With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

<p>During the COVID pandemic, this used-car seller thrived as supply-chain problems made new cars hard to find; today business is booming as inflation makes new cars hard to afford. Carvana sold nearly 600,000 cars in 2025 at healthy profit margins, and its revenue rose 49%, helping it leap ahead 94 spots on the Fortune 500.</p>

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-483-Carvana

Breaking into the <em>Fortune</em> 500 for the first time this year is online used car retailer, Carvana. The company is known for its multi-story, coin-operated car vending machines, where consumers pick up vehicles after finalizing their purchase.

This year's Fortune 500 marks the 66th running of the list.

This year's Fortune 500 marks the 65th running of the list.

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Founded by Ernest Garcia III, Ryan Keeton, and Ben Huston in 2012, Carvana set out to “change the way people buy cars.” The company operates an e-commerce platform for buying and selling used cars in the U.S. and, with its subsidiaries, offers related services including inspection and reconditioning, financing, and auction sites. Carvana debuted its distinctive car vending machine in Nashville in 2015, and now operates almost 40 of the glass towers showcasing its cars. Since launching in 2013, more than 4 million customers have chosen its automotive e-commerce experience to shop, sell, finance, and trade in vehicles entirely online.

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Carvana (CVNA): Company Profile, Stock Price, News, Rankings

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Carvana

carvana

afternoon, ladies and gentlemen, and thank you for joining us on Carvana's first quarter twenty twenty five 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 first quarter shareholder letter is also posted on the IR website. Additionally, we posted a set of supplemental financial tables for Q1, 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 ks 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 and A will be to the non GAAP metrics and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non GAAP 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 with that said, I'd like to turn the call over to Ernie Garcia. Ernie?

Thanks, Meg, and thanks everyone for joining the call. In 2018, we held an Analyst Day where we walked through the long term economics we believed our business model could deliver. That analysis resulted in us projecting a long term EBITDA margin range of 8% to 13.5% at a time when our actual adjusted EBITDA margin was negative 9%. For the last four consecutive quarters, we have been in that range and in Q1 in a seasonally weaker quarter, we were reporting 11.5%. This achievement is worth reflecting on and it begs an important question.

Why were we able to accurately forecast how our model would perform as a five year old newly public company that was significantly subscale and 20% of revenue away from our margin target? The answer is that the automotive industry is simpler when you zoom out than it looks when you zoom in. It is a mature industry with mature unit economics. It is highly fragmented with many industry players using similar processes with similar goals and similar underlying economics. This reality provides a lot of stability and makes the key to understanding any given player about understanding where they are different from the rest This is the method we use to determine our own long term financial model in 2018.

We went line by line using automotive retail history, simple mental models for the way our industry works and a bottom up analysis of the differences in costs and revenues of our business given our novel approach. Zooming out has been predictive over the last seven years and we expect it to be predictive in the future as well. When we went public in 2017, we opened our S1 with a statement of our mission to change the way people buy cars. What we meant by this is that we wanted to build a business so differentiated in selection, experience and value that it just became the way people buy cars. We wouldn't have said that then if we didn't believe it.

We've always believed it. But today, it is much more apparent externally that our mission is achievable. What happens when we continue growing selection and benefiting from the other positive feedback in our business? What happens when we continue unlocking and sharing value with our customers, further separating our offering in speed, experience and value? What happens when more people hear from their friends and family that buying a car from Carvana was fast, fun and fair?

What we think happens is that Carvana becomes the way people buy and sell cars. We are in an incredible position with an incredible business and an incredible team. In order to continue our rapid march toward fulfilling this mission, we are setting our next objective, to grow to $3,000,000 annual retail sales with 13.5% adjusted EBITDA margins in the next five to ten years. Given the position we're in and the fundamental gains we see in front of us, the path to that goal, which we currently view as both very exciting and very achievable is that we continue marching straight to 13.5% EBITDA margin and rapidly grow to 3,000,000 units while sharing significant additional value with our customers along the way. While we believe this is a likely path, we are too young a company that is too early in taking advantage of our opportunity and five to ten years is too long of a time to not have flexibility available to us.

Accordingly, it is important to communicate our priorities. Over the next five to ten years, we plan to prioritize growth over margin within reasonable margin ranges and plan to manage the speed of our growth to ensure we continue to deliver exceptional customer experiences and that we maintain high quality efficient operations. There are 40,000,000 used cars sold every year in The U. S. There are an additional 16,000,000 new cars sold every year.

Adding this up and using last quarter's unit sales annualized, we are still just about 1% of this market. It's very early in the Carvana story and we are firmly on the path to becoming the way people buy and sell cars. Mark?

Thank you, Ernie, and thank you all for joining us today. Our first quarter results were outstanding and driven by our team's ability to achieve further fundamental gains and operating efficiencies, while also delivering significant year over year growth. For the fifth consecutive quarter, we earned positive net income and we set new records for retail units sold, revenue, adjusted EBITDA, GAAP operating income and GAAP operating margin. Unless otherwise noted, all further comparisons will be on a year over year basis. Retail units sold totaled 133,898 in Q1, an increase of 46% and a new company record.

Revenue was $4,232,000,000 an increase of 38% and also a new company record. Consistent with past quarters, our growth in the first quarter was driven by our three long term drivers of growth: a continuously improving customer offering, increasing awareness, understanding and trust, and increasing inventory selection and other benefits of scale. We believe as we continue on our path of profitable growth, each driver will improve creating more positive feedback in our model. Our strong profitability results in Q1 were again driven by sustained and fundamental improvements in GPU and operations expenses as well as levering our overhead expenses. Non GAAP retail GPU was $33.08 an increase of $97 Year over year changes were primarily driven by reductions in reconditioning and inbound transport costs and lower retail depreciation rates, partially offset by lower spreads between wholesale and retail market prices.

Non GAAP wholesale GPU was $964 a decrease of $189 Year over year changes were primarily driven by faster growth in retail units than wholesale vehicle and wholesale marketplace units and higher wholesale vehicle depreciation rates. Non GAAP other GPU was $2,868 an increase of $430 Year over year changes in other GPU were primarily driven by higher spreads between origination interest rates and funding costs as well as a higher attachment rate on vehicle service contracts. Non GAAP SG and A expense was $468,000,000 an increase of 20%. Q1 was another strong quarter for demonstrating the power of our model to lever SG and A expenses. Our 46% growth in retail units sold led to a $750 reduction in non GAAP SG expense per retail units sold.

The Carvana operations portion of SG and A expense totaled $16.58 dollars per retail units sold, a decrease of $192 driven by our operational efficiency initiatives. The overhead portion of SG and A expense totaled $160,000,000 an increase of $9,000,000 and a decrease of $449 on a per retail unit basis. We continue to see opportunities for significant improvement in per unit SG and A expenses over time and as we scale, driven by both continued efficiency and operational expenses as well as leverage in the fixed components of our cost structure. Adjusted EBITDA was $488,000,000 in Q1, an increase of $253,000,000 and a new company record. Adjusted EBITDA margin was 11.5% in Q1, a 3.8 percentage point increase.

Our adjusted EBITDA margin of 11.5% was industry leading and is well within our long term financial model EBITDA margin range of 8% to 13.5%. Our adjusted EBITDA is very high quality compared to many rapidly growing companies due to our relatively low non cash expenses. We converted approximately 80% of adjusted EBITDA into $394,000,000 of GAAP operating income and a 9.3% GAAP operating margin in Q1 leading the public auto retail industry. As previously noted, we currently carry many expenses that support retail unit sales and capacity of over 1,000,000 units and expect our GAAP operating income to grow faster than adjusted EBITDA over time. Q1 was a record quarter that again demonstrated the significant power of our business model.

Assuming the environment remains stable, looking toward Q2, we expect a sequential increase in both retail units sold and adjusted EBITDA leading to all time company records on both metrics. We remain on track to deliver significant growth in both retail units sold and adjusted EBITDA in FY 2025. In conclusion, our results in Q1 were exceptional and we remain highly motivated by our opportunity to continue driving significant profitable growth. Thank you for your attention. We will now take questions.

We will now begin the question and answer session. The first question comes from Ron Josey with Citi. Please go ahead.

Great. Thanks for taking the question. I have two. Erinn, I wanted to in the letter, we talked about a lot of things in the letter, but specifically talked about very clear visibility to continued financial performance. And I wanted to the first part of this question is talk to us a little bit about macro about how tariffs fit in very short term I know and I know you just gave long term guidance, but wanted to hear your thoughts on the here and now and how things are going and how we should how you're thinking about the impact?

And then the second question is more on pricing and on GPUs. And just wondering when you're managing the business and do you manage the business between retail GPUs and total GPUs, meaning that as you can benefit from improving retail GPUs, does that go into lower pricing, maybe impacting the retail GPU, but yet financing GPUs are better. So I'm trying to understand how we're taking these efficiencies pushing it to greater growth and now how that rolls up to overall profitability of the company. Hopefully that makes sense. Thank you.

Thank you. Okay. I'll try to be quick on the first one. I don't know that we have as much interesting stuff to say as others might. But I think as it relates to tariffs, I think we've heard reasonable arguments that I think are directionally correct that if tariffs drive up car prices all else constant, that's bad.

And I think we've heard reasonable arguments that it would be more likely they would drive up new car prices by more than used car prices. And so it may be a directional benefit to used cars. And it may be a benefit to business models that are able to offer value to consumers, which a business model that we think we fit in that box. So we'll see how that works. I think the general approach that we try to take to this, and I think it's been true since the beginning we believe what matters in this industry is what are your expenses compared to everyone else?

What are your revenues compared to everyone else? And what is the experience you deliver compared to everyone else? And if you're better in those three things, then you're going to win. And the question is degree and the question is time, because it is a competitive industry. It's a mature industry.

It's an industry that's very large. And it's an industry where many of the other players have shared economics. And so we try really hard to put all of our energy into those three things, because you can kind of chase a macro environment in circles. That said, we pay attention. I think the good news is we have an adaptive system.

Our system inherently adapts to what it sees. So if customers start to prefer less expensive cars, we'll automatically start buying less expensive cars. If the reverse is true, then we'll react in the opposite way. I think we've seen little gyrations over the last month or so. I think when tariffs were first announced, we saw a small pull forward of demand and we reacted accordingly.

We like to try to keep sales approximately on our plan, keeps operations very smooth. So we pulled some levers to try to keep sales on our plan despite that little increase in demand. And then we saw probably a little bit of a trough thereafter, it feels like it's stabilized since. And I think overall, our expectations remain the same. So I don't think we have too much that's interesting there, but that's how we've been reacting.

I think as it relates to pricing in general, I think we continually use this term fundamental gains. And I think the last couple of years have been pretty exceptional in this regard. I think we've demonstrated a lot of improvement in every expense line item, in every revenue line item, and we've done that well, giving customers improving experiences with improving NPS and similar value. And I think that that's very exciting. And we think we tend to have kind of our annual planning around this time.

And we're setting our targets now for Q4 of this year and for Q2 of next year. And I think looking at the opportunities in every group, there again, very large and very exciting. And I think the hardest thing that we have to do is decide which things we're going to do and which things we're not going to do to try to stay focused and ensure that we get the most out of our effort along the way. But we still think there are very significant fundamental gains. And we think that in aggregate across the various line items, we're likely to take those fundamental gains and seek to share the significant majority of them with our customers to further separate our offering over time.

And we think that we're in a position to do that because we think the economics are very strong. So just to give a quick walk, which is to some degree in the shareholder letter, we were 11.5% this quarter in a traditionally seasonally weak quarter. And so we think that that's very strong to begin with. We think there's a couple of points of fixed cost leverage from there. Even in marketing, which is not a huge line item at this point, our older, more mature markets with larger market shares are a couple of hundred dollars better than our average.

We still think that there's very significant fundamental gains to be had. And I think when you start doing the mental math on that, it gets you well beyond our 13.5% target. But we view that as exciting because we think that that's fuel for future growth that we can share with customers. And we think we'll share it in many ways. It could be economic.

It could be additional investments and experience. You've seen some of the stats we put in show of the letter. We're delivering cars materially faster. We're answering phones more quickly. We're getting fewer calls from customers because we've invested in digital tools that answer questions for them.

So we're just becoming more efficient as a business overall. And I think that we will seek to continue to do that and to take these gains that we expect you'll get, but that we're going to have to work hard to go share them with our customers and see where that takes us. But we think the road in front of us is very clear and it's up to us to execute, we think we've got huge opportunity.

Super clear. Thanks, certainly. Appreciate it.

The next question comes from Brian Nagel with Oppenheimer. Please go ahead.

Hi, good afternoon. First off congratulations. I mean another very, very nice quarter. So congrats.

Thank you. We really do appreciate that. And we do keep track over here. Just remember coming up next.

So two questions. I'll put them together. I mean, first off, as part of the superior performance, you've been managing your retail GPU very well. I guess the question I have is where as you look at it from here, how should we think about from your standpoint the trajectory there kind of puts and takes both near and maybe longer term on that retail GPU? And then my second question, the longer term nature.

You introduced today the kind of newer new longer term financial goals for the company. So as we think about I've been recognizing the numbers you put out there over a long period of time. But what type of incremental investment are you starting to think about to sort of in a business to support those type of volumes? And when will we start to see that newer capacity so to say come online?

Sure. So I think as it relates to the various GPU line items, I mean the way that we think about it first order is we try to break it down. We say what are the various inputs. So in retail GPU, you've got inbound transport, you've got your acquisition costs, you've got reconditioning, you've got the price that we put in front of customers, which is driven by how well we're merchandising and how effectively we're driving demand to those cars. And so those are various areas where we have goals and we have projects that we're trying to tackle in every one of those areas and we try to get better.

And so I think first and foremost, we try to get fundamentally better. And if we get fundamentally better, then we've got good options. One option is you show that in the bottom line and one option is you pass it back to customers either in price itself or in some other form of investment and drive incremental demand. And so generally speaking, I think that we feel like we're in a pretty good spot from an overall GPU perspective. And it's driving us to this place where the EBITDA economic walk that we did a moment ago gets you to very, very exciting places.

So I think we're going to be managing kind of across the economics of the business to try to make sure that we're in a great overall margin spot. And we're going to try to get better in every sub line of every revenue line item and every expense line item. And we think we have visibility to do that and we'll seek to continue doing that. I think as it relates to investments to keep going from here, I think we are in a pretty unique and exciting position. We acquired ADESA several years back now.

And through that acquisition, we got access to a lot of real estate. We've been methodically opening up our mega sites, which support both auction capabilities and reconditioning capabilities. And then we also have underutilized inspection centers ourselves. So I think we're positioned very well to kind of grow into that infrastructure. I think, of course, along the way, there will be investments.

Mark's given some CapEx guidance for this year. I'm sure over time, we'll continue to provide that. But I think relative to most companies with this kind of opportunity, I think there's a lot of kind of pre purchased infrastructure that we get the benefit of growing into. So I think we're in a great spot there and we're excited about it and we'll work hard to unlock it.

The next question comes from Rajat Gupta with JPMorgan. Please go ahead.

Great. Thanks for taking the question. I have one question just on the macro. And you have several questions being asked over the last few months around how is Kirvana positioned to tackle another recession maybe a severe recession. Could you help us understand like what's different now in the business versus 2021, '20 '2?

How should we think about the challenges you might create in the lending I guess in the lending markets gain on sale margins etcetera? If you could just walk us through like some of maybe two or three top aspects that are very different from 2022, which puts you in a better position to navigate a downturn? I have a quick follow-up. Thanks.

Sure. Okay. Well, started that question with a great and then you didn't follow it up. So was that great that it was your turn? Or was that great quarter just so we can keep our stats

Okay. Thank you. Okay. So mark that one down. Here's what I would answer.

I think it's a good and fair question. I think the way that we would try to answer that one would be to point to the automotive industry in general. I think that we were a very, very different company in many respects heading into 2022, right? We were not a money making company. We were an extremely high growth company that was sprinting full speed in opportunity.

And we felt at the time that we are supported by investors in that mission. And then I think we ran into our own issues. We saw interest rates shoot up in a way that was very unique. We saw car prices shoot up over a full year in a that was unique. And we were in a position where we had to dramatically change our strategy.

And so I think there's just a lot of threads that came together at a single time there can give the impression of a pattern that we don't really think is predictive of where the future is likely to be. I think where we are today is we're the most profitable automotive retailer by a pretty long way. I think as measured by adjusted EBITDA margin, we're approximately twice as profitable as the average public automotive retailer. And that puts us in a very different position. We've got significant margin to work with.

We've got significant cash balances. We're simultaneously growing very quickly. And I think that that suggested our ability to absorb variation in the macro environment is very, very different. And I think it's likely to look more like other automotive retailers that were profitable heading into downturns in the past. And in general, when you go back and look at that history, the changes were not very severe.

I think you can also in any of these line items, can look at the history that we've generated over our relatively short life as a company. We've been through some real storms in finance GPU, for example, which I think is one of the areas that people tend to look at first when they ask these sorts of questions. We went through COVID and we saw finance GPU go down a little bit, but recover a quarter later. We went through 2022 and 2023 when you couldn't read a nice thing about us online if you search over and over again. And I think that we saw GPU go down a little bit, but not all that much.

Generally speaking, we are in a competitive market. Everyone else sees the same things that we see. Consumer credit gets worse, that gets priced in. If interest rates go up, that gets priced in. If car prices go up or down, that generally gets priced in.

And so I think our expectation would be that it would be much more like other highly profitable automotive retailers have dealt with difficult environments in the past than it would be like 2022 or 2023. And we'll do our best to make sure that that's the case.

Got it. Got it. And just a follow-up on just like the lending backdrop. I mean, you added like a new partner last year. Curious where you are in discussions potentially adding more partners?

Do you see yourself having more partners or additional partners this year? Where are we in those discussions today? Thanks.

Yes, sure. I think we're stronger than we've ever been by a long way. I think our securitization program is stronger than it's ever been. I think we have more support in the residual sale portion of that, which is kind of more of the almost whole loan risk taking portion of those securitizations. We've got more buyers that are kind of recurring buyers than we've ever had.

We've got obviously our Ally arrangement, which has been great for us over a long period of time and hopefully great for them as well. And we've also had large like pooled loan sales that we've done. We added another large pool buyer this quarter. And I think in general, we feel like we're in a really strong position there. We generate very high quality assets that have predictable cash flows and high yields relative to a lot of other assets that are available in the market.

And so in general, I would say that, that feels as good as it's ever felt. And I think that that's reflected in the results that you see this quarter. We had exceptional finance GPU this quarter. And in general, it's been an improving trend over the last year and a half plus. So I think that that's reflective of those trends.

Understood. Great. Thanks for all the color and good luck.

The next question comes from Chris Bottiglieri with BNP Paribas. Please go ahead.

Hey, thanks for taking the questions. First one, I'm not sure if I heard you correctly, but it sounded like you recast the TAM to the $40,000,000 used plus new and now you're 1% of that TAM. So just in context of acquiring that small dealership that you bought in the franchise space, just currently thinking want to hear how you're thinking about the new vehicle opportunity?

Sure. So we bought that dealership. I think that begs a series of intriguing questions, but it's also very early. I think we're just in the process now of experimenting and learning. And so I think it's a bit early to share much more than that, but stay tuned.

Okay. That's fair. And then I was hoping to dig in on the ramp. Like you provided some interesting context in the shareholder letter like you can get to $3,000,000 in five years versus 10,000,000 and what that implies for like the weekly production capacity. I mean to do it in 5,000,000 you'd have to almost probably start that this year or this coming year to do that.

But I guess what are the steps you do differently to hit it in five years versus 10? Like how does that change your capacity needs? It's the same facilities, but I guess what do do differently to do it in five versus 10? Is it more demand based? Or is it more like how you approach investment and scale it up quite more quickly?

Sure. Well, I think you referenced some data that we put in the letter that hopefully was helpful. But I think over the last twelve months, we've been simultaneously growing sales quite a bit and growing inventory. That means that we've been growing production pretty quickly. And so if you break that down to what we've been doing weekly, it means over the last twelve months, we've averaged increasing our production by about 80 units per week.

And we've done that very consistently over that period of time. It's been a tremendous undertaking by the team. I think they've done an unbelievable job. But I think it also bodes very well for our future because if you that is kind of like the real fundamental operating unit that underlies growing at least production, which is our most complex and difficult to scale operational component of our business. And so if you look at that pace, we really don't have to increase it by very much.

We estimate that we'd have to increase it to about 90 units per week over a ten year period to hit 3,000,000 sales. And so that feels very achievable and we need to be at about 180 units per week to hit 3,000,000 sales in five years, which sounds a bit further away. But I think it's also important to note that over the last year, we had on average about 23 locations that we were producing cars out of and we expect over time to have about 60 locations that we're producing cars out of. And production growth happens at a facility level and requires organization and leadership and hiring at all those levels. But it's something that is made easier certainly by adding more facilities.

So we think that operationally, it's very achievable. It's going to be a lot of work. And there are other parts of the kind of operational chain that we've got to make sure we expand as well. But it's the kind of work that we think that we can do and it's a scale of that work that we believe we have we've achieved in the past or at least have been close to in the past. And so I think that's pretty exciting.

And so I think our goal is going to be to go unlock that as quickly as we can subject to delivering great customer experiences with highly efficient operations to go get fundamental gains and share those with our customers and have that drive demand. Think generally speaking, if you look at the sum total of our life, we had an offering that has been pretty consistent over time and that very consistent offering has driven a lot of demand growth over an extended period of time. And we think looking forward, we're going to benefit from that same offering and we plan to make it better as we unlock additional fundamental gains. And so we think that should provide an ample amount of demand to get us to that level. Because again, 3,000,000 units is a big number, but it's relative the used market of 40,000,000 units, that's 7.5%.

In kind of other retail verticals, it is not abnormal in the lease to have a player have at least that market share and generally significantly larger. And we think with the business model that's twice as profitable as the average of the other public automotive retailers and growing at 46%, we absolutely have that ability and so we're going to go chase it down.

The next question comes from Sharon Zackfia with William Blair. Please go ahead.

Hi. I feel a lot of pressure to say congratulations. So I will do so because I know

you're keeping You have forced. We're still going to count it.

Feel that felt a little forced. It's a long day. It's long out here. So I guess I wanted to kind of drill back into the idea of reinvesting the gains with your customers in the future. I want to level set that that means future gains and we're not expecting kind of a retrenchment in GPU anytime soon because I'm getting pinged on that.

So just if you could clarify that. And then secondarily, as you think about reinvesting kind of further gains with the consumer, how are you prioritizing where to reinvest that? I mean is it are there certain areas where there's just a really quick ROI that you know will catalyze conversion or catalyze traffic? Are there areas where you have like certain return thresholds that you're thinking about when you're thinking about this reinvestment? I think it's just a whole construct and I'd love to know what I think you said reasonable margin ranges.

So I need you to define reasonable for me Ernie.

You know we're not going to do that. But okay, so let's start with the first question. So I think we put in the letter and said early in the call that we'll prioritize growth over margin within reasonable ranges. And so I think that that does then beg this very reasonable question of like, okay, our margins going backwards, is that the plan? And so just to be crystal clear, we think five to ten years is a long time and it's important when you're a company that's 1% of the market to have flexibility.

But we are on a very good path right now and we are not creating this long term plan with kind of reasonable flexibility built into it to set ourselves up for imminent reduction in margin. Is not our plan. We feel like we're on a very good path and are extremely excited by that. I think our plan going forward is to continue to unlock fundamental gains and we think those fundamental gains are still significant. Year over year, if you just look at the change in our EBITDA margin, that was about another $1,000 give or take per unit of value that we unlocked.

That if you can unlock that much that fast, there's likely more left. And we anticipate and we'll seek to go get more of that. And then we think that we will share that with customers. And I think when we share with customers, there's a number of ways you can do it. Our goal is a simpler, faster, more fun way to buy a car, where we offer more value.

And I think when you talk about margins going backwards, I think everyone's head goes first to the value side and they imagine lowering prices, lowering rates, increasing bids on cars we buy from customers. All of that is certainly possible and on the table. And I think we will look to share value with our customers in the most intelligent ways we can over time. But I think that simple, faster and fun are also areas that are worthy of investment. And so that's the kind of areas that I think that we've invested in over the last year or two that are driving NPS near three year highs leading to the statistics that we put in the letter and we discussed earlier.

Generally speaking, I think if you make investments in customer offering, it is usually more work and it is harder and you're not only kind of you're generally investing focus, would say more so than dollars. And I think in the best case scenario, we'll seek to invest as much focus as we can to keep making the experience even better because we think that really matters. And oftentimes that's more efficient than dollars. But we're clearly in a spot where if you look at reasonable expectations of additional opportunities we can unlock. It is relatively large dollars and we think that that's exciting and we'll try to invest intelligently going forward.

Okay. Can I follow-up on that? Is that as you're starting to kind of embark on these kinds of investments, are those things you're going to outline to us on The Street, so that we're aware of kind of where you're prioritizing that investment?

I think I don't want to sit here and talk about the exact forms that we'll discuss that in the future. But I mean, think we likely will. I think we just I think the areas that we discussed earlier where all the service levels across the entire business are getting better, those are I think areas where we put effort over the last twelve months. And I think it's showing up in the numbers and we're discussing them today.

The next question comes from Michael Montani with Evercore ISI. Please go ahead.

Hey, thanks. Appreciate you taking the question. Just wanted to ask if I could about some of the work that you all have been doing with respect to third party marketplace selling, if you could give us an update on that and how it's going? And then also if there's anything that we should be keeping in mind as we build out models and so forth with respect to the potential for ancillary revenue streams whether it's third party logistics or reconditioning? So that was the question I had.

Sure. I can hit both of those. So I think the offerings that we've been developing related to either wholesale or retail marketplace, I think are going well. I think we've talked a bit before about some of the fundamental opportunities we see to create a better offering for commercial sellers that gives them options to send a car to Carvana and either wholesale it through a physical auction in ADESA, wholesale it through our new digital auction offering that has been expanding this year ADESA Clear or to sell it via our retail marketplace offering. And so that's something where we see real fundamental gains in the time it takes to get a car from a commercial seller into the hands of the ultimate customer and also an opportunity to cut out costs out of the system in doing that same thing.

I'd say we're incredibly early in that story and thinking about what that can ultimately be. But I do think that it's a place in the industry where we see real fundamental opportunity for a faster and lower cost offering that makes everybody better. And so I do think it's something that we're excited about, but it's very, very early days and really thinking about what that can ultimately be. In terms of your question about what should I put into the model on ancillary revenue streams, and you mentioned a couple around third party reconditioning or logistics services. I think certainly we see opportunities in those areas.

Those areas are not a near term focus. I think our near term focus is starting from where we are today as roughly 1% player in this industry and really continuing to grow the key offering of selling cars to more and more customers. And I think that's really where our focus is going to be. And I think there are ancillary opportunities like the ones that you pointed to, but they're not a near term focus.

Carvana (CVNA) Q1 2025 Earnings Call Transcript

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