CARVANA CO

Previous wording

Our business combines a comprehensive online sales experience with a vertically integrated supply chain that allows us to sell high-quality vehicles to our customers transparently and efficiently at a low price. Using our website, customers can complete all phases of a retail vehicle purchase transaction. Specifically, our online sales experience allows customers to:

Current wording

Our business combines a comprehensive online sales experience with a vertically integrated supply chain that allows us to sell high-quality vehicles to our customers transparently and efficiently at a low price. Using our website or mobile application, customers can complete all phases of a retail vehicle purchase transaction. Specifically, our online sales experience allows customers to:

Previous wording

•Purchase a retail vehicle. As of March 31, 2024, we listed 30,694 total retail units on our website, where customers can select and purchase a vehicle, including arranging financing and signing contracts, directly from their desktop or mobile device. Selling vehicles to retail customers is the primary driver of our business. Selling retail vehicles generates revenue equal to the selling price of the vehicle, less an allowance for returns, and also enables multiple additional revenue streams, including the sale of finance receivables originated to finance the vehicle, vehicle service contracts ("VSCs"), GAP waiver coverage, other ancillary products, and trade-ins.

Current wording

•Purchase a retail vehicle. As of June 30, 2024, we listed 37,299 total retail units on our website, where customers can select and purchase a vehicle, including arranging financing and signing contracts, directly from their desktop or mobile device. Selling vehicles to retail customers is the primary driver of our business. Selling retail vehicles generates revenue equal to the selling price of the vehicle, less an allowance for returns, and also enables multiple additional revenue streams, including the sale of finance receivables originated to finance the vehicle, vehicle service contracts ("VSCs"), GAP waiver coverage, other ancillary products, and trade-ins.

Previous wording

•Protect their purchase. Customers have the option to protect their vehicle with a VSC as part of our online checkout process. VSCs provide customers with protection against the costs of certain mechanical repairs after the expiration of their vehicle’s original manufacturer warranty. We earn a fee for selling VSCs on behalf of an affiliate of DriveTime Automotive Group, Inc. (together with its consolidated affiliates, collectively, “DriveTime”), which is the obligor under these VSCs. We generally have no contractual liability to customers for claims under these agreements. We also offer GAP waiver coverage to customers in most states in which we operate. We have also partnered with Root, Inc. ("Root") to offer an integrated auto insurance solution, through which customers in most states may conveniently access auto insurance directly from the Carvana e-commerce platform.

Current wording

•Protect their purchase. Customers have the option to protect their vehicle with a VSC as part of our online checkout process. VSCs provide customers with protection against the costs of certain mechanical repairs after the expiration of their vehicle’s original manufacturer warranty. We earn a fee for selling VSCs on behalf of an affiliate of DriveTime Automotive Group, Inc. (together with its consolidated affiliates, collectively, “DriveTime”), which is the obligor under these VSCs. We generally have no contractual liability to customers for claims under these agreements. We also offer GAP waiver coverage to customers in most states in which we operate. We have additionally partnered with Root, Inc. ("Root") to offer an integrated auto insurance solution, through which customers in most states may conveniently access auto insurance directly from the Carvana e-commerce platform.

Previous wording

Since launching to customers in Atlanta, Georgia in January 2013, we have historically experienced rapid growth in sales through our website www.carvana.com. During the three months ended March 31, 2024, the number of vehicles we sold to retail customers increased by 15.9% to 91,878, compared to 79,240 in the three months ended March 31, 2023.

Current wording

Since launching to customers in Atlanta, Georgia in January 2013, we have historically experienced rapid growth in sales through our website www.carvana.com. During the three months ended June 30, 2024, the number of vehicles we sold to retail customers increased by 32.5% to 101,440, compared to 76,530 in the three months ended June 30, 2023. During the six months ended June 30, 2024, the number of vehicles we sold to retail customers increased by 24.1% to 193,318, compared to 155,770 in the six months ended June 30, 2023.

Previous wording

As of March 31, 2024, we have established a logistics network and local marketing presence in 316 metropolitan areas and have purchased, reconditioned, sold, and delivered over 1.8 million retail vehicles since the launch of our first market in January 2013. As of March 31, 2024, our 316 markets serviced 81.1% of the U.S. population. We calculate our population coverage as the population in our open markets at the end of the period as a percentage of the total metropolitan statistical area ("MSA") population in the U.S., based on 2015 data from the U.S. Census Bureau. Our hub and spoke market approach allows us to focus on serving our markets and providing the best possible car buying and selling experience to our customers at a low, transparent cost. Our established logistics network and ability to service customers within our markets by delivering or picking up any car on Carvana-branded haulers allow us to provide a low-cost, simple car buying and selling experience. We continually evaluate consumer demand and our operational capacity to determine our market development strategy.

Current wording

As of June 30, 2024, we have established a logistics network and local marketing presence in 316 metropolitan areas and have purchased, reconditioned, sold, and delivered over 1.9 million retail vehicles since the launch of our first market in January 2013. As of June 30, 2024, our 316 markets serviced 81.1% of the U.S. population. We calculate our population coverage as the population in our open markets at the end of the period as a percentage of the total metropolitan statistical area ("MSA") population in the U.S., based on 2015 data from the U.S. Census Bureau. Our hub and spoke market approach allows us to focus on serving our markets and providing the best possible car buying and selling experience to our customers at a low, transparent cost. Our established logistics network and ability to service customers within our markets by delivering or picking up any car on Carvana-branded haulers allow us to provide a low-cost, simple car buying and selling experience. We continually evaluate consumer demand and our operational capacity to determine our market development strategy.

Previous wording

Our largest source of revenue, retail vehicle sales, totaled $2.2 billion and $1.8 billion during the three months ended March 31, 2024 and 2023, respectively. We generally expect retail vehicle sales to trend proportionately with retail units sold, absent any material changes in macroeconomic conditions. We generate gross profit on retail vehicle sales from the difference between the retail selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale.

Current wording

Our largest source of revenue, retail vehicle sales, totaled $2.4 billion and $2.0 billion during the three months ended June 30, 2024 and 2023, respectively, and $4.6 billion and $3.8 billion during the six months ended June 30, 2024 and 2023, respectively. We generally expect retail vehicle sales to trend proportionately with retail units sold, absent any material changes in macroeconomic conditions. We generate gross profit on retail vehicle sales from the difference between the retail selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale.

Previous wording

March 31, 2024 and 2023, respectively. We generally expect wholesale sales to trend proportionately with retail units sold through trade-ins and from customers who wish to sell us a car independent of a retail sale and with the movement of wholesale marketplace units. We generate gross profit on wholesale vehicle sales from the difference between the wholesale selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale. We generate a gross profit on wholesale marketplace units from the difference between the revenue earned from the sale of wholesale marketplace units through our wholesale marketplace platform less our cost of sales associated with operating the wholesale marketplace platform.

Current wording

Wholesale sales and revenues includes sales of trade-ins and other vehicles acquired from customers that do not meet the requirements for our retail inventory. We also include revenue earned from the sale of wholesale marketplace units by non-Carvana sellers through our wholesale marketplace platform, including auction fees and related service revenues, in wholesale sales and revenues. Wholesale sales and revenues totaled $720 million and $777 million during the three months ended June 30, 2024 and 2023, respectively, and $1.4 billion during each of the six months ended June 30, 2024 and 2023. We generally expect wholesale sales to trend proportionately with retail units sold through trade-ins and from customers who wish to sell us a car independent of a retail sale and with the movement of wholesale marketplace units. We generate gross profit on wholesale vehicle sales from the difference between the wholesale selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale. We generate a gross profit on wholesale marketplace units from the difference between the revenue earned from the sale of wholesale marketplace units through our wholesale marketplace platform less our cost of sales associated with operating the wholesale marketplace platform.

Previous wording

Other sales and revenues, which primarily includes gains on the sales of finance receivables we originate and sales commissions on ancillary products such as VSCs, GAP waiver coverage, and auto insurance totaled $229 million and $161 million during the three months ended March 31, 2024 and 2023, respectively. We generally expect other sales and revenues to trend proportionately with retail units sold. We also expect other sales and revenues to increase as we improve our ability to monetize loans we originate, including through securitization transactions, and sell and offer attractive financing solutions and ancillary products to our customers, including products customarily sold by automotive retailers or insurance products customarily sold by traditional insurance companies, absent any material changes in macroeconomic conditions. Other sales and revenues are 100% gross margin products for which gross profit equals revenue.

Current wording

Other sales and revenues, which primarily includes gains on the sales of finance receivables we originate and sales commissions on ancillary products such as VSCs, GAP waiver coverage, and auto insurance totaled $279 million and $230 million during the three months ended June 30, 2024 and 2023, respectively and $508 million and $391 million during the six months ended June 30, 2024 and 2023, respectively. We generally expect other sales and revenues to trend proportionately with retail units sold. We also expect other sales and revenues to increase as we improve our ability to monetize loans we originate, including through securitization transactions, and sell and offer attractive financing solutions and ancillary products to our customers, including products customarily sold by automotive retailers or insurance products customarily sold by traditional insurance companies, absent any material changes in macroeconomic conditions. Other sales and revenues are 100% gross margin products for which gross profit equals revenue.

Previous wording

During the current macroeconomic uncertainty, our highest priority will continue to be providing exceptional customer experiences while improving efficiency and utilizing our infrastructure to support efficient growth in retail units sold to help us move along the path to achieve sustained profitability. Secondarily, we plan to pursue several strategies designed to increase our brand awareness and total gross profit per unit. These strategies may include the following:

Current wording

Our highest priority continues to be providing exceptional customer experiences while improving efficiency and utilizing our infrastructure to support efficient growth in retail units sold to help us move along the path to achieve sustained profitability. Efficient growth initiatives, which we may undertake from time to time, include the following:

Previous wording

•Reduce average days to sale. Our goal is generally to increase our sales at a faster rate than we increase our inventory size, which we believe would decrease average days to sale due to a relative increase in demand versus supply. Reductions in average days to sale lead to fewer vehicle price reductions, and therefore higher average selling prices, all other factors being equal. Higher average selling prices in turn lead to higher gross profit per unit sold, all other factors being equal.

Current wording

•Optimize average days to sale. Our goal is generally to optimize our inventory size relative to sales to achieve our desired average days to sale. Reductions in average days to sale lead to fewer vehicle price reductions, and therefore higher average selling prices, all other factors being equal. Higher average selling prices in turn lead to higher gross profit per unit sold, all other factors being equal.

Previous wording

•Leverage existing inspection and reconditioning infrastructure. As we scale, we intend to more fully utilize the capacity at our existing IRCs and auction locations, which collectively have capacity to inspect and recondition approximately 1.3 million vehicles per year at full utilization.

Current wording

•Leverage existing inspection and reconditioning infrastructure. As we scale, we intend to more fully utilize the capacity at our existing IRCs and auction locations, which collectively have capacity to inspect and recondition approximately 1.35 million vehicles per year at full utilization.

Previous wording

We have historically aggressively invested in the growth of our business. Due to the current macroeconomic environment, we are focused on driving fundamental gains in gross profit per unit and operational efficiency, flexibility, and scalability through process and technology improvements to increase profitability and provide a strong foundation for profitable growth. While we intend to become increasingly efficient over time, we also anticipate that our operating expenses will increase as we return to growth and continue to expand our logistics network, increase our advertising spending, and serve more of the U.S. population. There is no guarantee that we will be able to realize the desired return on our investments.

Current wording

While we have historically aggressively invested in the growth of our business, for the past several quarters we have been and continue to be focused on driving fundamental gains in gross profit per unit and operational efficiency, flexibility, and scalability through process and technology improvements to increase profitability and provide a strong foundation for profitable growth. As we continue targeting initiatives aimed at improving efficiencies, we simultaneously plan to invest in the profitable expansion of our business. While we intend to become increasingly efficient over time, we also anticipate that our operating expenses will increase as we return to growth and continue to expand our logistics network, increase our advertising spending, and serve more of the U.S. population. There is no guarantee that we will be able to realize the desired return on our investments.

Previous wording

We define a monthly unique visitor as an individual who has visited our website within a calendar month, based on data provided by Google Analytics. We calculate average monthly unique visitors as the sum of monthly unique visitors in a given period, divided by the number of months in that period. We view average monthly unique visitors as a key indicator of the strength of our brand, the effectiveness of our advertising and merchandising campaigns, and consumer awareness of our brand.

Current wording

We define a monthly unique visitor as an individual who has visited our website or iOS/Android application within a calendar month, based on data provided by Google Analytics. We calculate average monthly unique visitors as the sum of monthly unique visitors in a given period, divided by the number of months in that period. We view average monthly unique visitors as a key indicator of the strength of our brand, the effectiveness of our advertising and merchandising campaigns, and consumer awareness of our brand. During the three months ended June 30, 2024, the methodology used by Google Analytics to count unique visitors changed to include individuals visiting our iOS/Android application, in addition to those visiting our website. We believe this change allows us to more accurately calculate and reflect average monthly unique visitors. To conform to current period presentation, we have recast average monthly unique visitors for the three and six months ended June 30, 2023 and three months ended March 31, 2024. The change in measurement methodology resulted in 9.6% and 9.1% more average monthly unique visitors for the three and six months ended June 30, 2023, respectively, and 4.2% more average monthly unique visitors for the three months ended March 31, 2024, compared to previously reported numbers.

Previous wording

We define total gross profit per unit, non-GAAP as the aggregate gross profit, non-GAAP in a given period, divided by retail units sold in that period. Gross profit, non-GAAP is defined as gross profit plus depreciation and amortization in cost of sales, share-based compensation in cost of sales, and restructuring costs, minus revenue related to warrants to purchase shares of Root's Class A common stock (the "Root Warrants") as discussed in Note 17 — Fair Value of Financial Instruments. Refer to "Non-GAAP Financial Measures" for more information, including the reconciliation of non-GAAP financial measures to the most directly comparable financial measures under generally accepted accounting principles in the United States ("GAAP").

Current wording

We define total gross profit per unit, non-GAAP as the aggregate gross profit, non-GAAP in a given period, divided by retail units sold in that period. Gross profit, non-GAAP is defined as gross profit plus depreciation and amortization expense in cost of sales, share-based compensation expense in cost of sales, and restructuring expense, minus revenue related to warrants to purchase shares of Root's Class A common stock (the "Root Warrants") as discussed in Note 17 — Fair Value of Financial Instruments. Refer to "Non-GAAP Financial Measures" for more information, including the reconciliation of non-GAAP financial measures to the most directly comparable financial measures under generally accepted accounting principles in the United States ("GAAP").

Previous wording

The number of retail vehicles we sell depends on the volume of traffic to our website, our population coverage, our inventory selection, the effectiveness of our branding and marketing efforts, the quality of our customers' purchase experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition from other used car dealerships and general macroeconomic and used car industry conditions. On a quarterly basis, the number of retail vehicles we sell is also affected by seasonality, with demand for retail vehicles generally reaching a seasonal high point late in the first quarter of each year, commensurate with the timing of tax refunds, and diminishing through the rest of the year, with the lowest relative level of retail vehicle sales generally expected to occur in the fourth calendar quarter. In 2022 and 2023, heightened inflation and rising interest rates resulted in lower demand for used vehicles. Heightened inflation and interest rates persisted during the first three months of 2024 but were outweighed by seasonal demand associated with the timing of tax refunds.

Current wording

The number of retail vehicles we sell depends on the volume of traffic to our website, our population coverage, our inventory selection, the effectiveness of our branding and marketing efforts, the quality of our customers' purchase experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition from other used car dealerships and general macroeconomic and used car industry conditions. On a quarterly basis, the number of retail vehicles we sell is also affected by seasonality, with demand for retail vehicles generally reaching a seasonal high point late in the first quarter of each year, commensurate with the timing of tax refunds, and diminishing through the rest of the year, with the lowest relative level of retail vehicle sales generally expected to occur in the fourth calendar quarter. In 2023, heightened inflation and rising interest rates resulted in lower demand for used vehicles. Heightened inflation and interest rates persisted during the first three months of 2024, and, to a lesser extent, during the second three months of 2024, but were outweighed by seasonal demand associated with the timing of tax refunds and certain of our initiatives focused on growth in retail units sold.

Previous wording

Wholesale sales and revenues includes the aggregate proceeds we receive on vehicles we acquire and sell to wholesalers, and wholesale marketplace revenues. The vehicles we sell to wholesalers are primarily acquired from customers who sell a vehicle to us without purchasing a retail vehicle and from our customers who trade-in their existing vehicles when making a purchase from us. Factors affecting wholesale sales and revenues include the number of wholesale units sold and the average wholesale selling price of these vehicles. The average selling price of our wholesale units is primarily driven by the mix of vehicles we sell to wholesalers, as well as general supply and demand conditions in the applicable wholesale vehicle market. Wholesale sales and revenues includes aggregate proceeds we receive on vehicles sold to DriveTime through competitive online auctions that are managed by an unrelated third party and through the Company's wholesale marketplace platform. Wholesale marketplace revenues include revenue earned from the sale of wholesale marketplace units by third-party sellers to buyers through our wholesale marketplace platform, including auction fees and related services revenue.

Current wording

Wholesale sales and revenues includes the aggregate proceeds we receive on vehicles we acquire and sell to wholesalers, and wholesale marketplace revenues. The vehicles we sell to wholesalers are primarily acquired from customers who sell a vehicle to us without purchasing a retail vehicle and from our customers who trade-in their existing vehicles when making a purchase from us. Factors affecting wholesale sales and revenues include the number of wholesale units sold and the average wholesale selling price of these vehicles. The average selling price of our wholesale units is primarily driven by the mix of vehicles we sell to wholesalers, as well as general supply and demand conditions in the applicable wholesale vehicle market, including the level of depreciation in the wholesale vehicle market. Wholesale sales and revenues includes aggregate proceeds we receive on vehicles sold to DriveTime through competitive online auctions that are managed by an unrelated third party and through the Company's wholesale marketplace platform. Wholesale marketplace revenues include revenue earned from the sale of wholesale marketplace units by third-party sellers to buyers through our wholesale marketplace platform, including auction fees and related services revenue.

Previous wording

Other income, net includes changes in fair value on our beneficial interests in securitizations, purchase price adjustment receivables, and fair value adjustments related to our Root Warrants as discussed in Note 17 — Fair Value of Financial Instruments of our financial statements included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q.

Current wording

Other expense (income), net includes changes in fair value on our beneficial interests in securitizations, purchase price adjustment receivables, and fair value adjustments related to our Root Warrants as discussed in Note 17 — Fair Value of Financial Instruments of our financial statements included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q. For the three and six months ended June 30, 2024, Other expense (income), net also includes expense related to our Tax Receivable Agreement ("TRA") liability. Refer to Note 14 — Income Taxes for further discussion of the TRA.

Previous wording

(1) Includes $7 and $5, respectively, of wholesale sales and revenues from related parties.

Current wording

(1) Includes $7, $5, $14 and $10, respectively, of wholesale sales and revenues from related parties.

Previous wording

(2) Includes $42 and $36, respectively, of other sales and revenues from related parties.

Current wording

(2) Includes $47, $33, $89 and $69, respectively, of other sales and revenues from related parties.

Previous wording

(5) Includes $25 and $26, respectively, of depreciation and amortization expense.

Current wording

(5) Includes $22, $26, $47 and $52, respectively, of depreciation and amortization expense.

Previous wording

Retail vehicle sales increased by $348 million to $2.2 billion during the three months ended March 31, 2024, compared to $1.8 billion during the three months ended March 31, 2023. The increase in revenue was primarily due to an increase in the number of retail vehicles sold to 91,878 from 79,240 during the three months ended March 31, 2024 and 2023, respectively. Additionally, the average selling price of our retail units sold increased to $23,673 in the three months ended March 31, 2024 from $23,056 in the prior year, due primarily to improvements in turn times offset by overall depreciation in the used vehicle market compared to the three months ended March 31, 2023.

Current wording

Six months ended June 30, 2024 versus 2023. Retail vehicle sales increased by $0.8 billion to $4.6 billion during the six months ended June 30, 2024, compared to $3.8 billion during the six months ended June 30, 2023. The increase in revenue was primarily due to an increase in the number of retail vehicles sold to 193,318 from 155,770 during the six months ended June 30, 2024 and 2023, respectively, partially offset by a decrease in the average selling price of our retail units sold to $23,723 in the six months ended June 30, 2024 from $24,318 in the prior year, due primarily to higher overall depreciation in the used vehicle market, partially offset by faster turn times, compared to the six months ended June 30, 2023.

Previous wording

Wholesale sales and revenues increased by $39 million to $657 million during the three months ended March 31, 2024, compared to $618 million during the three months ended March 31, 2023. Wholesale marketplace revenues were higher during the three months ended March 31, 2024 at $232 million, compared to $211 million during the three months ended March 31, 2023, primarily due to an increase in the number of wholesale marketplace units sold to 242,647 from 213,764 during the three months ended March 31, 2024 and 2023, respectively. Additionally, there was an increase in the number of wholesale units sold that were acquired from customers on our website to 44,155 from 35,110 during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Three months ended June 30, 2024 versus 2023. Wholesale sales and revenues decreased by $57 million to $720 million during the three months ended June 30, 2024, compared to $777 million during the three months ended June 30, 2023. The decrease in revenue was primarily due to higher overall depreciation in the wholesale vehicle market as the average selling price of our wholesale units sold decreased to $9,550 during the three months ended June 30, 2024 from $11,926 during the three months ended June 30, 2023. This decrease was partially offset by an increase in the number of wholesale units sold that were acquired from customers on our website to 50,368 from 46,453 during the three months ended June 30, 2024 and 2023, respectively. Additionally, wholesale marketplace revenues were higher during the three months ended June 30, 2024 at $239 million, compared to $223 million during the three months ended June 30, 2023, primarily due to an increase in the number of wholesale marketplace units sold to 247,135 from 227,698 during the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Other sales and revenues increased by $68 million to $229 million during the three months ended March 31, 2024, compared to $161 million during the three months ended March 31, 2023. The increase was primarily due to an increase in gain on loan sales as a result of a more normalized level of loan sales, higher loan sale pricing, and increased retail units sold during the three months ended March 31, 2024, partially offset by lower interest income due to lower levels of finance receivables held for sale.

Current wording

Six months ended June 30, 2024 versus 2023. Other sales and revenues increased by $117 million to $508 million during the six months ended June 30, 2024, compared to $391 million during the six months ended June 30, 2023. The increase was primarily due to an increase in gain on loan sales as a result of more loans sold, higher loan sale pricing and increased retail units sold during the six months ended June 30, 2024, partially offset by lower interest income due to lower levels of finance receivables held for sale.

Previous wording

Retail vehicle gross profit increased by $173 million to $283 million during the three months ended March 31, 2024, compared to $110 million during the three months ended March 31, 2023. This increase was driven primarily by an increase in retail vehicle gross profit per unit to $3,080 for the three months ended March 31, 2024, compared to $1,388 for the three months ended March 31, 2023. The per unit increase was primarily driven by lower average days to sale, lower vehicle acquisition costs, and lower reconditioning and inbound transport costs on retail vehicles sold during the three months ended March 31, 2024.

Current wording

Three months ended June 30, 2024 versus 2023. Retail vehicle gross profit increased by $143 million to $347 million during the three months ended June 30, 2024, compared to $204 million during the three months ended June 30, 2023. This increase was driven primarily by an increase in retail vehicle gross profit per unit to $3,421 for the three months ended June 30, 2024, compared to $2,666 for the three months ended June 30, 2023. The per unit increase was primarily driven by lower average days to sale, lower vehicle acquisition costs relative to sales prices, and lower reconditioning and inbound transport costs on retail vehicles sold during the three months ended June 30, 2024.

Previous wording

Wholesale gross profit increased by $9 million to $79 million during the three months ended March 31, 2024, compared to $70 million during the three months ended March 31, 2023. This increase was primarily driven by an increase in wholesale marketplace gross profit by $7 million to $33 million during the three months ended March 31, 2024, compared to $26 million for the three months ended March 31, 2023. Additionally, the increase was driven by an increase in wholesale units sold to 44,155 from 35,110 for the three months ended March 31, 2024 and 2023, respectively, partially offset by a decrease in wholesale vehicle gross profit per wholesale unit to $1,042 from $1,253, respectively. The increase in wholesale units sold was primarily a result of an increase in overall vehicle acquisitions during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in wholesale vehicle gross profit per wholesale unit was primarily a result of higher depreciation in the wholesale vehicle market during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Three months ended June 30, 2024 versus 2023. Wholesale gross profit increased by $24 million to $89 million during the three months ended June 30, 2024, compared to $65 million during the three months ended June 30, 2023. This increase was primarily driven by an increase in wholesale marketplace gross profit by $15 million to $41 million during the three months ended June 30, 2024, compared to $26 million for the three months ended June 30, 2023, due to an increase in the number of wholesale marketplace units sold to 247,135 from 227,698 during the three months ended June 30, 2024 and 2023, respectively. Additionally, the increase was driven by an increase in wholesale units sold to 50,368 from 46,453 for the three months ended June 30, 2024 and 2023, respectively, along with an increase in wholesale vehicle gross profit per wholesale unit to $953 from $840, respectively. The increase in wholesale units sold was primarily a result of an increase in overall vehicle acquisitions during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in wholesale vehicle gross profit per wholesale unit was primarily a result of lower vehicle acquisition costs relative to sales prices during the three months ended June 30, 2024.

Previous wording

Interest expense increased by $14 million to $173 million during the three months ended March 31, 2024 compared to $159 million during the three months ended March 31, 2023, primarily due to increased PIK interest on the Senior Secured Notes.

Current wording

Interest expense increased by $18 million and $32 million during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively, primarily due to increased PIK interest on the Senior Secured Notes, partially offset by lower interest on the Senior Unsecured Notes, floor plan facility, and finance receivable facilities.

Previous wording

Other income, net increased by $84 million to income of $87 million during the three months ended March 31, 2024 compared to income of $3 million during the three months ended March 31, 2023. The increase was due to a $75 million increase in the fair value of our Root Warrants and $9 million increase in the fair value of our beneficial interests in securitizations during the three months ended March 31, 2024.

Current wording

Other expense (income), net changed by $43 million to expense of $35 million during the three months ended June 30, 2024, compared to income of $8 million during the three months ended June 30, 2023. The change was primarily due to a $22 million decrease in the fair value of our Root Warrants and a $19 million expense related to the TRA liability during the three months ended June 30, 2024. The TRA liability was generated from the expected cash tax savings to be realized by Carvana Co. as a result of LLC unit exchanges. Other expense (income), net changed by $41 million to income of $52 million during the six months ended June 30, 2024, compared to income of $11 million during the six months ended June 30, 2023. The change was primarily due to a net $54 million increase in the fair value of our Root Warrants and a net $9 million increase in the fair value of our beneficial interests in securitizations, partially offset by a $19 million expense related to the TRA liability during the six months ended June 30, 2024.

Previous wording

Income tax benefit decreased to a $1 million benefit during the three months ended March 31, 2024 compared to a $2 million benefit during the three months ended March 31, 2023.

Current wording

Income tax provision (benefit) changed by $1 million to a provision of $1 million during the three months ended June 30, 2024, compared to zero during the three months ended June 30, 2023. Income tax provision (benefit) changed by $2 million to zero during the six months ended June 30, 2024, compared to a $2 million benefit during the six months ended June 30, 2023.

Previous wording

Adjusted EBITDA is defined as net income (loss) plus income tax provision (benefit), interest expense, other operating expense (income), net, other expense (income), net, depreciation and amortization expense in cost of sales and SG&A expenses, goodwill impairment, share-based compensation expense in cost of sales and SG&A expenses, and restructuring expense in cost of sales and SG&A expenses, minus revenue related to our Root Warrants and gain on debt extinguishment. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of total revenues.

Current wording

Adjusted EBITDA is defined as net income (loss) plus income tax provision (benefit), interest expense, other operating expense, net, other expense (income), net, depreciation and amortization expense in cost of sales and SG&A expenses, goodwill impairment, share-based compensation expense in cost of sales and SG&A expenses, loss on debt extinguishment, and restructuring expense in cost of sales and SG&A expenses, minus revenue related to our Root Warrants and gain on debt extinguishment. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of total revenues.

Previous wording

In response to the macroeconomic environment in 2022 through 2024, we increased focus on driving profitability through initiatives to better conform our expense structure to unit volume levels. We expect to continue focus on these profitability initiatives as we return to growth in the future. We expect our primary sources of cash to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months.

Current wording

In response to the macroeconomic environment, our focus during previous quarters has been on driving profitability through initiatives to better conform our expense structure to unit volume levels. We expect to continue our focus on these profitability initiatives as we return to growth. We expect our primary sources of cash to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months.

Previous wording

Finally, subject to the restrictions in the indentures governing the Senior Secured Notes, we or our affiliates may, at any time, and from time to time, repurchase portions of our Class A common stock, our Senior Unsecured Notes, our Senior Secured Notes, or any other securities we may issue, from time to time, in open market transactions, privately negotiated transactions, in exchange for property or other securities or otherwise. Any repurchase decisions will be made after consideration of market conditions and liquidity needs and will be upon such terms and at such prices as we determine appropriate. However, there is no guarantee that a repurchase will take place.

Current wording

Finally, subject to the restrictions in the indentures governing the Senior Secured Notes, we or our affiliates have and may again, at any time, and from time to time, repurchase portions of our Class A common stock, our Senior Unsecured Notes, our Senior Secured Notes, or any other securities we may issue, from time to time, in open market transactions, privately negotiated transactions, in exchange for property or other securities or otherwise. During the three months ended June 30, 2024, we repurchased and cancelled $250 million principal amount of 2028 Senior Secured Notes. Any additional repurchase decisions will be made after consideration of market conditions and liquidity needs and will be upon such terms and at such prices as we determine appropriate. However, there is no guarantee that a repurchase will take place.

Previous wording

As of March 31, 2024 and December 31, 2023, the short-term revolving facilities had a total commitment of $4.2 billion each, an outstanding balance of $275 million and $668 million, and unused capacity of $3.9 billion and $3.5 billion, respectively.

Current wording

As of June 30, 2024 and December 31, 2023, the short-term revolving facilities had a total commitment of $4.2 billion each, an outstanding balance of $72 million and $668 million, respectively, and unused capacity of $4.1 billion and $3.5 billion, respectively.

Previous wording

As of March 31, 2024 and December 31, 2023, our outstanding principal amount of indebtedness was $5.8 billion and $6.0 billion, respectively, summarized in the table below. See Note 9 — Debt Instruments included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q for further information on our debt.

Current wording

As of June 30, 2024 and December 31, 2023, our outstanding principal amount of indebtedness was $5.5 billion and $6.0 billion, respectively, summarized in the table below. See Note 9 — Debt Instruments included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q for further information on our debt.

Previous wording

Includes $75 million and $185 million of accrued PIK interest as of March 31, 2024 and December 31, 2023, respectively. Accrued PIK interest increases the principal amount of Senior Secured Notes on each semi-annual interest payment date.

Current wording

(1) Includes $210 million and $185 million of accrued PIK interest as of June 30, 2024 and December 31, 2023, respectively. Accrued PIK interest increases the principal amount of Senior Secured Notes on each semi-annual interest payment date.

Previous wording

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the six months ended June 30, 2024 and 2023:

Previous wording

Our primary sources of operating cash flows result from the sales of retail vehicles, wholesale vehicles, loans we originate, and ancillary products. Our primary uses of cash from operating activities are purchases of inventory, personnel-related expenses, and cash used to acquire customers. Cash provided by operating activities was $101 million during the three months ended March 31, 2024 and cash used in operating activities was $66 million during the three months ended March 31, 2023, an increase in cash provided by operating activities of $167 million, primarily due to normalized sales of finance receivables during the three months ended March 31, 2024, a reduction in interest paid due to PIK interest on the Senior Secured Notes, and reduced selling, general and administrative expenses and reconditioning costs due to our profitability initiatives, partially offset by increased vehicle inventory acquisitions.

Current wording

Our primary sources of operating cash flows result from the sales of retail vehicles, wholesale vehicles, loans we originate, and ancillary products. Our primary uses of cash from operating activities are purchases of inventory, personnel-related expenses, and cash used to acquire customers. Cash provided by operating activities was $455 million and $443 million during the six months ended June 30, 2024 and 2023, respectively, an increase in cash provided by operating activities of $12 million, primarily due to more finance receivables sold during the six months ended June 30, 2024, a reduction in interest paid due to

Previous wording

Our primary use of cash for investing activities is purchases of property and equipment. Cash provided by investing activities was $7 million during the three months ended March 31, 2024 and cash used in investing activities was $19 million during the three months ended March 31, 2023, a decrease in cash used in investing activities of $26 million, primarily driven by decreased purchases of property and equipment as part of our effort to align our capital expenditures to current volumes along with increased principal payments received on and proceeds from the sale of beneficial interests in securitizations.

Current wording

Our primary use of cash for investing activities is purchases of property and equipment. Cash provided by investing activities was $9 million and $6 million during the six months ended June 30, 2024 and 2023, respectively, an increase in cash provided by investing activities of $3 million, primarily driven by increased principal payments received on and proceeds from the sale of beneficial interests in securitizations along with decreased purchases of property and equipment as part of our effort to align our capital expenditures to current volumes, partially offset by lower proceeds received from the sale of property and equipment.

Previous wording

Cash flows from financing activities primarily relate to our short and long-term debt activity, including proceeds from and payments on our short-term revolving facilities. Cash used in financing activities was $375 million during the three months ended March 31, 2024 and cash provided by financing activities was $151 million during the three months ended March 31, 2023, a decrease in cash provided by financing activities of $526 million. The change primarily relates to higher payments on short-term revolving facilities relative to borrowings.

Current wording

Cash flows from financing activities primarily relate to our short and long-term debt activity, including proceeds from and payments on our short-term revolving facilities. Cash used in financing activities was $451 million and $400 million during the six months ended June 30, 2024 and 2023, respectively, an increase in cash used in financing activities of $51 million. The change primarily relates to (1) higher payments on short-term revolving facilities relative to borrowings, (2) our repurchase and cancellation, during the three months ended June 30, 2024, of $250 million of principal amount of the 2028 Senior Secured Notes in the open market for $259 million, which included $7 million of accrued PIK interest, and (3) net proceeds of $347 million from the sale of approximately 3 million shares of Class A common stock at an average price of $114.85 per share pursuant to our "at-the-market offering" program.

Previous wording

•our ability to effectively manage our historical rapid growth;

Current wording

•our ability to effectively manage our rapid growth;