WEBVTT - Carvana CEO Ernie Garcia Talks Falling Shares 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Sticking with earnings, Carvana out with its report overnight, and

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<v Speaker 2>while the company had a strong fourth quarter and a

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<v Speaker 2>rosy outlook, shares our down significantly. Today. Let's get some

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<v Speaker 2>answers from CEO Ernie Garcia. Ernie, clearly, shares are reflecting

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<v Speaker 2>some skepticism, and in particular, your gross profit per vehicle declined.

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<v Speaker 2>What was behind that fall and do you expect it

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<v Speaker 2>to rebound this year?

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<v Speaker 3>Sure?

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<v Speaker 1>Well, first of all, thanks for having us and to

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<v Speaker 1>try to you'll briefly answer that question specifically, I think

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<v Speaker 1>that their seasonality in retail GPU and we saw that

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<v Speaker 1>a little bit this year. But I think there's a

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<v Speaker 1>way bigger story going on that we're extremely proud of,

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<v Speaker 1>and that's that we just had the most profitable year

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<v Speaker 1>in automotive retail history, and we did it while growing

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<v Speaker 1>at thirty three percent for the year and fifty percent

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<v Speaker 1>in the quarter, and we did it with just one

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<v Speaker 1>percent market chare. So I think the big story here

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<v Speaker 1>is we've still got a huge opportunity. We still have

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<v Speaker 1>a ton of work to do. The team's done a

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<v Speaker 1>great job. We're extremely excited day to day. The market

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<v Speaker 1>is going to do what the market does, and our

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<v Speaker 1>job is to just keep marching.

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<v Speaker 2>We're seeing some pullback in the retail sector and I'm

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<v Speaker 2>curious if this bodes kind of any kind of weakness

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<v Speaker 2>for Carvana. Where do you see used car prices going

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<v Speaker 2>this year? Is there any vulnerability to you know, your

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<v Speaker 2>consumers being more touchy around inflation?

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<v Speaker 1>Yeah, I think I think the way that we try

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<v Speaker 1>to think about things is a little bigger picture than that.

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<v Speaker 1>You know, again, I think the history of companies that

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<v Speaker 1>are the most profitable in their industry and are growing

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<v Speaker 1>the fastest is a pretty thin history. And when you

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<v Speaker 1>look back on those companies, generally, the next you know,

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<v Speaker 1>ten plus years, ten twenty years are are pretty great years.

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<v Speaker 3>I think we're focused on that timeline.

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<v Speaker 1>I think, you know, month to month, quarter to quarter,

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<v Speaker 1>year to year, there's going to be inflation stories, there

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<v Speaker 1>will be tariff stories, there will be ev stories.

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<v Speaker 3>But we don't talk about those specific.

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<v Speaker 1>Storylines about great companies when we look back in time,

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<v Speaker 1>and I think our goals would be a great company,

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<v Speaker 1>and so we're say, folks on our customers and just

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<v Speaker 1>keep moving down the path. And we think that's going

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<v Speaker 1>to take us to a great spot, as it has

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<v Speaker 1>over the last couple of years on average.

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<v Speaker 4>A mean, I completely hear you on the market's going

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<v Speaker 4>to do what the mark is going to do. It's

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<v Speaker 4>off by sixteen percent though today, and that is a

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<v Speaker 4>big four. I know that you've run up more than

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<v Speaker 4>three hundred percent in the previous year. So credit where

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<v Speaker 4>credit's due. But we need to get into some of

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<v Speaker 4>those issues that the investor base is seeing. And I

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<v Speaker 4>really want to ask about perhaps some of the gains

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<v Speaker 4>that you saw in the sales of loans, perhaps people saying,

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<v Speaker 4>look that padded your ebit dar. Is that something that

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<v Speaker 4>will continue to pad ebit dar? Is it something that's

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<v Speaker 4>a one off.

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<v Speaker 1>I think it's something that's been a consistent contributor for

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<v Speaker 1>the last couple of years, So I don't think we

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<v Speaker 1>expect major changes there. I think since you brought up

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<v Speaker 1>ibadad my jobs to make sure I frame all this

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<v Speaker 1>as posively as possible. We increase our ebadad by four

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<v Speaker 1>times a year over year, so I think that's pretty great.

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<v Speaker 1>Another is another line that points at a very good direction. So,

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<v Speaker 1>like I said, I think we got to focus on

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<v Speaker 1>our customers, give them a great experience that they love,

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<v Speaker 1>give them a ton of selection, give them a great

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<v Speaker 1>value you.

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<v Speaker 3>If we do that, the rest to take care of itself.

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<v Speaker 4>I think a job is to give things not just

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<v Speaker 4>a positive ring, but a truthful ring. And I'm sure

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<v Speaker 4>that that's what's you're trying to do. But let's talk

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<v Speaker 4>about it to over effect. You're a positive guy, Oni,

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<v Speaker 4>and we love it, But talk to us about some

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<v Speaker 4>of the positive impacts or indeed negative impacts of taris.

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<v Speaker 4>What does that mean for the secondhand market? What does

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<v Speaker 4>it mean for autos more broadly, if it's gonna be

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<v Speaker 4>tougher to get foreign cars in?

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<v Speaker 1>So I think that's incredibly complicated, and I think there's

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<v Speaker 1>probably a lot of people that are better position to

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<v Speaker 1>answer those questions than we are. So I unfortunately, I

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<v Speaker 1>am going to give you a very unsatisfying answer that

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<v Speaker 1>we will pay attention, will react to whatever happens. But again,

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<v Speaker 1>I think what's going on inside of Carvona is you know,

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<v Speaker 1>we grew at thirty three percent last year. That's so

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<v Speaker 1>large compared to anything that can happen macro, and so

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<v Speaker 1>we think it's smarter for us to say, folks on

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<v Speaker 1>our customers and on what we do, because it's just

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<v Speaker 1>a bigger range than anything it's going to happen from

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<v Speaker 1>a macro perspective.

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<v Speaker 2>Ernie, you said your guidance is based on the environment

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<v Speaker 2>remaining stable, but there's a lot of external factors that

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<v Speaker 2>also come into play. Which ones are you paying attention to? Specifically?

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<v Speaker 2>Given to Caroline's point, tariffs do play a role, inflation

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<v Speaker 2>does play a role. What will you be focused on

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<v Speaker 2>to make sure that guidance stays on track?

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<v Speaker 3>Yeah, I think everything you just mentioned, I think that

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<v Speaker 3>you know, we'll see.

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<v Speaker 1>I think there's a lot of uncertainty about what happens

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<v Speaker 1>with harriff, there's a lot of uncertaint about what happens

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<v Speaker 1>with inflation. I think if you ask two people, you

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<v Speaker 1>get three answers. I think there's a lot of uncertain

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<v Speaker 1>about what's going to happen with rates. We're going to

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<v Speaker 1>pay attention, we're going to adapt to our environment, and

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<v Speaker 1>we're going to keep moving forward.

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<v Speaker 3>So I think we watch all of that.

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<v Speaker 1>Of course, investors watch that very closely as well, But

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<v Speaker 1>we think that our job is mostly to look at

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<v Speaker 1>our business, to put together a bunch of projects that

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<v Speaker 1>we're very confident we'll create value for our customers over

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<v Speaker 1>a long period of time and to march through those

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<v Speaker 1>projects one at a time, because on average, the macro

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<v Speaker 1>environment is the average, and if you spend a ton

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<v Speaker 1>of energy chasing your tail on that it's energy that

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<v Speaker 1>could be put somewhere else that creates long term value.

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<v Speaker 3>So we try to stay long term focused.

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<v Speaker 2>Another parts of the car market, autonomous vehicles is kind

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<v Speaker 2>of the next big thing. How are you thinking about

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<v Speaker 2>how that might affect your business model? Are you looking

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<v Speaker 2>to buy more of those types of cars wholes sale

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<v Speaker 2>or how do you bring in that kind of business

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<v Speaker 2>into the fold?

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<v Speaker 3>Sure, well, so I think related concepts evs.

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<v Speaker 1>You know, we put out a report today that that

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<v Speaker 1>said that, you know, five point seven percent of our

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<v Speaker 1>sales last year we're EVS. That compares to one point

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<v Speaker 1>three percent for the used market in total, so we're

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<v Speaker 1>you know, four times more likely to sell and eb

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<v Speaker 1>to our customers.

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<v Speaker 3>We're believers in EVS.

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<v Speaker 1>We generally set up our system where it's a pull system,

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<v Speaker 1>so we're buying the cars that our customers want. As

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<v Speaker 1>autonomous vehicles start to become more available, we will certainly

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<v Speaker 1>buy more of those and provide those to our customers,

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<v Speaker 1>and in general, I think you know, we're fans of

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<v Speaker 1>any technology that pushes things forward. We think that as

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<v Speaker 1>a one percent market shareholder, we will likely be beneficiaries

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<v Speaker 1>of any change in the market, any shakeup, we're very

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<v Speaker 1>well positioned to take advantage of because our customers love

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<v Speaker 1>our offering and it makes things a little easier for us.

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<v Speaker 1>So we'll be rooting for EV, we'll be rooting for autonomy,

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<v Speaker 1>and we'll be doing our best to give our customers

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<v Speaker 1>a great experience along the way.

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<v Speaker 4>It's great to have some time with you today. Thanks

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<v Speaker 4>for coming on all the positivity to thank you. Appreciate it, Honey,

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<v Speaker 4>Garcia