1
00:00:00,080 --> 00:00:03,360
Speaker 1: Look at the stock year to date right now, it's

2
00:00:03,480 --> 00:00:07,520
Speaker 1: up eight hundred and ninety six percent, a massive gain

3
00:00:08,000 --> 00:00:11,119
Speaker 1: after an agreement, well a lot of it came after

4
00:00:11,160 --> 00:00:15,560
Speaker 1: an agreement to restructure five point two billion dollars of

5
00:00:15,640 --> 00:00:18,520
Speaker 1: debt and to sell shares as the used car retailer

6
00:00:18,560 --> 00:00:22,759
Speaker 1: tries to regain its footing following a pandemic boom and bust.

7
00:00:22,880 --> 00:00:24,840
Speaker 2: The moves are breakthroughs in.

8
00:00:24,840 --> 00:00:28,760
Speaker 1: Carvana's efforts to get a handle on its debilitating debt load.

9
00:00:28,880 --> 00:00:32,200
Speaker 1: The agreement with bond holders will eliminate about eighty three

10
00:00:32,240 --> 00:00:35,600
Speaker 1: percent of Carvana's twenty twenty five and twenty twenty seven

11
00:00:35,720 --> 00:00:39,760
Speaker 1: unsecured note maturities. It's going to lower required cash interest

12
00:00:39,880 --> 00:00:42,960
Speaker 1: expenses by four hundred and thirty million dollars a year

13
00:00:43,479 --> 00:00:46,360
Speaker 1: for the next two years, and in total, the company

14
00:00:46,400 --> 00:00:49,519
Speaker 1: expects to reduce debt with this plan, debt outstanding by

15
00:00:49,600 --> 00:00:52,760
Speaker 1: more than one point two billion dollars. So let's talk

16
00:00:53,000 --> 00:00:55,440
Speaker 1: about that right now with Ernie Garcia. He is the

17
00:00:55,480 --> 00:00:58,720
Speaker 1: CEO and chairman of Carvana. He joins US now live

18
00:00:58,760 --> 00:01:00,760
Speaker 1: from Phoenix, Earni. Great to get you on the program,

19
00:01:00,800 --> 00:01:03,680
Speaker 1: Thanks so much for joining us. You know this year

20
00:01:03,760 --> 00:01:06,760
Speaker 1: the stock had had quite a run up even before

21
00:01:06,800 --> 00:01:10,760
Speaker 1: this agreement, and I wonder how pivotal the recovery of

22
00:01:10,760 --> 00:01:14,199
Speaker 1: your stock has been this year in clinching this deal

23
00:01:14,800 --> 00:01:16,039
Speaker 1: with key lenders.

24
00:01:16,160 --> 00:01:18,320
Speaker 3: Sure, so I think that's exactly right. I think we've

25
00:01:18,360 --> 00:01:21,039
Speaker 3: been on a great comeback trail for the last year.

26
00:01:21,080 --> 00:01:23,480
Speaker 3: I think twenty twenty two was was a tough year

27
00:01:23,480 --> 00:01:25,240
Speaker 3: for us. We came into the year expecting a ton

28
00:01:25,280 --> 00:01:28,399
Speaker 3: of growth, and car prices went up and instrates shot up,

29
00:01:28,440 --> 00:01:30,759
Speaker 3: and that made it tougher for customers to afford cars,

30
00:01:31,160 --> 00:01:33,160
Speaker 3: and that was a tough transition for us, for sure.

31
00:01:33,200 --> 00:01:35,440
Speaker 4: But we've been on a very steady path.

32
00:01:35,760 --> 00:01:37,800
Speaker 3: You know, we went from last year in Q one

33
00:01:37,880 --> 00:01:39,960
Speaker 3: we lost three hundred and sixty million dollars Viva Dot,

34
00:01:40,000 --> 00:01:43,319
Speaker 3: which is obviously a really tough number, and then you

35
00:01:43,360 --> 00:01:45,720
Speaker 3: know this last quarter, we just reported yesterday we had

36
00:01:45,760 --> 00:01:48,560
Speaker 3: one hundred and fifty million dollars of positive Vivada, so

37
00:01:48,600 --> 00:01:50,800
Speaker 3: a massive change, and I think that's sort of most

38
00:01:50,840 --> 00:01:52,440
Speaker 3: of the comeback and also made it much easier for

39
00:01:52,480 --> 00:01:55,120
Speaker 3: us to find a win win solution with our lenders.

40
00:01:55,440 --> 00:01:58,840
Speaker 1: So in terms of getting the lenders to do this deal,

41
00:01:59,640 --> 00:02:02,000
Speaker 1: you had get them a little bit closer to the assets.

42
00:02:02,080 --> 00:02:05,080
Speaker 1: And I wonder if there's any discussion about lowering your

43
00:02:05,160 --> 00:02:08,160
Speaker 1: voting control. You and your father have I think about

44
00:02:08,200 --> 00:02:11,120
Speaker 1: eight percent of the outstanding equity, but eighty eight percent

45
00:02:11,240 --> 00:02:12,840
Speaker 1: of the voting control.

46
00:02:12,919 --> 00:02:14,040
Speaker 2: Will that remain the same.

47
00:02:15,960 --> 00:02:16,960
Speaker 4: It will remain the same.

48
00:02:17,639 --> 00:02:20,720
Speaker 3: And we also own have more of the stock than that,

49
00:02:20,760 --> 00:02:23,520
Speaker 3: which I think makes it more proportionate to the voting control,

50
00:02:23,600 --> 00:02:26,800
Speaker 3: but that will remain the same. You know, hopefully they've

51
00:02:26,800 --> 00:02:29,919
Speaker 3: got okay faith in us to make decisions. You will

52
00:02:29,919 --> 00:02:31,520
Speaker 3: continue to stay on the path we're on today.

53
00:02:31,800 --> 00:02:37,280
Speaker 1: You had reportedly a very highly regarded advisor, and Ken Molus.

54
00:02:37,480 --> 00:02:40,080
Speaker 1: I wonder if he was in the discussions with you

55
00:02:40,160 --> 00:02:41,560
Speaker 1: and how helpful his advice was.

56
00:02:43,480 --> 00:02:46,440
Speaker 3: Sure, well, I think I can't say enough good things

57
00:02:46,480 --> 00:02:49,560
Speaker 3: about Ken. Ken what was great in the discussions. This

58
00:02:49,639 --> 00:02:51,840
Speaker 3: is obviously not something companies do all the time, so

59
00:02:51,880 --> 00:02:53,639
Speaker 3: you don't have a ton of experience, and it's helpful

60
00:02:53,680 --> 00:02:55,400
Speaker 3: to talk to someone that you know, you can trust,

61
00:02:55,919 --> 00:02:57,799
Speaker 3: who has a ton of insight and can help you

62
00:02:57,880 --> 00:02:58,400
Speaker 3: navigate that.

63
00:02:58,720 --> 00:02:59,640
Speaker 4: I would also.

64
00:02:59,440 --> 00:03:04,320
Speaker 3: Say I think working with the bondholders was much friendlier

65
00:03:04,560 --> 00:03:07,880
Speaker 3: and straightforward and honest and transparent that I think is

66
00:03:07,919 --> 00:03:09,840
Speaker 3: often perceived, and I think we were able to find

67
00:03:09,880 --> 00:03:11,600
Speaker 3: a solution that was great for all of us. You know,

68
00:03:11,639 --> 00:03:13,680
Speaker 3: over the last several years, when we issued our debt

69
00:03:14,080 --> 00:03:16,160
Speaker 3: to build this company that kind of has done all

70
00:03:16,200 --> 00:03:17,960
Speaker 3: things that we've done over the last many years, we

71
00:03:18,000 --> 00:03:20,799
Speaker 3: didn't provide collateral. We did onsecure debt and we paid

72
00:03:20,840 --> 00:03:22,919
Speaker 3: a hire straight as a result. But then that gave

73
00:03:23,000 --> 00:03:25,760
Speaker 3: us this asset of having collateral today that enabled us

74
00:03:25,800 --> 00:03:28,359
Speaker 3: to come to in agreement with our bondholders. I think

75
00:03:28,440 --> 00:03:31,680
Speaker 3: is good for everyone, and undoubtedly getting advice on that

76
00:03:31,800 --> 00:03:32,800
Speaker 3: journey was very helpful.

77
00:03:33,080 --> 00:03:37,000
Speaker 1: How much further do you need to reduce your debt load?

78
00:03:37,040 --> 00:03:39,680
Speaker 1: How much further do you think you can reduce your debtload?

79
00:03:39,680 --> 00:03:42,320
Speaker 1: And what steps are you going to take to achieve that?

80
00:03:43,960 --> 00:03:46,280
Speaker 3: You Know, what I would say is, I think the

81
00:03:46,360 --> 00:03:48,640
Speaker 3: most important thing here is continue to make progress as

82
00:03:48,640 --> 00:03:50,640
Speaker 3: a company. I think it can be really easy to

83
00:03:50,640 --> 00:03:53,880
Speaker 3: get caught up in these transactions and all of these moments,

84
00:03:53,920 --> 00:03:56,000
Speaker 3: but it's important to remember that. You know, from twenty

85
00:03:56,040 --> 00:03:58,800
Speaker 3: thirteen we launched to twenty twenty one, you know, we

86
00:03:58,800 --> 00:04:01,280
Speaker 3: were the third fastest company to ever make the fortune

87
00:04:01,280 --> 00:04:02,240
Speaker 3: five hundred that.

88
00:04:02,080 --> 00:04:04,080
Speaker 4: That's pretty remarkable achievement.

89
00:04:04,960 --> 00:04:06,880
Speaker 3: And then in the last fifteen months we've gone from

90
00:04:06,880 --> 00:04:08,680
Speaker 3: three hundred and sixty million of negative D to one

91
00:04:08,760 --> 00:04:12,400
Speaker 3: hundred and fifty positive. That's a huge, huge move, and

92
00:04:12,440 --> 00:04:15,480
Speaker 3: that's possible for two reasons. Customers love our offering. We

93
00:04:15,560 --> 00:04:18,120
Speaker 3: have something totally differentiated and they love it. And then

94
00:04:18,120 --> 00:04:20,800
Speaker 3: we have people inside Carbona that are incredibly capable. And

95
00:04:20,800 --> 00:04:22,320
Speaker 3: when we set our mind to something, we tend to

96
00:04:22,320 --> 00:04:24,840
Speaker 3: go hit that goal, and we've done that several times

97
00:04:24,839 --> 00:04:27,600
Speaker 3: in a row. So to me, that's what matters the most,

98
00:04:27,640 --> 00:04:30,000
Speaker 3: by a long long way. Those are the most important numbers.

99
00:04:30,920 --> 00:04:34,480
Speaker 3: The way that we ultimately capitalize ourselves over time may change,

100
00:04:34,720 --> 00:04:36,680
Speaker 3: but the most important thing is that we deliver great

101
00:04:36,680 --> 00:04:38,920
Speaker 3: experience to customers and we have people inside Carbona that

102
00:04:39,240 --> 00:04:41,719
Speaker 3: care and keep building great solutions for our customers.

103
00:04:41,760 --> 00:04:45,680
Speaker 1: You had a lot of tailwinds though previous to this,

104
00:04:45,760 --> 00:04:49,159
Speaker 1: you had very low interest rates helping you along with

105
00:04:49,240 --> 00:04:52,800
Speaker 1: your growth. You had easy access to capital during that

106
00:04:52,839 --> 00:04:56,320
Speaker 1: time period. You had used car prices that were soaring

107
00:04:57,120 --> 00:04:58,200
Speaker 1: during the pandemic.

108
00:04:58,520 --> 00:04:59,039
Speaker 4: That helped.

109
00:04:59,640 --> 00:05:04,200
Speaker 1: I want with those With those trends gone now in

110
00:05:04,240 --> 00:05:07,080
Speaker 1: this sort of new era, post pandemic, How do you

111
00:05:07,160 --> 00:05:10,640
Speaker 1: get to a net profitability a level?

112
00:05:12,400 --> 00:05:15,559
Speaker 3: Sure, so that's a bit of a complicated question to answer,

113
00:05:15,640 --> 00:05:17,560
Speaker 3: but I'll try to do the best I can. I

114
00:05:17,560 --> 00:05:20,400
Speaker 3: think it's important to remember that again, from twenty thirteen

115
00:05:20,480 --> 00:05:22,320
Speaker 3: to twenty twenty one, you know, we grew it over

116
00:05:22,320 --> 00:05:24,920
Speaker 3: one hundred percent per year. That was through all kinds

117
00:05:24,920 --> 00:05:27,400
Speaker 3: of different dynamics, and it wasn't always supported by very

118
00:05:27,440 --> 00:05:30,719
Speaker 3: low interest rates. I think undoubtedly twenty twenty to twenty

119
00:05:30,760 --> 00:05:32,359
Speaker 3: twenty one was a good period for us, but it

120
00:05:32,400 --> 00:05:34,279
Speaker 3: was a period where we actually grew a little slower

121
00:05:34,279 --> 00:05:37,159
Speaker 3: than we had grown prior. So I don't think the

122
00:05:37,279 --> 00:05:39,840
Speaker 3: data supports the idea that that was a huge part

123
00:05:39,880 --> 00:05:42,880
Speaker 3: of our story, although to some degree it maybe has

124
00:05:42,960 --> 00:05:45,479
Speaker 3: become that. And then I also think car price is

125
00:05:45,480 --> 00:05:48,520
Speaker 3: going up is actually harmful to us in the sense

126
00:05:48,520 --> 00:05:50,320
Speaker 3: that it hurts our customers and it makes it harder

127
00:05:50,320 --> 00:05:51,559
Speaker 3: for them to be able to afford cars.

128
00:05:51,560 --> 00:05:53,560
Speaker 4: So we would love for car prices to drop.

129
00:05:53,600 --> 00:05:54,760
Speaker 3: I think that would be great for us, it'd be

130
00:05:54,800 --> 00:05:57,800
Speaker 3: great for our customers, and we look forward to that

131
00:05:57,920 --> 00:05:59,920
Speaker 3: environment as it seems like it may be approaching.

132
00:06:00,440 --> 00:06:03,520
Speaker 1: So do you do you think the used car prices

133
00:06:03,520 --> 00:06:05,920
Speaker 1: are going to continue to come down? If you look

134
00:06:05,960 --> 00:06:11,920
Speaker 1: at the Mannheim Index, for example, prior to the pandemic,

135
00:06:11,960 --> 00:06:13,960
Speaker 1: we were looking at one hundred and forty one hundred

136
00:06:14,000 --> 00:06:17,200
Speaker 1: and fifty. It soared obviously during the pandemic, but has

137
00:06:17,320 --> 00:06:19,920
Speaker 1: rolled over to about two ten. Now do you see

138
00:06:19,920 --> 00:06:22,960
Speaker 1: car prices coming down? Used car prices coming down further

139
00:06:23,240 --> 00:06:25,400
Speaker 1: throughout twenty twenty three and twenty twenty four.

140
00:06:27,400 --> 00:06:30,520
Speaker 3: So I think predicting prices in any market is always

141
00:06:30,640 --> 00:06:34,120
Speaker 3: very hard. So I'll provide that caveat, and then I'll

142
00:06:34,120 --> 00:06:37,159
Speaker 3: tell you what I think is probably most likely over

143
00:06:37,440 --> 00:06:40,360
Speaker 3: you know, a couple of year timeframe. I think, you know,

144
00:06:40,400 --> 00:06:43,599
Speaker 3: car prices relative to other prices in the economy have

145
00:06:43,680 --> 00:06:46,160
Speaker 3: a pretty natural relationship because people buy cars and they

146
00:06:46,160 --> 00:06:48,800
Speaker 3: buy other things. And you know, over the last couple

147
00:06:48,839 --> 00:06:51,680
Speaker 3: of years, when the pandemic hit and new car manufacturer

148
00:06:51,720 --> 00:06:54,880
Speaker 3: we're producing fewer cars, car prices went up dramatically relative

149
00:06:54,920 --> 00:06:57,400
Speaker 3: to other things, and so we saw monthly payments for

150
00:06:57,440 --> 00:07:00,599
Speaker 3: car prices go up about fifty percent when other prices

151
00:07:00,640 --> 00:07:03,120
Speaker 3: maybe gone up by around ten percent. So cars clearly

152
00:07:03,120 --> 00:07:07,080
Speaker 3: got relatively unaffordable. I think over time it is probably

153
00:07:07,080 --> 00:07:09,480
Speaker 3: more likely than not that the affordability of cars will

154
00:07:09,520 --> 00:07:12,760
Speaker 3: return relative to other goods, which I think does suggest

155
00:07:12,760 --> 00:07:14,920
Speaker 3: that there should be more downward pressure than upward pressure

156
00:07:14,960 --> 00:07:17,840
Speaker 3: over time. But you know, calling that month to month

157
00:07:17,920 --> 00:07:20,160
Speaker 3: is a really, really hard game. I think, you know,

158
00:07:20,200 --> 00:07:22,280
Speaker 3: over the last month or so, we've seen depreciation that

159
00:07:22,280 --> 00:07:24,920
Speaker 3: looked like the back half of last year. You know,

160
00:07:25,000 --> 00:07:27,360
Speaker 3: many in the market were surprised by a little appreciation

161
00:07:27,480 --> 00:07:27,880
Speaker 3: this year.

162
00:07:28,280 --> 00:07:29,880
Speaker 4: So hard to say, you know.

163
00:07:29,840 --> 00:07:33,040
Speaker 3: We'll we'll continue to position for uncertainty in that because

164
00:07:33,040 --> 00:07:35,120
Speaker 3: it's it's hard to know exactly what will happened. But

165
00:07:35,400 --> 00:07:37,840
Speaker 3: over time, I think our best expectation is probably car

166
00:07:37,920 --> 00:07:39,040
Speaker 3: prices continue going down.

167
00:07:39,800 --> 00:07:44,680
Speaker 1: What other cost levers can you pull to get closer

168
00:07:44,760 --> 00:07:47,200
Speaker 1: to net profitability? And by the way, do you, Ernie,

169
00:07:47,200 --> 00:07:49,360
Speaker 1: do you have a forecast for when you'll post a

170
00:07:49,400 --> 00:07:49,960
Speaker 1: net profit?

171
00:07:51,080 --> 00:07:53,360
Speaker 4: We're a company, so we always have forecasts. We never

172
00:07:53,400 --> 00:07:55,080
Speaker 4: share them. That's part of the that's part of the

173
00:07:55,080 --> 00:07:55,560
Speaker 4: whole deal.

174
00:07:55,920 --> 00:07:58,000
Speaker 3: But because what I would say is, you know, we've

175
00:07:58,040 --> 00:08:00,360
Speaker 3: cut over a billion dollars of expense out of the

176
00:08:00,400 --> 00:08:04,520
Speaker 3: business in the last year. That's a that's a big number, right,

177
00:08:05,440 --> 00:08:07,680
Speaker 3: and you know, we continue to pull the expenses out.

178
00:08:07,720 --> 00:08:09,280
Speaker 3: You know, we cut over one hundred million out in

179
00:08:09,360 --> 00:08:11,440
Speaker 3: Q one. We cut another twenty million of expenses out

180
00:08:11,640 --> 00:08:13,160
Speaker 3: in Q two, so we've.

181
00:08:12,920 --> 00:08:14,680
Speaker 4: Got a lot of levers. We'll keep pulling that down.

182
00:08:14,720 --> 00:08:17,840
Speaker 3: We've also been driving our RGPu up, so I think

183
00:08:17,880 --> 00:08:20,600
Speaker 3: the business performing really well. And again I think you know,

184
00:08:20,600 --> 00:08:22,800
Speaker 3: twenty twenty two was a tough year for us, but

185
00:08:22,840 --> 00:08:24,680
Speaker 3: the people inside Carbon it came together and that's why

186
00:08:24,720 --> 00:08:26,000
Speaker 3: we're having so much success today.

187
00:08:26,480 --> 00:08:30,520
Speaker 1: Our delivery are there still delivery delays, delivery issues. I

188
00:08:30,560 --> 00:08:34,040
Speaker 1: know that for a long time, even in your business,

189
00:08:34,040 --> 00:08:37,599
Speaker 1: the used car business, it was a problem getting buyers

190
00:08:37,640 --> 00:08:40,200
Speaker 1: their cars in a timely manner, and that's been a

191
00:08:40,200 --> 00:08:43,760
Speaker 1: problem obviously for the manufacturers as well for new cars.

192
00:08:44,440 --> 00:08:45,560
Speaker 2: How does that look right now?

193
00:08:47,080 --> 00:08:47,840
Speaker 4: No way, I think.

194
00:08:48,320 --> 00:08:48,520
Speaker 2: You know.

195
00:08:49,080 --> 00:08:51,360
Speaker 3: Inside of our business, there's kind of two major steps.

196
00:08:51,400 --> 00:08:53,760
Speaker 3: One step is getting the car from the point where

197
00:08:53,760 --> 00:08:56,040
Speaker 3: you purchase it to our inspection centers, where we put

198
00:08:56,040 --> 00:08:58,000
Speaker 3: about one thousand dollars aparts in labor in every car

199
00:08:58,040 --> 00:09:00,960
Speaker 3: to prepare it for the buyer who ul to buy it.

200
00:09:01,040 --> 00:09:03,120
Speaker 3: And then there's our delivery to that customer when they

201
00:09:03,160 --> 00:09:04,840
Speaker 3: go to our website, they buy it online, and then

202
00:09:04,880 --> 00:09:07,200
Speaker 3: we deliver it to their door. And we've actually been

203
00:09:07,240 --> 00:09:08,480
Speaker 3: speeding those timelines up.

204
00:09:09,120 --> 00:09:09,560
Speaker 4: Recently.

205
00:09:09,559 --> 00:09:12,160
Speaker 3: We've been testing same data delivery, which is pretty remarkable.

206
00:09:12,200 --> 00:09:13,839
Speaker 4: We had one customer in.

207
00:09:13,800 --> 00:09:15,720
Speaker 3: Phoenix the other day that actually got a car delivered

208
00:09:15,760 --> 00:09:18,360
Speaker 3: an hour and fifty nine minutes after placing the order,

209
00:09:18,600 --> 00:09:21,480
Speaker 3: which is pretty remarkable. So, you know, we're trying to

210
00:09:21,720 --> 00:09:24,520
Speaker 3: give customers a huge selection with our online model and

211
00:09:24,559 --> 00:09:26,640
Speaker 3: then build all of our operations and processes in a

212
00:09:26,640 --> 00:09:28,200
Speaker 3: way that allow them to not only have that huge

213
00:09:28,200 --> 00:09:30,120
Speaker 3: selection but also get the car very quickly. And I

214
00:09:30,120 --> 00:09:31,400
Speaker 3: think that's something we're very proud of.

215
00:09:31,640 --> 00:09:35,960
Speaker 1: How much do you expect buyers to embrace the online

216
00:09:36,080 --> 00:09:39,079
Speaker 1: only model? I mean, you know a lot of people

217
00:09:39,160 --> 00:09:41,320
Speaker 1: want to go into a dealer ship kicked the tires,

218
00:09:41,360 --> 00:09:43,920
Speaker 1: look under the hood, or they have in the past.

219
00:09:45,240 --> 00:09:47,720
Speaker 1: How much do you see that changing, for example, in

220
00:09:47,800 --> 00:09:51,000
Speaker 1: terms of a percentage of all sales.

221
00:09:51,160 --> 00:09:52,319
Speaker 2: Where do you expect it to go?

222
00:09:54,040 --> 00:09:54,280
Speaker 4: Sure?

223
00:09:54,280 --> 00:09:56,280
Speaker 3: So, I think different people like different things, and they'll

224
00:09:56,320 --> 00:09:59,360
Speaker 3: continue like different things. I think what we're proud of

225
00:09:59,400 --> 00:10:01,880
Speaker 3: is that we're giving customers a different kind of offering

226
00:10:02,440 --> 00:10:04,120
Speaker 3: they can go to our website, they can buy a car.

227
00:10:04,200 --> 00:10:05,920
Speaker 3: You know, we've had people buy cars on our website

228
00:10:05,960 --> 00:10:08,360
Speaker 3: and scheduled delivery and as little as ten or fifteen minutes,

229
00:10:08,400 --> 00:10:10,520
Speaker 3: and then, as I just told you, our fastest delivery

230
00:10:10,520 --> 00:10:12,320
Speaker 3: was an hour and fifty nine minutes after that. So

231
00:10:12,679 --> 00:10:14,720
Speaker 3: it can be very fast, it can be very easy.

232
00:10:14,760 --> 00:10:17,800
Speaker 3: They get a huge selection of cars, tens of thousands.

233
00:10:18,200 --> 00:10:20,520
Speaker 3: They generally save money. We offer our cars at lower

234
00:10:20,520 --> 00:10:23,360
Speaker 3: prices than most of our competitors because our business model

235
00:10:23,440 --> 00:10:26,040
Speaker 3: enables us to do that. And so it's a different

236
00:10:26,120 --> 00:10:29,800
Speaker 3: kind of offering for different preferences and different people are different.

237
00:10:29,840 --> 00:10:32,000
Speaker 3: But the great news is, you know, today we're about

238
00:10:32,040 --> 00:10:34,840
Speaker 3: one percent of the market. So I think our view

239
00:10:34,960 --> 00:10:36,600
Speaker 3: is that, you know, when you say you can get

240
00:10:36,600 --> 00:10:39,080
Speaker 3: a broader selection, you can save money, you can save time,

241
00:10:39,120 --> 00:10:41,000
Speaker 3: there's probably more than one percent of people that want

242
00:10:41,040 --> 00:10:41,320
Speaker 3: to do that.

243
00:10:41,880 --> 00:10:46,040
Speaker 1: Right I'm looking for a Dodge Challenger RT scat pack

244
00:10:46,160 --> 00:10:48,920
Speaker 1: wide body. They're not super easy to find it dealers

245
00:10:48,960 --> 00:10:53,000
Speaker 1: near me, so I may look to a dealer in California.

246
00:10:53,160 --> 00:10:56,200
Speaker 1: Is that what people are increasingly doing? And do you

247
00:10:56,200 --> 00:10:58,840
Speaker 1: expect it to be maybe two percent of the market

248
00:10:58,920 --> 00:11:01,440
Speaker 1: in say by twenty twenty five, three percent of the

249
00:11:01,480 --> 00:11:02,720
Speaker 1: market by twenty twenty five.

250
00:11:04,320 --> 00:11:07,120
Speaker 3: Well, what I would say is we've you know, at

251
00:11:07,200 --> 00:11:09,000
Speaker 3: various times we've had in some of our older markets

252
00:11:09,040 --> 00:11:11,760
Speaker 3: market shares already above three point five percent and growing

253
00:11:11,840 --> 00:11:15,440
Speaker 3: very quickly. And I think, you know, our product offering

254
00:11:15,480 --> 00:11:17,360
Speaker 3: is only getting better. I think customers are only getting

255
00:11:17,360 --> 00:11:21,400
Speaker 3: more comfortable online, and so I think our view would

256
00:11:21,440 --> 00:11:24,959
Speaker 3: be much larger than that. Over time. We'll have to

257
00:11:25,000 --> 00:11:27,640
Speaker 3: see exactly where it goes. But I think again the

258
00:11:27,960 --> 00:11:30,880
Speaker 3: benefits are not being online. Online is something that enables

259
00:11:30,960 --> 00:11:33,080
Speaker 3: customers to save money, to save time, to have a

260
00:11:33,120 --> 00:11:35,200
Speaker 3: huge selection, so we're more likely to find that scat

261
00:11:35,280 --> 00:11:38,080
Speaker 3: back for you. So I think that's what customers are

262
00:11:38,080 --> 00:11:39,600
Speaker 3: really looking for, and we're trying to provide it.

263
00:11:39,880 --> 00:11:42,280
Speaker 1: You've had to pull back by your inventory I see

264
00:11:42,280 --> 00:11:46,080
Speaker 1: from our reporting by more than fifty percent. Are you

265
00:11:46,160 --> 00:11:49,640
Speaker 1: going to be able to bring that back because obviously

266
00:11:49,679 --> 00:11:53,240
Speaker 1: you want to offer a broad array of vehicles for

267
00:11:53,360 --> 00:11:54,920
Speaker 1: customers to choose from.

268
00:11:55,559 --> 00:11:57,400
Speaker 4: Yeah, for sure, I think you know.

269
00:11:57,480 --> 00:11:59,760
Speaker 3: Twenty twenty two is about getting back in balance after

270
00:12:00,480 --> 00:12:02,520
Speaker 3: car prices went up and inustrates went up, and it

271
00:12:02,559 --> 00:12:05,280
Speaker 3: made cars unaffordable for customers and slowed down their purchases.

272
00:12:05,720 --> 00:12:07,199
Speaker 3: And I think we've done that, and I think that's

273
00:12:07,240 --> 00:12:10,599
Speaker 3: why our results have been so positive recently. But I

274
00:12:10,600 --> 00:12:14,120
Speaker 3: think undoubtedly as we turn back to growth, which we

275
00:12:14,160 --> 00:12:16,480
Speaker 3: will do in due time, we will certainly want to

276
00:12:16,480 --> 00:12:19,160
Speaker 3: grow inventory and give customers an even broader selection. But

277
00:12:19,240 --> 00:12:22,280
Speaker 3: even today, with the pullback and inventory size to get

278
00:12:22,320 --> 00:12:24,920
Speaker 3: back in balance, we're offering customer selection of tens of

279
00:12:24,920 --> 00:12:26,920
Speaker 3: thousands of cars, so it's still a pretty great place

280
00:12:26,920 --> 00:12:27,600
Speaker 3: to go check out.

281
00:12:27,800 --> 00:12:30,320
Speaker 1: You know, I saw a figure that your total debt

282
00:12:30,320 --> 00:12:32,599
Speaker 1: load was about two thousand dollars a car in the

283
00:12:32,679 --> 00:12:35,280
Speaker 1: last quarter. I'm wondering what it looks like now after

284
00:12:35,280 --> 00:12:37,120
Speaker 1: this deal and where you want to see it.

285
00:12:39,040 --> 00:12:42,160
Speaker 3: Sure, at a high level, I think it probably decreased

286
00:12:42,160 --> 00:12:45,079
Speaker 3: by fifteen to twenty percent, And again I would go

287
00:12:45,200 --> 00:12:47,880
Speaker 3: back to the answer I provided before. I think the

288
00:12:47,880 --> 00:12:49,560
Speaker 3: most important thing we could do as a company is

289
00:12:49,600 --> 00:12:52,400
Speaker 3: just keep delivering great customer experiences, keep building the business

290
00:12:52,400 --> 00:12:55,000
Speaker 3: as best we can. I think the capital choices will

291
00:12:55,040 --> 00:12:57,079
Speaker 3: make over time, but I think that's very secondary to

292
00:12:57,880 --> 00:12:59,440
Speaker 3: just building the core business and the best way we

293
00:12:59,440 --> 00:12:59,920
Speaker 3: possibly can.

294
00:13:00,120 --> 00:13:04,200
Speaker 1: So I mean Before this happened, obviously there was a

295
00:13:04,200 --> 00:13:06,480
Speaker 1: lot of speculation in the market. People were worried that

296
00:13:06,520 --> 00:13:11,320
Speaker 1: you were on the brink of filing. Now you've been

297
00:13:11,360 --> 00:13:14,360
Speaker 1: thrown this lifeline. Can you say, now that we're past

298
00:13:14,480 --> 00:13:16,080
Speaker 1: that sort of crisis point?

299
00:13:16,160 --> 00:13:16,480
Speaker 4: Are you?

300
00:13:17,320 --> 00:13:21,160
Speaker 1: Does this allow you to avoid any chance of bankruptcy

301
00:13:21,160 --> 00:13:21,720
Speaker 1: in the future.

302
00:13:23,920 --> 00:13:25,800
Speaker 4: I'll say more than that. I think we were never there,

303
00:13:26,720 --> 00:13:26,920
Speaker 4: you know.

304
00:13:26,960 --> 00:13:30,240
Speaker 3: I think drama always finds a bigger audience than reality,

305
00:13:30,280 --> 00:13:32,880
Speaker 3: which can sometimes be a bit more boring. But we

306
00:13:32,920 --> 00:13:34,679
Speaker 3: always had a great business. We were always making a

307
00:13:34,720 --> 00:13:37,920
Speaker 3: ton of progress. We continue to do so, so I

308
00:13:37,960 --> 00:13:40,240
Speaker 3: think this, you know, this is a great transaction for us.

309
00:13:40,240 --> 00:13:41,840
Speaker 3: I think the quarter was a great quarter for us.

310
00:13:42,240 --> 00:13:44,760
Speaker 3: I think we're in much better shape than many people

311
00:13:44,800 --> 00:13:47,640
Speaker 3: may have believed before, and we're gonna work hard to

312
00:13:47,640 --> 00:13:49,040
Speaker 3: be an even better shape in the future.

313
00:13:49,080 --> 00:13:50,559
Speaker 4: So we'll just keep improving.

314
00:13:50,520 --> 00:13:52,000
Speaker 2: In terms of costs.

315
00:13:52,320 --> 00:13:54,720
Speaker 1: Ernie, I wonder, you know, do the people of Carvana

316
00:13:54,800 --> 00:13:56,800
Speaker 1: have to kind of buckle their belts a little bit

317
00:13:56,840 --> 00:14:01,560
Speaker 1: tighter right now? Do you go for the single instead

318
00:14:01,600 --> 00:14:04,640
Speaker 1: of the suite? Do you fly commercial instead of private?

319
00:14:04,679 --> 00:14:06,559
Speaker 1: Do you do everything you can as a company to

320
00:14:06,600 --> 00:14:07,560
Speaker 1: bring those costs down.

321
00:14:09,200 --> 00:14:12,560
Speaker 3: I think that there's no doubt that we can do more.

322
00:14:12,640 --> 00:14:14,600
Speaker 3: We should do more, and we have done a lot.

323
00:14:14,720 --> 00:14:16,960
Speaker 3: I think one of the lessons that I'll take from

324
00:14:17,000 --> 00:14:20,240
Speaker 3: twenty twenty two is that pressure is very valuable because

325
00:14:20,240 --> 00:14:22,480
Speaker 3: it drives discipline, and that discipline isn't just where you're

326
00:14:22,520 --> 00:14:24,600
Speaker 3: spending money, it's also where you're spending time, which is

327
00:14:24,720 --> 00:14:28,160
Speaker 3: very very important. And I think, you know, an advantage

328
00:14:28,160 --> 00:14:30,240
Speaker 3: that every startup has when they first start out is

329
00:14:30,760 --> 00:14:32,640
Speaker 3: they always feel a lot of pressure. There's a lot

330
00:14:32,680 --> 00:14:34,440
Speaker 3: of milestones that are trying to hit. It's really tough,

331
00:14:34,480 --> 00:14:37,000
Speaker 3: and I think as a result of that pressure, productivity

332
00:14:37,040 --> 00:14:37,920
Speaker 3: per person's.

333
00:14:37,640 --> 00:14:38,360
Speaker 4: Very very high.

334
00:14:38,520 --> 00:14:41,160
Speaker 3: And I think when you get to become a bigger company,

335
00:14:41,840 --> 00:14:43,920
Speaker 3: you don't mean too People are working hard, they're focused.

336
00:14:43,920 --> 00:14:46,800
Speaker 3: But I do think pressure tends to alleviate slowly but surely.

337
00:14:47,280 --> 00:14:50,840
Speaker 3: And I think, you know, in a way, we may

338
00:14:50,920 --> 00:14:53,400
Speaker 3: thank the world for providing more pressure on top of

339
00:14:53,520 --> 00:14:55,040
Speaker 3: us in twenty twenty two because I do think it

340
00:14:55,040 --> 00:14:56,440
Speaker 3: made us better, and I think we're going to try

341
00:14:56,440 --> 00:14:59,560
Speaker 3: to maintain that footing that it forced us into because

342
00:14:59,600 --> 00:15:01,000
Speaker 3: it causes to improve very quickly.

343
00:15:01,440 --> 00:15:02,840
Speaker 2: Ernie what do you say to the shorts.

344
00:15:02,880 --> 00:15:05,800
Speaker 1: I saw a report I think by S three Partners

345
00:15:05,880 --> 00:15:09,640
Speaker 1: yesterday that almost fifty percent of your stock was shorted.

346
00:15:11,520 --> 00:15:13,360
Speaker 2: What do you say to them or do you thank them?

347
00:15:13,400 --> 00:15:15,680
Speaker 1: Because it does look like short covering is a big

348
00:15:15,760 --> 00:15:17,840
Speaker 1: part of the huge run up we've seen in the price.

349
00:15:19,080 --> 00:15:20,960
Speaker 4: Oh, I don't know. I think our job is to

350
00:15:20,960 --> 00:15:21,560
Speaker 4: build a business.

351
00:15:21,640 --> 00:15:23,920
Speaker 3: I think there's a place in the market for shorts,

352
00:15:23,960 --> 00:15:26,120
Speaker 3: right They look for opportunities where they think things are

353
00:15:26,160 --> 00:15:28,640
Speaker 3: overvalued and they decide to take that view. That's their

354
00:15:28,680 --> 00:15:31,720
Speaker 3: position to take. We got to do our thing and

355
00:15:31,720 --> 00:15:34,720
Speaker 3: build the business. So I think you know, I've got

356
00:15:34,720 --> 00:15:37,960
Speaker 3: no advice for him, nothing positive, productive, or useful.

357
00:15:38,080 --> 00:15:40,520
Speaker 2: But you're out with more stock as part of this deal.

358
00:15:41,360 --> 00:15:45,880
Speaker 1: I assume you'll use those proceeds to lower debt even further.

359
00:15:46,560 --> 00:15:52,040
Speaker 1: Have the shareholders shared the pain of the bond holders enough?

360
00:15:55,160 --> 00:15:58,400
Speaker 3: That's a complicated question. I guess you can ask the

361
00:15:58,440 --> 00:16:01,560
Speaker 3: sum of that. I think last year was a tough

362
00:16:01,640 --> 00:16:03,600
Speaker 3: year for sure, and I think we're on the comeback

363
00:16:03,600 --> 00:16:06,640
Speaker 3: trail now and I think all stakeholders are pretty happy

364
00:16:06,840 --> 00:16:08,480
Speaker 3: I think today, So I think that's the good news.

365
00:16:08,600 --> 00:16:11,120
Speaker 1: I did see that eight analysts now in the course

366
00:16:11,120 --> 00:16:15,320
Speaker 1: of twenty four hours have boosted their price targets. You're

367
00:16:15,400 --> 00:16:17,960
Speaker 1: trading right now for just under fifty at forty seven

368
00:16:18,000 --> 00:16:21,080
Speaker 1: twenty three a share. You have any idea where the

369
00:16:21,080 --> 00:16:23,440
Speaker 1: stock's going to be, say in a year's time earning.

370
00:16:24,480 --> 00:16:25,560
Speaker 4: No idea whatsoever.

371
00:16:25,920 --> 00:16:27,040
Speaker 3: But we're going to do the best to make the

372
00:16:27,040 --> 00:16:29,200
Speaker 3: company as best we can, and then I think the

373
00:16:29,240 --> 00:16:30,680
Speaker 3: markets can figure out exactly where.

374
00:16:30,520 --> 00:16:31,120
Speaker 4: The stock goes.

375
00:16:31,360 --> 00:16:32,600
Speaker 2: That's probably the smartest answer.

376
00:16:32,680 --> 00:16:34,720
Speaker 1: I really appreciate your time, Ernie, thanks so much for

377
00:16:34,800 --> 00:16:37,040
Speaker 1: joining us at Oh you know what, since you're in Arizona,

378
00:16:37,120 --> 00:16:39,920
Speaker 1: I do actually have one more question. It has been

379
00:16:40,040 --> 00:16:42,160
Speaker 1: hot there, and in fact, I think I read that

380
00:16:42,360 --> 00:16:44,320
Speaker 1: for twenty days in a row it's been over one

381
00:16:44,360 --> 00:16:46,360
Speaker 1: hundred and ten degrees in Phoenix.

382
00:16:46,960 --> 00:16:49,000
Speaker 2: Does that you think change.

383
00:16:48,760 --> 00:16:52,720
Speaker 1: As well car buyers behavior. I mean, not just I

384
00:16:52,760 --> 00:16:54,440
Speaker 1: have no ie, not just the hot weather there. But

385
00:16:54,480 --> 00:16:56,680
Speaker 1: I'm just saying weather changes around the world. Do you

386
00:16:56,720 --> 00:16:59,960
Speaker 1: think it changes car buyers behavior, driving them further online

387
00:17:00,120 --> 00:17:02,720
Speaker 1: rather than going out and visiting dealerships.

388
00:17:04,680 --> 00:17:06,200
Speaker 4: I don't think in any material way.

389
00:17:06,200 --> 00:17:07,680
Speaker 3: I think it makes everyone who lives in Phoenix a

390
00:17:07,720 --> 00:17:09,280
Speaker 3: little bit tougher, so we can go out there and

391
00:17:09,760 --> 00:17:11,399
Speaker 3: face tough problems and build a great company.

392
00:17:11,440 --> 00:17:13,119
Speaker 4: So that's what I think happens with all that heat.

393
00:17:13,240 --> 00:17:15,840
Speaker 1: What doesn't kill you only makes you stronger, Earning our SIA,

394
00:17:15,880 --> 00:17:18,960
Speaker 1: thanks so much for joining us, the CEO and chairman

395
00:17:19,119 --> 00:17:21,240
Speaker 1: of Carvon, I really appreciate your time.