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Carvana Reports Expense Reduction and Efficiency Improvement in Uncertain Environment

Carvana made progress in reducing expenses and improving efficiency during the third quarter, leading to record third-quarter levels of adjusted EBITDA and gross profit per unit (GPU).

The online used car retailer’s CEO, Ernie Garcia, expressed his confidence in the company’s business model and the long-term potential of the industry Thursday (Nov. 2) during the company’s quarterly earnings call. While acknowledging potential challenges in the current market environment, Carvana remains optimistic about its long-term goals and opportunities for continued success.

Garcia emphasized Carvana’s ambition to sell millions of cars and become the largest and most profitable automotive retailer. He mentioned that Carvana expects volumes to decrease in the fourth quarter due to normal seasonality and potential industry softening. However, he said that Carvana continues to operate within its target unit range for next step of its plan.

“The sum of these dynamics leads us to expect to produce another great quarter, but as in past Q4, we expect lower industrywide volume coupled with higher industrywide depreciation rates to cause lower adjusted EBITDA than we have achieved in the past two quarter,” Garcia said during the call.

The company’s number of retail units sold in the third quarter decreased compared to the previous year but increased sequentially, Carvana Chief Financial Officer Mark Jenkins said during the call.

Carvana’s focus on growth was highlighted throughout the conference call and in supporting materials. The company’s efforts to improve efficiency, reduce expenses, and drive growth were emphasized by both Garcia and Jenkins. They expect continued progress in improving operational expenses and unit economics.

“While our focus today remains on continuing to drive operating efficiency and even stronger unit economics, we are incredibly well-positioned for a return to profitable growth when the time is right as evidenced by the operating leverage we realized in Q3 and the substantial infrastructure we have built to support efficient scaling,” Garcia said in a Thursday earnings release.

While acknowledging the potential impact of industry trends, such as seasonal changes and potential softening, the executives said Carvana remains confident in its ability to navigate these challenges and achieve its long-term goals.

“We are still just a small player in the largest retail market in the world and we are still on the path to selling millions of cars and becoming the largest and most profitable automotive retailer,” Garcia said during the call.