
Speaker 1: at thirty three percent for the year and fifty percent
Speaker 1: in the quarter, and we did it with just one
Speaker 1: percent market chare. So I think the big story here
Speaker 1: is we've still got a huge opportunity. We still have
Speaker 1: a ton of work to do. The team's done a
Speaker 1: great job. We're extremely excited day to day. The market
Speaker 1: is going to do what the market does, and our
Speaker 1: job is to just keep marching.
Speaker 2: We're seeing some pullback in the retail sector and I'm
Speaker 2: curious if this bodes kind of any kind of weakness
Speaker 2: for Carvana. Where do you see used car prices going
Speaker 2: this year? Is there any vulnerability to you know, your
Speaker 2: consumers being more touchy around inflation?
Speaker 1: Yeah, I think I think the way that we try
Speaker 1: to think about things is a little bigger picture than that.
Speaker 1: You know, again, I think the history of companies that
Speaker 1: are the most profitable in their industry and are growing
Speaker 1: the fastest is a pretty thin history. And when you
Speaker 1: look back on those companies, generally, the next you know,
Speaker 1: ten plus years, ten twenty years are are pretty great years.
Speaker 3: I think we're focused on that timeline.
Speaker 1: I think, you know, month to month, quarter to quarter,
Speaker 1: year to year, there's going to be inflation stories, there
Speaker 1: will be tariff stories, there will be ev stories.
Speaker 3: But we don't talk about those specific.
Speaker 1: Storylines about great companies when we look back in time,
Speaker 1: and I think our goals would be a great company,
Speaker 1: and so we're say, folks on our customers and just
Speaker 1: keep moving down the path. And we think that's going
Speaker 1: to take us to a great spot, as it has
Speaker 1: over the last couple of years on average.
Speaker 4: A mean, I completely hear you on the market's going
Speaker 4: to do what the mark is going to do. It's
Speaker 4: off by sixteen percent though today, and that is a
Speaker 4: big four. I know that you've run up more than
Speaker 4: three hundred percent in the previous year. So credit where
Speaker 4: credit's due. But we need to get into some of
Speaker 4: those issues that the investor base is seeing. And I
Speaker 4: really want to ask about perhaps some of the gains
Speaker 4: that you saw in the sales of loans, perhaps people saying,
Speaker 4: look that padded your ebit dar. Is that something that
Speaker 4: will continue to pad ebit dar? Is it something that's
Speaker 4: a one off.
Speaker 1: I think it's something that's been a consistent contributor for
Speaker 1: the last couple of years, So I don't think we
Speaker 1: expect major changes there. I think since you brought up
Speaker 1: ibadad my jobs to make sure I frame all this
Speaker 1: as posively as possible. We increase our ebadad by four
Speaker 1: times a year over year, so I think that's pretty great.
Speaker 1: Another is another line that points at a very good direction. So,
Speaker 1: like I said, I think we got to focus on
Speaker 1: our customers, give them a great experience that they love,
Speaker 1: give them a ton of selection, give them a great
Speaker 1: value you.
Speaker 3: If we do that, the rest to take care of itself.
Speaker 4: I think a job is to give things not just
Speaker 4: a positive ring, but a truthful ring. And I'm sure
Speaker 4: that that's what's you're trying to do. But let's talk
Speaker 4: about it to over effect. You're a positive guy, Oni,
Speaker 4: and we love it, But talk to us about some
Speaker 4: of the positive impacts or indeed negative impacts of taris.
Speaker 4: What does that mean for the secondhand market? What does
Speaker 4: it mean for autos more broadly, if it's gonna be
Speaker 4: tougher to get foreign cars in?
Speaker 1: So I think that's incredibly complicated, and I think there's
Speaker 1: probably a lot of people that are better position to
Speaker 1: answer those questions than we are. So I unfortunately, I
Speaker 1: am going to give you a very unsatisfying answer that
Speaker 1: we will pay attention, will react to whatever happens. But again,
Speaker 1: I think what's going on inside of Carvona is you know,
Speaker 1: we grew at thirty three percent last year. That's so
Speaker 1: large compared to anything that can happen macro, and so
Speaker 1: we think it's smarter for us to say, folks on
Speaker 1: our customers and on what we do, because it's just
Speaker 1: a bigger range than anything it's going to happen from
Speaker 1: a macro perspective.
Speaker 2: Ernie, you said your guidance is based on the environment
Speaker 2: remaining stable, but there's a lot of external factors that
Speaker 2: also come into play. Which ones are you paying attention to? Specifically?
Speaker 2: Given to Caroline's point, tariffs do play a role, inflation
Speaker 2: does play a role. What will you be focused on
Speaker 2: to make sure that guidance stays on track?
Speaker 3: Yeah, I think everything you just mentioned, I think that
Speaker 3: you know, we'll see.
Speaker 1: I think there's a lot of uncertainty about what happens
Speaker 1: with harriff, there's a lot of uncertaint about what happens
Speaker 1: with inflation. I think if you ask two people, you
Speaker 1: get three answers. I think there's a lot of uncertain
Speaker 1: about what's going to happen with rates. We're going to
Speaker 1: pay attention, we're going to adapt to our environment, and
Speaker 1: we're going to keep moving forward.
Speaker 3: So I think we watch all of that.
Speaker 1: Of course, investors watch that very closely as well, But
Speaker 1: we think that our job is mostly to look at
Speaker 1: our business, to put together a bunch of projects that
Speaker 1: we're very confident we'll create value for our customers over
Speaker 1: a long period of time and to march through those
Speaker 1: projects one at a time, because on average, the macro
Speaker 1: environment is the average, and if you spend a ton
Speaker 1: of energy chasing your tail on that it's energy that
Speaker 1: could be put somewhere else that creates long term value.
Speaker 3: So we try to stay long term focused.
Speaker 2: Another parts of the car market, autonomous vehicles is kind
Speaker 2: of the next big thing. How are you thinking about
Speaker 2: how that might affect your business model? Are you looking
Speaker 2: to buy more of those types of cars wholes sale
Speaker 2: or how do you bring in that kind of business
Speaker 2: into the fold?
Speaker 3: Sure, well, so I think related concepts evs.
Speaker 1: You know, we put out a report today that that
Speaker 1: said that, you know, five point seven percent of our
Speaker 1: sales last year we're EVS. That compares to one point
Speaker 1: three percent for the used market in total, so we're
Speaker 1: you know, four times more likely to sell and eb
Speaker 1: to our customers.
Speaker 3: We're believers in EVS.
Speaker 1: We generally set up our system where it's a pull system,
Speaker 1: so we're buying the cars that our customers want. As
Speaker 1: autonomous vehicles start to become more available, we will certainly
Speaker 1: buy more of those and provide those to our customers,
Speaker 1: and in general, I think you know, we're fans of
Speaker 1: any technology that pushes things forward. We think that as
Speaker 1: a one percent market shareholder, we will likely be beneficiaries
Speaker 1: of any change in the market, any shakeup, we're very
Speaker 1: well positioned to take advantage of because our customers love
Speaker 1: our offering and it makes things a little easier for us.
Speaker 1: So we'll be rooting for EV, we'll be rooting for autonomy,
Speaker 1: and we'll be doing our best to give our customers
Speaker 1: a great experience along the way.
Speaker 4: It's great to have some time with you today. Thanks
Speaker 4: for coming on all the positivity to thank you. Appreciate it, Honey,
Speaker 4: Garcia