Good afternoon, and welcome to the Carvana Q1 2021 earnings conference call. I would now like to turn the conference over to Mike Levin, Vice President, Investor Relations. Please go ahead. Thank you, Gary. Good afternoon, ladies and gentlemen, and thank you for joining us on Carvana's Q1 2021 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 Q1 shareholder letter is also posted on the 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-K and Form 10-Q. The forward-looking statements and risks in this conference call are based on current expectations as of today, Carvana assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Unless otherwise noted on today's call, all comparisons are on a year-over-year basis. Our commentary today will include non-GAAP financial measures, 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 investor relations website. Now, with that said, I'd like to turn the call over to Ernie Garcia. Ernie? Thanks, Mike, and thanks, everyone, for joining the call. The Q1 was another great quarter across the board. In our shareholder letters, we always lay out our financial priorities of rapidly scaling the business, of growing GPU, and of demonstrating operating leverage. In the Q1, we made tremendous progress across each of these priorities. We grew units and revenue by 76% and 104% respectively. We grew GPU by over $1,000 year-over-year and almost $300 quarter-over-quarter. We levered EBITDA margin by over 10% year-over-year and 2.5% quarter-over-quarter. Even more impressively, these results were achieved despite meaningful operational constraints across the business and the significant investments we've been making to alleviate them. In the Q1, our average weekly production was up 26% versus the fourth quarter. As a result of the relatively low inventory levels we are carrying throughout the quarter, unit volumes closely tracked production up 28% sequentially. Importantly, the investments we have made in ramping up our ops capacity in general and our inspection center capacity in particular are starting to pay off. As a result of ongoing focus, weekly production levels have been up closer to 50% above the fourth quarter more recently, which positions us well to begin growing inventory and increasing selection for our customers again for the first time since the pandemic struck over a year ago. Getting to this point is the result of a lot of careful planning and hard work across our real estate, inspection center, logistics, market ops, and advocate teams, who have all put in tremendous efforts to catch up to demand and to fight off the pandemic-driven ops constraints of the last year. Great job and thank you to those teams. These efforts and the ongoing execution of our plan have positioned us well for a great 2021 and 2022, and the foundation is continuing to be laid to enable us to continue scaling rapidly in the years beyond. Eight years ago, we had a dream to change the way people buy cars, and we've made a lot of progress. When we look back at what got us here, it is just a list of simple ideas that are easy to say and very hard to actually put into action. It all started by imagining a new way to buy a car that was better for our customers in every important way. The excitement of that dream enabled us to attract incredible people who made our dream their own. It has just been ambition, hard work, perseverance, and constant learning. With a critical mass of enthusiastic, customer-focused, ambitious people, we've built a self-reinforcing culture. Those simple ideas have taken us a long way. In 2013, our first year, we had $4 million of revenue. Today, we're over 1,000x larger. Looking forward, we're just as excited as we were then. We are delivering to customers the best experiences available when buying or selling a car. The quality of the unit economics that emerged from the investments we have made over time are showing up in our results. The scalability of our model is apparent, and our business gets better as it gets bigger. We're still dreaming. The ambition that underlies our dreams burns as brightly today as it did at the beginning, and with every step we take, we can see further down the field. While we're extremely proud of what we've built and the team that got us here, we're nowhere near where we ultimately want to be in either scale or scope. We're still at the beginning. To get from where we are to where we want to be, we will maintain our customer focus. We will keep surrounding ourselves with exceptional people. We will remain ambitious. We will stay disciplined in prioritizing our efforts. We'll keep working a little harder than those around us, and we'll have fun along the way. In short, we'll traverse the path in front of us the same way we have traversed the path behind us. We know what to do. We just have to keep doing it. Mark? Thank you, Ernie, and thank you all for joining us today. Q1 was a strong quarter for Carvana across all key financial metrics, and our financial results demonstrate significant progress toward our long-term goals. Retail units sold in Q1 totaled 92,457, an increase of 76%. Total revenue was $2.245 billion, an increase of 104%. Revenue growth outpaced retail unit growth due to higher retail average selling prices and wholesale and other revenue. We expect revenue growth to outpace retail unit growth again in Q2, and then we expect revenue growth to be similar to retail unit growth in the back half of the year. Total GPU was $3,656 in Q1, an increase of $1,016 year-over-year and $277 sequentially. Since Q1 2020 was impacted by the onset of COVID-19 in March, I will focus my commentary on sequential changes. Retail GPU declined slightly to $1,211 from $1,265 in Q4, reflecting a continuation of approximately $200 per unit of transitory costs, primarily driven by rapidly ramping our reconditioning capacity in the midst of COVID-19. We do not expect the majority of these transitory costs to impact Q2. Wholesale GPU increased to $227 from $108 in Q4, primarily driven by strong industry-wide wholesale prices in the latter part of Q1. Other GPU increased to $2,218 from $2,006 in Q4, primarily driven by completing two public securitizations for the first time in Q1, paired with an increase in ancillary product attachment rates that offset a one-time benefit in Q4. EBITDA margin was negative 1.3% in Q1, a 2.6 percentage point improvement from negative 3.9% in Q4, driven by both GPU gains and SG&A leverage. We ended the quarter with more than $2 billion in total liquidity resources, giving us significant flexibility to execute our plan. We had another strong quarter of buying cars from customers in Q1, buying approximately as many cars from customers as we sold to them and achieving a customer source ratio over 60%. Our success over the last two years has made the strength of our offering of buying cars from customers clear, and we no longer expect to provide detailed statistics on buying cars from customers each quarter. So far in Q2, we are seeing outstanding performance. In April, we set a new company record for cars bought from customers, both on an absolute basis and relative to retail units sold. We are as excited as ever about the opportunities ahead. We continue to focus on scaling our production capacity to meet demand. In Q1, we opened our 12th IRC near Birmingham, Alabama, bringing our total annual production capacity to approximately 680,000 units at full utilization. We remain on track to open one additional IRC in Q2 and eight in 2022, bringing our total capacity at full utilization to over 1.25 million units by the end of 2022. So far in Q1, we've opened 22 new markets, bringing our total to 288 and increasing our population coverage to more than 77% of the U.S. population. In May, we also launched our first 5 markets in the Pacific Northwest, adding the last major region to our nationwide footprint. After Q2, we expect our path to 95% population coverage to primarily consist of opening smaller fill-in markets. In our Q4 2020 shareholder letter, we outlined our expectations for the year 2021, including accelerated retail unit sold growth, revenue growth in line with retail unit growth, total GPU in the mid-$3,000s, and a small EBITDA margin loss while investing for growth and continuing our progress on demonstrating leverage. We remain on track to meet or exceed these expectations, and we continue to be excited about 2021 as a significant step toward our long-term goals. Thanks for your attention. We will now take questions. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit your questions to one with 1 follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Sharon Zackfia with William Blair. Please go ahead. Hi, good afternoon. I did not expect to be first. I guess congratulations on a great Q1 and I'm trying to kind of think about your improvements that you've been making in productivity and how we should think about that for the rest of the year. I think, Ernie, you mentioned that soon you'll have available inventory ahead of the year-ago period. I guess I'm wondering when will you be back to kind of pre-pandemic levels? What's your line of sight on that? I know you mentioned the $200 in transitory costs on GPU. Obviously, the year-over-year contraction was a little bit more than that on the car itself. What else was pressuring that? Are you finding that it's more competitive to get inventory? You're having to pay a little bit more than would be ideal. Any thoughts there would be great. Sure. Let's start with production. I think, you know, as you know, basically since the Q2 of last year, we've been pretty constrained in production, given the pullback that we made then and all the demand that we've seen and just trying to catch up. I think in the Q1, you know, we kept pace. Basically, our sales grew sequentially at effectively the same rate as our production grew. I think that kinda suggests that those constraints were still in place. Post the end of the Q1, we've made a lot of progress, and we've continued to see our production growing. We now expect to be able to grow inventory. You know, basically what we're saying there is we've kind of gotten to a place where we expect production to be a little bit more than sales. We don't wanna kind of specify exactly the rates which we expect Inventory to grow, but that's a meaningful mile marker to kind of now be in a place we expect to grow inventory, and we're pretty excited about that. Obviously growing inventory helps with conversion across the site. That's an important milestone that we've hit. We're not gonna quantify it from there. We'll keep working hard and trying to grow that as quickly as we can as we, you know, grow into the production capacity we expect to be around 1.25 million by the end of 2022. Mark, do you wanna hit number two? Sure. Yeah. I'll hit the question on retail GPU. You know, Q1 retail GPU was largely in line with our expectations when taking into account the transitory costs that we talked about in Q4. I think when you look on a year-over-year basis, in addition to those transitory costs, you know, last year we talked some about the impact of some of the early phases of iteration on buying cars from customers that positively impacted GPU last Q1. I think there's some, you know, base effect from those early phases of iteration that's impacting the year-over-year comparison. You know, I think when we, when we look at where we're headed from here, you know, we did call out that we expect the majority of those transitory costs that impacted Q4 and Q1 this year to be gone by Q2. That's a tailwind to retail GPU as we move toward Q2, other things being equal. Obviously, overall, we feel really good about our progress there. You know, had a solid quarter in light of those transitory costs and, you know, expect to step up in Q2. Our next question is from Zachary Fadem with Wells Fargo. Please go ahead. Hey, guys. Thanks for taking the question. Now that you've entered the Pacific Northwest and now have reconditioning centers all over the country, can you talk about the opportunity to start listing your inventory regionally versus nationwide? To what extent this could unlock a higher level of GPU or operating efficiencies across the business? Sure. Obviously, we're excited about launching the Pacific Northwest. That was kind of the last region or footprint that we weren't yet in. I think, you know, opening that up is exciting because it basically means, you know, from here to, you know, roughly our 95% population coverage goal, in the long run, we basically just have markets fill in. That's very exciting. Also, as we grow, you know, demand in general in the existing markets and in new markets, that just puts us in a position where we can economically carry a larger and larger inventory. That's great news for conversion across the country. As inventory gets larger and larger, you know, you certainly have some duplication of inventory that is optimal, where you want to take some of that duplicative inventory and put it in different places around the country that are closer to customers to minimize delivery times, which is also an input into conversion. There is some of what you're talking about that kind of automatically happens with scale, where shipping distances should drop and conversion rates should go up. You know, we have all kinds of tests all the time where we're getting a good handle on how inventory size impacts conversion, how delivery times impact conversion, and kind of what the right thing is to do internally. I don't think that we're gonna give more concrete guidance on the precise expectations that we have around those different numbers. Got it. On production, you've got one more IRC to go this year, but could you talk about the glide path for adding more production lines in your existing facilities? How should we think about the full unlock of the 680,000 in capacity as we move through the year? Sure. I think a way to look at that is to look at our past. You know, we provided in our shareholder letter in Q4 2020, you can kind of see our production capacity, our facility production capacity in each of our previous years. You can get a sense of how long it took for us to unlock that facility capacity with actual production by just looking at kind of sales rates in the future periods. That'll at least give you a sense of how quickly we can unlock that. You know, something we've been working on a lot internally is being able to unlock that production capacity more quickly. You know, we've spoken before about, you know, there are many different operational parts of the business, and all those different parts of the business have different lag times associated with how quickly you can alleviate constraints if you find yourself constrained. Definitely production is the area with the longest lead times. It's the hardest to kind of, you know, grow capacity very quickly there. We've seen that over the last year. We've definitely put a lot of focus on catching up and on making ourselves even more flexible. You know, you can see the results of that progress in kind of our sales growth over the last several quarters and in the fact that we're now expecting to grow inventory. That's been a huge focal point, and it's something that we think we are continuing to get better at. Our next question is from Nick Jones with Citi. Please go ahead. Great. Thanks for the question. I guess, you know, what are the puts and takes in investing into production capacity if maybe the chip shortage lasts longer than expected? I mean, can you be in a situation where you have too much capacity? I guess how fluid is that situation? The second question I have is, you know, some of your legacy competitors or brick-and-mortar competitors are hanging out pretty large targets now. You know, Ernie, how do you feel the competition has changed really, if at all, due to COVID or people noticing what Carvana's been doing all these years? Thanks. Sure. I think first, you know, the used market is fairly different than the new market. It's not totally independent. It's impacted in many ways. You know, the used market, all those cars are already on the road today. There's around 270 million cars on the road, and basically a used transaction is just customers trading with one another. It's not fundamentally impacted by underlying production levels in the way that the new market is. The new market, you know, is impacting the used market to a degree today because the kind of decrease in available supply in new then kind of flows over in excess demand to late model used, and that kind of flows down through all the other used kind of year levels as well. There are some impacts there, but wouldn't expect them to be super pronounced. I don't think that's like a first order driver of what's gonna happen to the used market over the next six months or one year. Even more importantly than that, I think, you know, production capacity is an investment in kind of our long-term future. You know, when we open these facilities and we unlock that capacity by hiring and training, the people in those inspection centers, you know, that then means that we have a capacity to kind of build those cars over and over again that powers our growth, you know, to 2 million cars and beyond, and to becoming the largest, most profitable automotive retailer. Those are big investments in our future that are kind of being made with a much longer lens than the current chip shortages that we're seeing today. As it relates to competitors, I mean, I think there was probably no reasonable expectation of our path from kind of where we started to where we wanted to be, that there wouldn't be competition along the way. I think we've been fortunate enough to have a fair amount of success. You know, with success, there's always competition. You know, we expected competition. I think we should continue to expect competition. We should probably expect competition to, you know, continue to show up as we continue to have more success in the future. You know, that said, I do think if you kind of step back and evaluate the competitive environment, this market, the used car market does have a lot of really nice properties. You know, first of all, it's a 40 million, you know, unit market. So, you know, the largest player has, you know, on the order of a 2% market share. You know, we're now the second-largest player, in just eight years. It's highly fragmented. You know, even some of these, you know, big goals that are being put out by others in the industry, they still are very, very small compared to the market itself. Then, you know, by some measures, the market may be considered fairly competitive in the sense that there's, you know, tens of thousands of players in it. Those tens of thousands of players for the most part are providing customers with a very similar experience to one another. When you start to look at kind of differentiated experiences, there's very, very few players that really have the capacity to make the investments in time, energy, and money that are necessary to build an e-commerce platform. We're way ahead there. You know, we're really excited about, you know, our position. We think that the market that we operate in has really nice competitive dynamics, all else constant. Then we also think that the most important thing that we can do is stay focused on our customers and on ourselves. It gets really easy for two competitors to look at each other and kind of chase each other in circles. We instead wanna make sure that we're focusing on our customers, that we're building out the solutions that they really need, then that we're focusing on ourselves. You know, the last year has taught us that, you know, when you see a lot of demand and you're trying to grow really rapidly, that comes accompanied with a bunch of operational challenges that aren't trivial to solve. You know, we need to stay really focused on ourselves and our execution. We think if we do that, we're gonna achieve our goals. The next question is from Chris Bottiglieri with Exane BNP Paribas. Please go ahead. Hey, guys. Thanks for taking the question. I just wanted to focus a little bit on retail GPU. You know, some of the movements in used car pricing I thought might have been a tailwind in Q1 versus a headwind in Q4. You know, was that the case? Do you not see that? You know, B, if it was if used car pricing was more favorable this quarter, were there any other headwinds that we should, you know, be thinking of as we model retail GPU that you incurred this quarter? Sure. I think there are always many dynamics that are going into retail GPU. You know, I think this quarter, you know, we certainly started to see appreciation, rapid appreciation in the wholesale market. You know, that's appearing to some degree in the retail market. That really came on more toward the end of the quarter. You know, I, I think I'm not sure that that was a particularly large effect on our Q1 number. I think the main effects on Q1 were the ones I called out, namely these transitory costs on the order of $200, you know, roughly the same as what we experienced in Q4. That was probably the biggest unusual impact on retail GPU in Q1. As I mentioned, we expect the majority of those transitory costs to have disappeared by Q2. You know, we think the, you know, the removal of those transitory impacts will be a tailwind, other things equal, as we move toward Q2. Gotcha. Okay. Thank you. Thanks. The next question is from Rajat Gupta with JPMorgan. Please go ahead. Hi. Good afternoon, good evening. Thanks for taking my questions. You know, just had a question on, you know, like just to follow up to one of the previous questions. You know, as you open up more IRCs, you know, and to production capacity increasing and like thus the inventory selection increases, how does like the advertising leverage start to look once that happens? Like, do we start to see a meaningful pickup in the leverage or, you know, just how should we think about that, you know, as that capacity ramps up? I had a quick follow-up. Sure. I think there's probably a lot of ways to think about that. Certainly as we grow inventory, all else constant, we would expect conversion rates to go up. As we kind of decrease delivery time, we would expect conversion rates to go up. The relationship from conversion rates to customer acquisition costs is very clear. As conversion rates go up, you would expect to see leverage in customer acquisition costs. I think that those relationships would be as expected. You know, I also think if you take a look at kind of the cohort data that we've provided over the last several Q4s, you can kind of take a look at what our customer acquisition cost looks like in some of our older cohorts. I think in our oldest cohort, last Q4 was approaching on the order of $500, give or take, versus a company level of around $1,100, I think in Q1. I think we've kind of demonstrated what we can do with customer acquisition costs. In those older markets, obviously in those older markets, we expect it to continue to go down over time as we grow inventory and decrease delivery times and further build the brand. Hopefully that gives you a sense of where we think that can go. Between here and there, I think it's just a function of how many markets we open, what we decide to do with our marketing budget, how quickly we can grow our inventory, how quickly we can decrease our delivery times, how well we execute. In general, we still feel like we're very early in brand building. We measure that in lots of different ways, virtually any measure of customer awareness is still at low levels relative to where we wanna be. We're not being shy about continuing to invest in our brand, we'll do that as long as we think that that's a smart thing to do. Got it. That's helpful. Just on the finance GPU, I know it wasn't broken out separately this quarter, but just based on my math, you know, it points to somewhere around $1,700 or so. Firstly, is that close or accurate? Then just looking at, you know, versus the target from of the analyst day like 2.5 years back, obviously rates are much lower. But what other factors have driven this uptake? Is this kind of like a sustainable level that you would expect in the near term or maybe even higher? Just curious as to how to think about that and like what a more normalized finance GPU number should look like going forward. Thanks. Sure. You know, first of all, we didn't try that breakout, we don't intend to provide it here. I think just so you at least understand, you know, our rationale there. You know, going back in time to our analyst day that you referenced, you know, at that time, we were selling on the order of a quarter as many cars as we're selling today. Our GPU was on the order of half, you know, maybe even less than what it is today. I think our EBITDA margin was probably 10 or 15 points worse. At that time, you know, we were trying to provide pretty detailed walks for our investors so they could understand, you know, how those buildups would occur over time. I think as we've matured and as we've seen a lot of progress in many of those different line items, and I think, you know, the market in general has a much better understanding of how those things progress, you know, we're just kind of simplifying our reporting and kind of aligning more closely with industry standard. We don't intend to kind of break it out at that level of detail going forward. That said, you know, I think it's not hard to infer the general area that it's in, as you pointed to, and that general area is very exciting and it's very strong compared to what we initially outlined at that analyst day in 2018. I think there's a couple reasons for that. You know, some of them are fundamental and sustainable. I think we've really, you know, done a pretty good job with that business, and we've made a lot of fundamental progress in terms of the way that we're able to assess credit risk and price credit risk and the way that we're able to monetize our finance platform. I think there's a lot of things that we've done there that we're proud of, and we think that there's probably some additional fundamental value that we can unlock. I think we're also in something of a unique environment. You know, early in the pandemic, we tightened credit pretty dramatically. You know, we've held credit tighter than probably would be the norm of all else constant. We've generally over kind of the last several quarters been in a very low interest rate environment, so that's helpful. I think there's a couple things that aren't necessarily persistent across time, but we still think that there's progress to be made there. In the rest of other, we think that there's progress to be made in our other existing items, and we think that there's progress to be made by adding additional items as well over time. You know, we think that that's, you know, one of several success stories relative to our long-term model that we, that we put out in 2018, and we think that gives us a lot of flexibility going forward. The next question is from Colin Sebastian with Baird. Please go ahead. Thanks. Good afternoon. I have a couple of questions. I guess first off, I was hoping you could update us on the attach rates of other products and services and how much room there might be to grow those. Secondly, there've been some questions around Google's testing of auto listing ads, and curious if that's something that you might find attractive to participate in, or if you think that that might change the competitive landscape at all. Thanks. Sure. I apologize. I think I'm gonna give you kind of boring answers to those questions. We don't plan to kind of break out our attach rates for our other products and services. We definitely do believe that there is room to continue to improve there. We've made a lot of improvement over the last several years, but we think there's clearly room to go from here. You know, we'll work to do that. As far as, you know, Google testing their different ad products, you know, we obviously use Google as one of our many customer acquisition channels. You know, we use them in search marketing, we use them in several other ways as well. I think we'll view that as a marketing channel. We'll evaluate it like we evaluate all of our other marketing channels. And to the extent it gives us a, you know, high-quality return, then we would expect to utilize that as well. The next question is from Michael Montani with Evercore ISI. Please go ahead. Okay. Thank you for taking the question. First one I had was just around when you're able to self-source a unit, is there a sense that you can provide of the kind of tailwind that that gives, you know, to GPU versus when you have to go to auction? I guess I was thinking, you know, potentially 10% benefit, you know, over $1,000. Just wondering if you could give any clarity there, and then I had a follow-up. Sure. I Go ahead, Mark. Yeah, sure. Yeah, I can take that one. I think, you know, it varies quarter to quarter, but a reasonable way to think about the benefit of sourcing a car from customers is to, you know, look at it in the context of our wholesale GPU. Basically, what wholesale GPU captures is the difference between, you know, our acquisition cost of a car from a customer and the wholesale market trading price of that car. That's a good way to think about the cost benefit of customer sourcing. You know, that just gives you a sense and, you know, to give you a sense of that. You know, it varies quarter to quarter. This quarter we were, you know, around $800 or so, on wholesale GPU. I think that's, you know, it does vary quarter to quarter, but that's a reasonable way to just sort of keep track of the relative cost benefit, of customer sourcing. Okay. That makes sense. Just a follow-up question I had was any incremental color you can share this year and then next year with the 8 IRCs on how to think about the CapEx outlook. You know, what's kind of a normal number, and then specifically, how does this year and next year look? Yeah, sure. You know, a rough way to think about, you know, capital investment related to one of these 67,000 unit IRCs is on the order of $50 million per IRC, maybe a little bit more than that. But on that order of magnitude. You know, of course, the way we think about that from a financing perspective is we've historically sale-leaseback our IRCs. You know, we think that, you know, there's lots of, you know, very efficient ways and a great market for financing those IRC investments so that they're not actually net outlays for the business, but they're, you know, financed outlays. You know, that's to give you a rough order of magnitude of how much they cost. You know, I think, you know, we feel really good about, you know, the desirability of those assets from a financing perspective. The next question is from Nat Schindler with Bank of America. Please go ahead. Yeah. Great. Thank you, guys. I think the GPU question's been done to death, so I thought I'd try something a little different. Could you walk through maybe on a, you know, what you saw probably more on a weekly or daily basis prior to stimulus checks going out and then after them going out and how much impact that had on the quarter? Secondly, on a related note, with the tax filing date pushed out to May 15th, does that have any impact on the seasonality that is usually more Q1 weighted as people get their tax returns? Finally, Well, let's just stop there. That's good enough. I'm not gonna add more. Sure. Nice multi-part question there. Let's try to break it down. I think, let me try to combine basically the first two concepts. I think both, tax refunds and stimulus basically take the form of, you know, government depositing relatively large checks in the bank accounts of many, many people at once. I think, you know, that didn't look materially different than it's looked in years past. You know, generally what happens is, you know, people start to get notifications, through email or whatever else that kind of money's hit their account, and you'll see, kind of the evening before. You know, we'll see a lot of traffic and activity happen on the site, and then, you know, the next day you'll start to see demand show up. I think that that was undoubtedly material this year. As it relates to us, I think a key statistic to keep in mind is, you know, we did grow sales sequentially 28%. We also grew production sequentially 26%. We undoubtedly saw increased demand kind of on the day after stimulus was dropped. The form that that takes, that just further compressed your inventory, you know, therefore reducing conversion rates for everyone afterwards. I think if we had to try to imagine kind of what would've happened to our sales absent stimulus, I think first of all, that's very hard to do. Just directionally, we clearly would've been less kind of on the, you know, days and weeks immediately after stimulus, and our expectations would've been more, you know, in the, in the weeks, kind of, you know, a couple of weeks after the stimulus dropped. I don't know how big the impact was, but I think it was smaller for us this year than it would've been in previous years, because in previous years, we're carrying enough inventory heading into that kind of an event, to be able to handle that big onslaught of demand and then still have sufficient inventory for our customers afterwards. I do think it was a little bit different. You know, the tax returns being pushed out a little bit, I do think that that had an impact, but I think that impact is largely behind us. The vast majority of that impact is behind us, so I don't think that's too meaningful for the future. You don't expect the normal Q1 tax refund, call it seasonality, is gonna be drawn out into Q2? It was pretty much still all taken up into Q1 despite being pushed out a week, a month. The tax filing date was pushed out one month from what I believe is April 15th to May 15th. The date at which most customers get money in their accounts has historically been sometime in February. If you go back, you know, maybe 10 years, it was even kind of late January. It's been slowly kind of moving out, and more recently has been the end of February. That this year might've been one week later than normal, and then probably had kind of a normal spread from there in terms of when you see the demand impact. That didn't move as much as just the filing date itself moved, and the filing date itself is far less powerful than the day that the tax refunds are kind of released to the masses. The next question is from Naved Khan with Truist Securities. Please go ahead. Yeah. Thanks a lot. Maybe on a related note. Since the noise from the stimulus and the tax seems to be behind us, can you maybe give us some sense of how the April trends are looking like for you, and how should we think about the shape of the quarter? Then I have a follow-up. Sure. you know, we wanna stay away, I think, from giving too much detailed kind of intra-period color. you know, we provide an outlook in the shareholder letter, and I think that that captures our expectations. demand has been very strong for really the last you know, year for our offering. We've continually been, you know, carrying a lower inventory than we wished that we were carrying. We're excited now to kind of be at a place where we believe that we'll be able to start growing inventory, which we think is helpful all else constant. you know, I would say, you know, things continue to look great from our perspective. There's nothing notable to call out that would go in any other direction and kind of, you know, those expectations are what we have in our outlook. Okay. Thanks. Maybe you guys mentioned maybe opportunity for more ancillary products. Is there a near-term potential for to introduce a new product on the platform, or is that still ways away? Yeah, I think across the entire business there's many different things that we can focus on. You know, obviously we have a very complicated business from vehicle acquisition, you know, transporting it to the inspection centers, running the inspection centers, you know, merchandising it for customers, pricing for customers, you know, building the finance business, you know, running our warranty product. There's so much that we can work on. We have across the business, we have on the order of 70 different product teams that are working on all these various roadmaps at different points in time. You know, we do our best to prioritize all those different projects as intelligently as we can. Generally speaking, we won't kind of, you know, comment on what that underlying prioritization looks like, but there's no doubt that there's opportunity in the future to add additional products, and that could be potentially exciting. The next question is from Ron Josey with JMP Securities. Please go ahead. Great. Thanks. I wanted to ask two questions, please. I think just to follow up on an earlier question on the expansion of the Pacific Northwest. Can you just help Ernie talk about the distribution and the time to deliver and how you can flex your supply chain into those five new markets in that overall region, which is new? The second question is just, you know, on brand awareness and with 95% population coverage now in sight, and, you know, I think still pretty low brand awareness as we've talked about, $100 million in marketing spend in the quarter is pretty interesting. Just wanted to get your sense on how we should think about marketing spend going forward, how you all are putting those dollars to work around brand awareness, educational spend and performance. Thank you. Sure. The Pacific Northwest is, you know, obviously something that we've been looking at for a long time. It's, you know, it's a relatively isolated population center, you know, way up in the Northwest. It took us a long time to get to a place where we thought it was sensible to kind of add that to our logistics network. Over the last, you know, month or two, we've added that, and we also added, you know, the Salt Lake City area in Utah, which kind of gives us a midpoint that allows us to connect, you know, up there. We can also connect through California. We thought it was a natural time. You know, obviously our long-term aspirations are to get to approximately 95% population coverage and to be a national brand. You know, that was something that we need to do at some point. We've been holding off as we've been so constrained in inventory. Given, you know, our expectation that we're gonna grow inventory and our visibility into where we're headed over the next two years, as well as, you know, our knowledge of our historical lag times and ramping up volumes in new markets, we thought now was a good time. We went ahead and pulled the trigger on that. You know, we're excited to kind of fill out the rest of our regional footprint. On brand awareness, I do think that we remain, you know, very low in brand awareness. You know, our dollar spend is starting to approach, you know, pretty sizable numbers that are meaningful compared to the marketing budgets of lots of companies. We have to also keep in mind that kind of our accumulated dollar spend is still very low compared to a lot of more mature companies that have been around for a long time. We do think that it's still early. You know, we're spending a lot in brand. We definitely spend a lot in kind of education. I think, you know, for a customer to buy a car from Carvana, they have to first, you know that you exist. They have to next understand, you know, what you do and kind of how it's different from buying a car in a traditional way. You know, we have a lot of different value props that we have to educate them about. They have to trust that you're real and your return policy is real, and that they can kind of trust the quality of car that comes their way. All those things just take time to build up in consumer minds. You know, we're testing a lot. We're learning a lot as we go. I think we're very excited about the position that we're in with customer acquisition costs given the knowledge that we've accumulated over time by just looking at how we've levered our older cohorts. you know, we're confident that we know how to lever customer acquisition pretty, you know, significantly, but we also believe that we're very early in brand building. As long as we find different channels that we think are hitting a different audience and educating them in a different way, you know, like I said before, we're not gonna be shy about spending that money and building our brand because we think that's a good investment in the long term. The next question is from Alex Potter with Piper Sandler. Please go ahead. Great. Thanks a lot. I had a question about certified pre-owned. I was just wondering if you have a strategy for trying to break in there, or is that, you know, a segment that you consider more or less off limits? Anything you'd be willing to share on that front would be interesting. Sure. I think there's maybe a couple ways to approach that problem. You know, first of all, every car that we sell is certified. It's Carvana certified, and our certification process was patterned off of, you know, some of the luxury manufacturers' certification processes. The cars that we deliver to customers are of that quality. The specific brand certified pre-owned is generally reserved for the combination of kind of franchise dealers and oftentimes kind of the branded OEM warranty that gets associated with that sale, although that's not always necessarily a condition of the brand of certified pre-owned. I think that, you know, we do believe that we're breaking into that market by building a brand of delivering very high-quality cars and by building a logistics network and infrastructure of reconditioning centers that are able to certify cars to that same quality. You know, that's our goal. The particular brand is generally protected by or for franchise dealers. Okay, understood. Last question, customer source ratio, still really strong. I can appreciate that you won't be disclosing that going forward. I guess maybe just qualitatively, you're still running well ahead of what you thought you could do several years ago, which has been great. I'm sure it's a tailwind for GPU. Are you starting to get convinced now that you can actually keep running indefinitely at these higher customer sourcing rates? Thanks. Sure. Well, I mean, at a very high level of, you know, the market for selling cars is around 40 million possible units. Generally speaking, a customer who's getting a car is also, you know, getting rid of another car. You know, the market for us buying cars is kind of, you know, theoretically at least very similar in size. If you look at, you know, Q1 sales of 92,000 and the, you know, number of cars bought from customers in a similar ballpark, you're basically looking at something like 1% of the market. I think that we're very, very small compared to both of those markets. I do think they are connected in certain ways through brand, particularly our brand and the speed at which we can build our brand and generate awareness across all customers that we both buy and sell cars. They're also fairly disconnected in the sense that, you know, only a subset of those transactions happen simultaneously when a customer is simultaneously buying a car and trading another car. A lot of them are kind of separated in time, where a customer will buy a car and then maybe sell a car later, sell a car and then buy a car later. I think they can grow independently. We've undoubtedly seen, you know, a tremendous amount of progress in that business over the last couple of years, and we're extremely excited about it. I think, you know, now basically the retail business and the business of buying cars from customers are gonna race each other to the unseeable finish line somewhere out in the great blue yonder. The next question is from Seth Basham with Wedbush Securities. Please go ahead. Thanks a lot, and good afternoon. My question is back on the topic of finance GPU. Seems like you hit a high water mark there with this quarter's result, and I'm trying to understand if you think that is a high water mark for 2021 and where you think that can go longer term. Sure. I think for Other GPU in general, we have definitely hit kind of our highest level ever. As described earlier, I do think that there are fundamental gains that we can continue to make in every line item of Other GPU, and there are other opportunities for different products that we can add over time. I think that that's exciting. I also do think that it's hard to size the kind of beneficial impacts that exist in this environment where, one, we're doing, you know, something that we have control over but is likely leading to slightly higher, you know, Other GPU, which is running with tighter credit. Two, you know, we've benefited from very low interest rates. Those are likely to unwind. I think the balance of those things is hard to precisely predict, but we're clearly in great shape versus the long-term model that we outlined a couple of years ago. I think it's too early and we're in too unique of an environment to update that model. We think in general that that's probably roughly the right way to continue to think about it. Obviously, you know, we've done very well against that model over the last several quarters. Got it. All right. Helpful. My follow-up question is just around reconditioning. Have you been using third-party reconditioning for things other than specialized services? Do you plan to do that in the future? Sure. I think in the past, we've talked about, you know, we have run various tests to try to see, you know, what are the various ways that we can ramp up our production capacity across the business that has included utilizing some third-party recon. We are continuing to utilize some third-party recon today. It, you know, it remains a significant minority of the cars we produce overall. That's our expectation for the future as well. But it is something that we are utilizing and continuing to test today. The next question comes from John Colantuoni with Jefferies. Please go ahead. Hi. Thanks for taking my question. Can you talk about the tight inventory environment in the wholesale market and some of the measures Carvana has implemented to unlock new channels for in-inventory acquisition, and if you're expecting those measures to have any notable impacts on the near-term vehicle GPU outside of what's going on with wholesale prices? Thanks. Sure. I can take that one. I mean, I think, you know, our number one channel for sourcing inventory has now become sourcing cars directly from customers, which has several advantages that we've talked about, you know, historically. I think we're certainly gonna continue to focus on that. That's a business that we want to build and continue to grow over the long term. I think, you know, that's our number one area of focus and would be sort of the first answer to that question. I think in terms of the wholesale market dynamics, you know, we're still certainly buying cars out of the wholesale market. You know, I think we're, you know, buying cars. You know, we're making money on those cars when we retail them. I think, you know, we feel very comfortable in the current environment. You know, from a sourcing perspective, you know, our main area of focus is going to be continue to grow the business of buying cars from customers. Great. Thank you so much. Thank you. Our final question comes from Edward Yruma with KeyBanc. Please go ahead. Hey, thanks for squeezing me in. Just two quick ones for me. I guess first on interest rates, have you seen any significant movement in the interest rates you're offering your consumers? Has there been an impact? A broader question, one of your competitors, I guess, as they've scaled, has had, you know, kind of customer service and close difficulties. Obviously, your numbers have been phenomenal, but how would you score kind of your customer service levels, particularly as you continue to ramp your business? Thanks. Sure. I think, you know, on interest rates, they've come down obviously since pre-pandemic, pretty dramatically. Then they've kinda bounced around a little bit from there. There's been some upward movement over the last quarter or so, but nothing material. I don't think that there's The story there is that they're low. I don't think that recent movements are super material. In terms of, you know, customer service levels, you know, our focus from day one has been to build a business from the ground up that delivers great customer experiences and to build all the things that are required to really enable those great experiences to be differentiated in a fundamental way. That's always been our focus. I think when we look at kind of all of our scores, for what customer experience looks like, there's a lot of different things that drive that. I think first and foremost is the way that we've designed the business and the way that we've designed the customer experience. Then I think, you know, from there, you've got your technology and your processes and the quality of those and kind of how good an experience those are capable of delivering. I think very importantly, the next layer is your cultural layer. You know, how much do all the people that talk to your customers, that fix your customer's car, that deliver the car to the customers, how much do they, you know, care about the customers and care about what we're doing together and empathize with the exciting moment that the customer's having when they are getting a car, which is, you know, the second largest purchase they make in their life? I think that we've You know, we would like to think that we've done a pretty good job building a culture there that really cares about delivering great customer experiences. Then I think the last layer is, you know, do you have sufficient capacity across your operations groups to deliver to customers great experiences? I think, you know, over time, you know, we've been constrained many, many times in our eight-year life. Obviously, throughout the pandemic, you know, you've heard of various constraints. If we go back to 2019, we had logistics and market ops constraints. You know, prior to that, we had constraints in the call center and in different places. We've had, you know, constraints across the business at various points in time. Those constraints generally do lead all else constant to our measures of customer experience going down a little bit. Now when they go down, they've traditionally gone down by relatively small amounts, and they remain at levels that are far above industry standard. Importantly, when we, you know, continue to kind of staff up and get our feet underneath us and alleviate those constraints, we see them go right back to where they were, which means that we're in a great place in the kind of foundational elements that matter the most, which is business design, technology, processes, and culture. You know, clearly, we're really happy about the way that we've been able to manage customer experience, which is our primary goal, through all of this growth that has driven us, you know, to be a 1,000x larger company today than we were in the first year that we launched in 2013. Undoubtedly, there are impacts, you know, from very high levels of growth, and those impacts are in the directions that you would expect. I think we've done a good job managing them historically. Thank you. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Perfect. Well, thanks everyone for joining the call. To the entire Carvana team, thank you. Great quarter. Great job. To all the operations teams, you know, this has been a long slog. You've done an incredible job coming in every day and delivering great customer experiences, and we really appreciate it. I hope that you hear the sincerity of that appreciation. Doesn't just sound like something that we say every call. To the inspection center team in particular, this has been an absolute battle. Great job to all of you. I know that you've taken the last couple calls and pinned those up on your locker for inspiration. Clearly it did inspire. You guys have done a great job. We really appreciate it. Please keep going. We've still got a lot of ground to cover, but thanks to all. Have a good one. The conference is now concluded. 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