Carvana Q2 revenue up 108% price up 25%

Carvana Q2 2019 revenue up 108% and stock price up over 25% on 8/8/2019.

Holy moly, 22 consecutive quarters of triple-digit revenue growth! And finally, after 20 consecutive quarters of triple digit growth in the number of retail used car units sold, Q1 ‘19 and this Q2 ‘19 “fell short” showing increases of only 99% and 95%, respectively.

Equally gratifying is Carvana’s ongoing kick-ass stock price performance. After reporting its 2018 Q2 financial results on 8/07/19, Carvana share price rocketed up almost 20% in after hours trading and the following day, opened at $71.19 up 23% and closed at $72.53 up over 25%.

As of 8/8/2019, Carvana is up 122% YTD and up 54% over the recent past 52-week period. Here’s the latest Y-T-D Big Chart showing Carvana substantially out-performing some of my favorite holdings, i.e., AMRN, TWLO, ZS and MDB.
• YTD substantially out-performing my favorites, e.g., AMRN, TWLO, ZS and MDB, as shown in this Big Chart.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?..
and over the recent past 52-week period, performing well in comparison with the other aforementioned companies, except against AMRN’s overwhelming performance in this ?Big Chart.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?..

I am a Carvana stockholder, who first brought Carvana to the attention of this board back on 11/26/2018 CVNA TWLO top price & revenue gainers
https://boards.fool.com/cvna-twlo-top-price-revenue-gainers-…
and, thereafter, posted the following quarterly and annual results: • CVNA Q4/FY 18 triple digit gains continue
https://boards.fool.com/cvna-q4fy-18-triple-digit-gains-cont…
• 5/9/19 Carvana Q1’19 revenues up 110% YoY
https://boards.fool.com/carvana-q13919-revenues-up-110-yoy-3…
On 5/22/19, I countered a rather shallow, overly simplistic post against Carvana with my ongoing case FOR Cavana post.
https://boards.fool.com/my-ongoing-case-for-cavana-34213744…

All the above by a company, acknowledged in my original Carvana post here on 11/26/18, that:
(a) is disrupting and transforming the retail used car sector with their company’s custom-built business model and e-Commerce platform.
(b) is not a software company with recurrent revenue,
(c) sells things, i.e., used cars,
(d) is capital intensive,
(e) has low (akin to its automotive retail industry), but significantly improving gross margins,
(f) has a low EV/Revenue of 3.81,
(g) continues aggressive expansion into new markets and expansion of its network of inspection and reconditioning centers (IRCs).

For now, I intend to stick with Carvana management’s objectives and Long-Term financial goals, vigilantly watch their execution and progress and keep my Carvana investment.

CARVANA Q1 2019 RESULTS

In his 7/7/2019 Letter to Shareholders, Carvana (CVNA) co-founder and CEO Ernie Garcia III reported the following for Q2 2019:
https://investors.carvana.com/~/media/Files/C/Carvana-IR/doc…

Q2 2019 GAAP Results

• Retail units sold totaled 44,000, an increase of 95%

• Revenue totaled $986.2 million, an increase of 108%

• Total gross profit, including Gift, was $137.8 million, an increase of 181%

• Net loss, including Gift, was $64.1 million, an increase of 25%

• Basic and diluted net loss, including Gift, per Class A share was $0.58 based on 46.0 million shares of Class A common stock outstanding

Q2 2019 Ex-Gift Results, non-GAAP
• Total gross profit per unit ex-Gift was $3,175, an increase of $1,002
• EBITDA margin ex-Gift was (3.3%), an improvement from (8.8%)
• Adjusted net loss per Class A share, was $0.40, based on 152.4 million adjusted shares of Class A common stock outstanding, assuming the exchange of all outstanding LLC Units for shares of Class A common stock

Q2 2019 Other Results
• Opened 28 new markets and two vending machines, bringing our end-of-quarter totals to 137 and 18, respectively; in addition, we opened one vending machine after quarter end bringing our total to 19 as of August 7, 2019
• Completed a senior notes and equity offering, yielding $543.8 million in net proceeds
• Completed our second auto loan securitization, selling $470 million of principal balances

FY 2019 GUIDANCE

Carvana increased its guidance for retail unit sales, revenue and total gross profit per unit ex-Gift as follows (all financial comparisons stated below are versus FY 2018, unless otherwise noted):


**Carvana 	           FY Guidance     Increase/ 	REVISED FY GUIDANCE   Increase/**
 **as of Q1 '19     Change	  as of Q2 '19         Change**
		
Retail Unit sales       165,000 - 170,000  75% - 81%     167,000 - 172,500    78% - 83%

Total Revenue	        $ 3.5 B - 3.6 B    79% - 84%     $ 3.6 B - 3.7 B      84% - 89%

ex-Gift:
Total Gross Profit/unit	$ 2,450 - 2,650    from $2,133	 $ 2,650 - 2,850      from $2,133 
EBITDA	Margin           (5.5%) - (3.5)    from (9.9%)	  (5.5%) - (3.5%)     from (9.9%)
 
Market Openings              55 - 60       from 41          55 - 60           from 41
                                           in 2018*                           in 2018*

* bringing Carvana end-of-year total to 140-145 markets and our total U.S. population coverage to approximately 67%

Edmunds Used Vehicle Outlook for 2019 projected the following:
https://static.ed.edmunds-media.com/unversioned/img/industry…
Conclusion:
Used vehicles have finally emerged as a compelling alternative to new, and market factors in 2019 will only increase their appeal. Growing new-vehicle transaction prices and an oversupply of used vehicles have expanded the savings advantage in pre-owned vehicles. Additionally, consumers give up less going the used route since late-model cars are rich in technology and come in the body styles Americans gravitate toward, namely trucks and SUVs. At the same time, incentives that have made record-high new-vehicle transaction prices more palatable, such as zero percent APR and steeply discounted leases, have dried up. Without these incentives, we expect shoppers will gravitate to used vehicles for the significant savings they present. While the new vehicle market is expected to fall below 17 million sales for the first time in five years, we expect used vehicle sales, which crossed 40 million units in 2018, to strengthen and grow.
Key excerpts include the following:

40.2 million used vehicles were sold in 2018


**Year   Used Sales   Franchise Sales  CPO Sales**

2013   35,775,755     10,793,385       2,112,548
2014   36,241,800     11,178,073       2,340,348
2015   37,254,854     11,400,111       2,553,663
2016   38,602,466     11,600,597       2,641,900
2017   39,203,694     11,461,515       2,644,422
**2018   40,232,959     11,882,637       2,700,394**

USED CARS POISED TO STEAL SHOPPERS FROM THE NEW CAR MARKET
In 2018, over 57 million new and used vehicles were sold in the United States. It’s a staggering figure considering the adult population stood at only 253 million*, which translates to one vehicle transaction per every 4.4 adults. In 2019, however, we expect a pullback in the new car market as rising prices and interest rates push many potential buyers out of the market. As a result, we expect there will be renewed interest in the used car market as a substitute for new for the following reasons:

  • The price gap between new and used vehicles has widened, giving consumers an opportunity to save more than ever by opting for a 3-year-old used vehicle.
  • While the price gap is widening, the gap between interest rates for new and used vehicles has narrowed. Interest rates on new vehicles have shot up rapidly, with the once popular zero percent offers all but vanishing.
  • A record number of lease returns are expected in 2019, increasing inventory of near-new used vehicles and giving consumers a wider selection.

• An uptick in truck and SUV leasing three years ago means higher quantities of these popular vehicles will hit dealer lots throughout the year.

For those interested, here’s EDMUNDS 2019 AUTOMOTIVE INDUSTRY TRENDS:
MIDYEAR UPDATE June 2019:
https://static.ed.edmunds-media.com/unversioned/img/industry…

CARVANA MANAGEMENT OBJECTIVES

Our management team focuses on delivering an exceptional and unparalleled customer experience while simultaneously growing the business rapidly and achieving our financial objectives. We firmly believe wowing the customer is the core of our model and drives all other metrics. To realize our long-term vision, our three primary financial objectives remain unchanged: (1) Grow Retail Units and Revenue; (2) Increase Total Gross Profit Per Unit; and (3) Demonstrate Operating Leverage. We believe continued focus on these goals will lead to a strong long-term financial model.

Long Term Financial Goals

Below we present our long-term financial model that we introduced at our Analyst Day on November 29, 2018. We believe this is the appropriate frame through which to evaluate our results and progress towards each of our financial objectives.


**LONG TERM**
**Carvana (CVNA)	                 FY 2016   FY 2017	  FY 2018	   Q1 2019	 Q2 2019     TARGET**
					
YOY Revenue Growth	            180%      135%	     128%	      110%	    108%         -
					
Gross Margin 	                    5.3%      7.9%    10.1%/10.3%      11.7%/11.8%   14.0%/14.1%     15% - 19%
(include Gift/exclude Gift)
					
Advertising	                    7.4%      6.5%	     5.7%	      5.2%	    5.1%    1.0% - 1.5%
					
SG&A ex. Advertising & D&A         21.1%     18.2%    14.9%/14.5%      14.3%/14.0%   12.4%/12.3%    4.5% - 5.5%
(include Gift/exclude Gift)					
					
D & A   	                    1.3%      1.3%	     1.2%	      1.1%	    0.9%    0.5% - 1.0%
					
SG&A Total as % of Revenue         29.8%     26.0%    21.7%/21.3%      20.6%/20.3%   18.4%/18.3%      6% - 8%
(include Gift/exclude Gift)				
					
Net Loss Margin 	          25.5)%   (19.1)% (13.0)%/(12.4)% (10.9)%/(10.5)% (6.5%)/(6.2%)	 -
(include Gift/exclude Gift)					
					
EBITDA Margin (exclude Gift)     (23.2)%   (16.9)%	    (9.9)%	    (7.4)%	  (3.3%)      8% - 13.5%

* bringing Carvana end-of-year total to 140-145 markets and our total U.S. population coverage to approximately 67%


Objective #1: Grow Retail Units and Revenue

CVNA reported the following:

We grew units and revenue significantly again in Q2. Retail units sold increased to 44,000, up 95% from 22,570 in Q2 2018. Revenue in Q2 grew to $986.2 million, up 108% from $475.3 million. Our growth in the second quarter was broad-based, driven by gains across our markets nationwide.
Total vehicles acquired from customers grew by 188% in Q2 2019, meaning we bought 52% as many cars from our customers as we sold, up from 35% in Q2 2018 and 40% last quarter. Wholesale units sold, which are primarily sourced from customers, increased by 194% to 10,756 in Q2 2019 from 3,658 in Q2 2018. Growth in vehicles acquired from customers has also fed our retail inventory, diversifying our selection and improving acquisition prices. In Q2, 17% of retail units sold were sourced from customers, up from 11% in Q2 2018 and 14% last quarter.

Objective #2: Increase Total Gross Profit Per Unit (GPU)

The following are Carvana excerpts:

We exceeded our $3,000 midterm GPU goal this quarter driven by record performance across all parts of the transaction. This significant milestone demonstrates our ability to access the numerous profit sources within automotive retail. As laid out at our Analyst Day, we continue to see significant GPU opportunities as we progress towards our long-term financial goals.

For Q2 2019:

• Total
o Total GPU (incl. Gift): $3,132 vs. $2,173 in Q2 2018
o Total GPU ex-Gift: $3,175 vs. $2,173 in Q2 2018

• Retail
o Retail GPU (incl. Gift): $1,440 vs. $1,180 in Q2 2018
o Retail GPU ex-Gift: $1,482 vs. $1,180 in Q2 2018
o Gains in Retail GPU were primarily driven by a greater number of customer-sourced vehicles,
incremental shipping revenue, and a reduction in average days to sale to 61 from 66

• Wholesale
o Wholesale GPU (incl. Gift) was $159 vs. $73 in Q2 2018
o Wholesale GPU ex-Gift was $161 vs. $73 in Q2 2018
o Changes in Wholesale GPU were driven by higher wholesale unit volume (+194%) relative to
retail units (+95%), and higher gross profit per wholesale unit sold ($650 incl. Gift and $660 ex-
Gift vs. $452 in Q2 2018)

• Other
o Other GPU was $1,532 vs. $919 in Q2 2018
o Gains in Other GPU were driven by improved loan monetization from our second auto loan
securitization, as well as higher attachment of VSC and GAP waiver coverage. Total finance GPU, including gain on loan sale and interest income net of securitization fees and expenses, was $1,100 in Q2 compared to $574 in Q2 2018. Monetization took a meaningful step forward in our second deal, which further diversified and expanded our investor base. It is worth noting that the Q2 securitization benefited from recent reductions in benchmark rates that we estimate added $100-$150 to finance GPU and that we don’t expect to persist. That said, even from Q2 levels, we see additional finance GPU upside as we continue to improve deal structure and execution spreads over time.

Objective #3: Demonstrate Operating Leverage

The following are Carvana excerpts:

We achieved record net loss margin and EBITDA margin this quarter, taking another step toward our long-term financial goals. Net loss margin incl. Gift levered by 4.3% and EBITDA margin ex-Gift levered by 5.5%. The second quarter also represented a meaningful milestone for the business as EBITDA dollar losses were reduced on a year-over-year basis for the first time in our history despite substantial investments in growth.

For Q2 2019:
• Total SG&A levered by 1.7% incl. Gift and 1.8% ex-Gift, primarily reflecting benefits from scale, partially offset by investments to support buying cars from customers
• Compensation and benefits levered by 0.5% incl. Gift and 0.7% ex-Gift, primarily reflecting benefits from scale
• Advertising levered by 0.5%, reflecting leverage in existing markets, shifting mix towards older markets, and lower initial CACs in new markets, partially offset by the introduction of advertising focused on buying cars from customers
• Logistics and market occupancy levered by 0.3%, reflecting improving efficiency and volumes through our fulfillment network
• Other SG&A levered by 0.3%, primarily reflecting benefits from scale

CORPORATE FINANCIALS


**CARVANA**
	                   8/08/18	            
GICS SECTOR	  Consumer Discretionary   
GISC INDUSTRY	     Automotive Retail	      
			
MARKET CAP	           $  10.91 B	           
Employees	              3,879             
	                     			
52-WK HIGH	              76.85	              
PRICE/SHARE 	              72.53	              
52-WK LOW	              28.44	              
			
Price Y-T-D change	     121.7%	              
Price change 52-wk	      54.1%	              
S&P 500 52-wk change	      1.07%	               

EV/EBITDA (mrq)	                 NA	              
P/E (ttm)	                N/A	              	              
EV/Revenue (ttm)	       3.81	                            

After reporting its Q2 2019 financial results on 8/07/19, CVNA share price rocketed up almost 20% in after hours trading and the following day opened at $71.19 up 23% and closed at $72.53 up 121.7%.


**5-YEAR SUMMARY OF CVNA CORPORATE FINANCIALS**

**MARKET  NO.   USED 		  WHOLESALE				  NET    Diluted  SHARE**
**CARVANA     CAP    OF   VEHICLE   Change   VEHICLE   Change   REVENUE	Change	 INCOME	   EPS	  PRICE  Change**
**FY/QTR	    ($M)  MKTS UNITS SOLD  YoY	  UNITS SOLD   YoY      ($M)	 YoY	  ($M)	   ($) 	   ($)	  YoY**

**Q2 '19   10.91 B  137   44,000     94.9%   10,756   194.0%   986.221   107.5%  (26.610)  (0.58)   62.59   50.5%** 

Q1 '19   10.88 B  109   36,766     99.1%    6,701   186.1%   755.234   109.6%  (28.549)  (0.60)   41.82   82.4%
											
FY 2018	 4.712 B   85   94,108    112.7%   15,125    132.4% 1,955.467	127.7%	(61.754)  (2.24)  32.71	  71.1%

Q4 '18	 4.712 B   85   27,750    105.3%    4,717    155.8%   584.838	120.6%	(28.704)  (0.74)  32.71   71.1%									          	
Q3 '18	 5.428 B   78   25,324	  116.1%    4,408    145.3%   534.921   137.3%  (16.042)  (0.50)  38.75  164.0%								
Q2 '18	 5.818 B   65   22,570    111.3%    3,658    131.5%   475.286	127.0%	 (9.965)  (0.41)  41.60	 103.2%
Q1 '18	 3.003 B   56   18,464    121.6%    2,342     81.8%   360.422	126.6%	 (7.043)  (0.53)  22.93	 106.6%
											
FY 2017	 2.606 B   44   44,252    135.9%    6,509    145.5%   858.870	135.2%	(62.841)  (1.31)  19.12	
											
Q4 '17	 2.606 B   44   13,517    141.4%    1,844    152.3%   265.053	148.1%	 (5.480)  (0.45)  19.12	
Q3 '17	 1.949 B   39   11,719    133.3%    1,797    128.3%   225.379	128.0%	 (4.380)  (0.29)  14.68	
Q2 '17	 2.718 B   30   10,682    145.3%    1,580    151.2%   209.365	142.0%	(14.542)  (0.28)  20.47	
Q1 '17		   23    8,334    120.3%    1,288    155.6%   159.073	118.1%	(38.439)  (0.28)  11.10	
											
FY 2016		   21   18,761    187.6%    2,651    147.8%   365.148	180.0%  (93.112)				
											
Q4 '16		   21    5,600	  155.5%      731             106.827	151.3%	(35.694)  (0.26)		
Q3 '16		   16    5,023	  182.8%      787	       98.844	177.1%	(21.985)  (0.16)		
Q2 '16		   14    4,355	  224.3%      629	       86.526   202.5%	(18.108)  (0.13)		
Q1 '16		   11    3,783	  212.1%      504	       72.951	237.7%	(17.325)  (0.13)		
											
FY 2015		    9    6,523	  209.9%    1,070    681.0%   130.392   212.8%					

Q4 '15		    9	 2,192	  182.8%		       42.514	200.7%				
Q3 '15		    5	 1,776	  206.7%		       35.668	202.4%				
Q2 '15		    5	 1,343	  208.0%		       28.607	202.8%				
Q1 '15		    4	 1,212	  284.8%		       21.603	243.0%				
												
FY 2014		    3	 2,105		      137	       41.679				
												
Q4 '14		    3	   775				       14.137					
Q3 '14		    3	   579				       11.795					
Q2 '14		    2	   436				        9.449					
Q1 '14		    1	   315				        6.298

===========================

Margins

Carvana margins demand investor vigilance. So far, during its ongoing growth and expansion phase, Carvana is realizing vast improvements in all three margins.

In the Carvana Long Term Financial Goals, management set forth a long term target of 15% to 19% for Gross Margin.


**MARGINS	GROSS	 OPERATING	PROFIT**

Q2 '19  13.9%       (6.5%)      (2.7%)
                
Q1 ’19  11.7%       (8.8%)      (3.8%)

FY '18	10.1%	   (11.7%)	(3.2%)

Q4 '18   9.6%      (12.7%)      (4.9%)
Q3 '18	10.7%      (10.9%) 	(2.9%)	
Q2 ‘18	10.3%	    (9.8%)	(2.1%)
Q1 ‘18	 9.5%	   (13.6%)	(2.0%)
			
FY '17	 7.9%	   (18.1%)	(7.3%)
			
Q4 ‘17	 8.3%	   (17.0%)     (18.9%)
Q3 ‘17	 9.1%	   (17.0%)	(1.9%)
Q2 ‘17	 7.7%	   (17.2%)	(7.0%)
Q1 ‘17			
			
FY '16	 5.3%	   (24.5%)     (25.5%)

==================================

STOCK-BASED COMPENSATION (SBC)

SBC/revenue ratios are favorably low.


**PERIOD	  SBC	SBC/Revenue** 
**($ M)**
Q2 '19 	 8.034      0.8%	       

Q1 ’19   7.711      1.0%

Q4 '18   6.205      1.1%
Q3 '18  13.800      2.6%			
Q2 ‘18	 2.580	    0.5%	      
Q1 ‘18	 1.510	    0.4%	      

FY '18  24.095	    2.5%		
FY '17	 5.611	    0.7%	      
FY '16	 0.555	    0.2%	      
FY '15	 0.490	    0.4%	      

=====================

Capital Structure


**CAPITAL STRUCTURE	            Q2 2019**
		
Cash & cash equivalents (mrq)      $ 40.200 M	
Working Capital	                  $ 707.707 M	
Current Ratio (mrq)	              3.83  	   
LT Debt (mrq)	                  $ 743.132 M     	            
Stockholders’ Equity	          $ 393.817 M	
LT Debt/Stockholders’ Equity	    188.7%	           	            	            

=====================================

WHY BOTHER INVESTING IN CARVANA, A COMPANY IN THE AUTOMOTIVE RETAIL INDUSTRY?

The U.S. automotive retail industry is gigantic as the largest retail trade sector in the U.S.

According to data in the latest available 2017 Annual Retail Trade Survey by the U.S. Census, the 2017 annual sales for the business of motor vehicle and parts dealers accounted for $1.174 trillion or 23% of the total $5.047 trillion retail sales in the U.S. as shown in the following table.

2016 Annual Retail Trade Survey
Estimated Annual Sales off U.S. Retail Firms by Kind of Business: 1992-2017


**ANNUAL RETAIL SALES in $ Billion        2017    2016	 2015	  2014	   2013	    2012     2011     2010     2009	2008	 2007**

**TOTAL U.S. RETAIL SALES	             5,046.9  4,851.8  4,726.0  4,639.4  4,458.5  4,302.2  4,103.0  3,818.0  3,612.5  3,935.3  3,995.2**

**MOTOR VEHICLE & PARTS DEALERS	     1,174.4  1,142.3  1,094.1  1,020.9	   959.3    886.5    812.9    742.9    671.8    785.9	 910.1**
**• % of Total U.S. Retail Sales	         23%      24%	   23%	    22%	     22%      21%      20%      19%	 19%	  20%	   23%**
										
TOTAL AUTOMOBILE DEALERS	     1,009.5    984.4	 940.5	  875.6	   819.3    752.8    684.5    621.2    552.0    649.5	 767.4
• % of Motor Vehicle & Parts dealers	 86%      86%	   86%	    86%	     85%      85%      84%      84%	 82%	  83%	   84%
• % of Total U.S. Retail Sales	         20%      20%	   20%	    19%	     18%      17%      17%      16%	 15%	  17%	   19%
										
NEW CAR DEALERS	                       898.9    876.6	 842.1	  785.1	   735.4    672.6    608.8    549.5    486.6    575.6	 687.7
• % of Total Automobile Dealers 	 89%      89%	   90%	    90%	     90%      89%      89%      88%      88%	  89%	   90%
• % of Total U.S. Retail Sales	         18%      18%	   18%	    17%	     16%      16%      15%      14%      13%	  15%	   17%
									
USED CAR DEALERS	               110.6    105.8	  98.3	   90.4	    83.9     80.2     75.7     71.7     65.4	 73.9	  79.7
• % of Total Automobile Dealers 	 11%      11%	   10%	    10%	     10%      11%      11%      12%      12%	  11%	   10%
• % of Total U.S. Retail Sales	          2%       2%	    2%	     2%	      2%       2%       2%	 2%	  2%	   2%	    2%
										
AUTO PARTS, ACCESS. & TIRE STORES       90.8     90.6	  89.3	   85.8	    85.0     84.1     83.0     77.9     74.2	 76.3	  74.7
• % of Motor Vehicle & Parts dealers	  8%       8%	    8%	     8%	      9%       9%      10%      10%      11%	  10%	    8%
• % of Total U.S. Retail Sales	          2%       2%	    2%	     2%	      2%       2%       2%	 2%	  2%	   2%	    2%

When the automobile retail industry dropped from 23% in 2007 to 19% in 2009 as shown in the above table, the incoming new Obama administration came up with the Cash for Clunker program as part of their 2009 economic stimulus program that was sold as a lifeline from the federal government to a sinking U.S. auto industry. The program turned out to be a lemon, as further verified in 2015 by researchers at Texas A&M in their economic study [ https://www.nber.org/papers/w20349.pdf ] that measured the impact of Cash for Clunkers on sales and found the program actually decreased industry revenue by $3 billion over a nine-to-11-month period. The “stimulus” also cost taxpayers $3 billion. The program let people turn in their old cars for up to $4,500 in cash to be used toward the purchase of a more fuel-efficient alternative. Nearly 700,000 vehicles were traded in through the program.

The way consumers buy cars is changing rapidly.

Historically, consumers discovered vehicles for sale through local print and broadcast media, as well as word of mouth, and would go to dealerships to educate themselves on potential purchases. Consumers no longer rely solely on traditional media and dealerships to discover and research vehicles. According to the Cars Online 2014 report from Capgemini, 97% of customer vehicle purchases involve online research. In fact, the 2016 Car Buyer Journey report from Autotrader indicates that a typical used car buyer spends approximately nine hours researching his or her prospective car purchase online.

The U.S. retail used car market is huge.

The U.S. retail used car marketplace is not only huge, but also highly fragmented. There are approximately 43,000 used car dealerships in the U.S. according to Borrell Associates’ 2017 Outlook, including approximately 27,000 independent dealerships. The largest dealer brand commands approximately 1.7% of the U.S. market and the top 100 used car retailers collectively hold approximately 7.0% market share, according to Edmunds.com, publicly-listed dealership filings and Automotive News.

According to the latest 2019 Used Car Report released by Edmunds, the leading car shopping and information platform, used car sales climbed to an all-time high of 40.2 million vehicles in 2018. This reflects a 2.6% increase in sales from 2017 and a 8.9% increase from 2011.
https://static.ed.edmunds-media.com/unversioned/img/industry…
For comparison, I’ve added Carvana’s annual used car units sold to the Edmonds table to show:
• Carvana’s share of the total used cars sold annually and
• identify Carvana’s huge opportunity to penetrate this huge market and expand further its rapidly growing, albeit tiny share.


 **U.S. TOTAL                                      CVNA TOTAL              CVNA % OF**
 **USED VEHICLES           FRANCHISE   CERTIFIED    USED VEHICLES    CVNA    U.S. TOTAL**
**YEAR       SOLD     CHANGE        USED   PRE-OWNED         SOLD        CHANGE  USED VEHICLES**
 **(millions)    YoY    (millions)  {millions)     (millions)      YoY       S0LD** 

**2018      40.233      2.6%       11.883       2.700      0.094108      112.7%      0.23%**

2017	  39.204      1.6%	 11.462	      2.644      0.044252      135.6%      0.11%
2016	  38.602      3.6%	 11.601	      2.642      0.018761      187.6%      0.05%
2015	  37.255      2.8%	 11.400	      2.533      0.006523      209.9%      0.02%
2014	  36.242      1.3%	 11.178	      2.340      0.002105                  0.01%
2013	  35.776     (4.8%)	 10.793	      2.113
2012	  37.583      1.8%	  9.992	      1.833
2011	  36.921		  9.387	      1.742

Carvana management believes the primary competitive factors in this market include transparency, convenience, price, selection and vehicle quality.

I’ll reiterate here the points made in the Edmunds Used Vehicle Outlook for 2019.
https://static.ed.edmunds-media.com/unversioned/img/industry…
Conclusion:
Used vehicles have finally emerged as a compelling alternative to new, and market factors in 2019 will only increase their appeal. Growing new-vehicle transaction prices and an oversupply of used vehicles have expanded the savings advantage in pre-owned vehicles. Additionally, consumers give up less going the used route since late-model cars are rich in technology and come in the body styles Americans gravitate toward, namely trucks and SUVs. At the same time, incentives that have made record-high new-vehicle transaction prices more palatable, such as zero percent APR and steeply discounted leases, have dried up. Without these incentives, we expect shoppers will gravitate to used vehicles for the significant savings they present. While the new vehicle market is expected to fall below 17 million sales for the first time in five years, we expect used vehicle sales, which crossed 40 million units in 2018, to strengthen and grow.
Key excerpts:
40.2 million used vehicles were sold in 2018


**Year   Used Sales   Franchise Sales  CPO Sales**

2013   35,775,755     10,793,385       2,112,548
2014   36,241,800     11,178,073       2,340,348
2015   37,254,854     11,400,111       2,553,663
2016   38,602,466     11,600,597       2,641,900
2017   39,203,694     11,461,515       2,644,422
**2018   40,232,959     11,882,637       2,700,394**

USED CARS POISED TO STEAL SHOPPERS FROM THE NEW CAR MARKET
In 2018, over 57 million new and used vehicles were sold in the United States. It’s a staggering figure considering the adult population stood at only 253 million*, which translates to one vehicle transaction per every 4.4 adults. In 2019, however, we expect a pullback in the new car market as rising prices and interest rates push many potential buyers out of the market. As a result, we expect there will be renewed interest in the used car market as a substitute for new for the following reasons:

  • The price gap between new and used vehicles has widened, giving consumers an opportunity to save more than ever by opting for a 3-year-old used vehicle.
  • While the price gap is widening, the gap between interest rates for new and used vehicles has narrowed. Interest rates on new vehicles have shot up rapidly, with the once popular zero percent offers all but vanishing.
  • A record number of lease returns are expected in 2019, increasing inventory of near-new used vehicles and giving consumers a wider selection.
    • An uptick in truck and SUV leasing three years ago means higher quantities of these popular vehicles will hit dealer lots throughout the year.

For those interested, here’s EDMUNDS 2019 AUTOMOTIVE INDUSTRY TRENDS:
MIDYEAR UPDATE June 2019:
https://static.ed.edmunds-media.com/unversioned/img/industry…

CONCLUSION

For now, I intend to stick with Carvana management’s objectives and Long-Term financial goals, vigilantly watch their execution and progress and keep my Carvana investment.

As always conduct your own due diligence and decision-making.

Regards,
Ray

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I am a Carvana stockholder, who first brought Carvana to the attention of this board back on 11/26/2018 CVNA TWLO top price

Remember your detailed report plus subsequent posts plus other posters just not seeing what you did. I brought on your report and after doing extensive research so thank you Ray. Not my usual Company to invest but until now and hopefully for a while longer it’s been good for us.

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