Carvana (NYSE:CVNA) Q4 2025 Earnings call February 18, 2026 05:30 PM ET Company ParticipantsErnie Garcia - CEOMark Jenkins - CFOMeg Kehan - VP of Investor RelationsConference Call ParticipantsBrian Nagel - Equity Research AnalystChris Pierce - Equity Research AnalystDaniela Haigian - Equity Research AnalystJeff Lick - Equity Research AnalystJoe Spak - Equity Research AnalystJohn Babcock - Equity Research AnalystLee Horowitz - Equity Research AnalystMarvin Fong - Equity Research AnalystRajat Gupta - Equity R ...

Financial Data and Key Metrics Changes - In Q4 2025, net sales reached $1.3 billion, reflecting a year-over-year growth of 6.3% and marking the second consecutive quarter of growth [5][17] - For the full year, net sales increased nearly 1% to just over $5 billion, with an adjusted EBITDA of $658 million and a margin of 13.1%, indicating expansion for the second consecutive year [6][35] - The total leverage ratio improved to 2.8x from 3.9x at the end of 2023, highlighting a stronger financial foundation [4][31] Business Line Data and Key Metrics Changes - North America experienced a 19% increase in new distributors year-over-year, while Latin America achieved its seventh consecutive quarter of growth [7][8] - The energy, sports, and fitness product category was the fastest-growing segment in 2025, driven by successful product launches [51][62] Market Data and Key Metrics Changes - India reported its highest quarterly net sales in Q4, with a 15% increase year-over-year, attributed to a reduction in the goods and services tax rate [18][26] - Latin America saw reported net sales growth of 18%, with local currency results up 11%, driven by favorable pricing and volume growth [25][26] - In Asia Pacific, reported net sales increased by 5% year-over-year, with a 9% volume growth [26] Company Strategy and Development Direction - The company aims to be the world's premier health and wellness platform, focusing on innovation and digital engagement to enhance distributor success [4][10] - Plans for 2026 include launching new products and modernizing the digital ecosystem to improve customer engagement and personalization [10][11] - The partnership with Cristiano Ronaldo, who acquired a 10% equity stake in Pro2col Software, is expected to elevate brand visibility and expand market reach [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and ability to execute, anticipating net sales growth in all regions except China for 2026 [40][41] - The reduction in GST in India is expected to provide a tailwind for sales until late 2026, despite some margin pressures from increased costs [46][79] - The company is committed to reducing gross debt to $1.4 billion by the end of 2028 while continuing to explore small acquisitions to enhance its core business [31][92] Other Important Information - Adjusted EBITDA for Q4 was $156 million, exceeding guidance, while the adjusted net income for the quarter was $48 million [19][20] - The company has implemented a strategic phased beta rollout of its health and wellness operating system, Pro2col, to enhance distributor engagement [12][13] Q&A Session Summary Question: Can you provide guidance on sales for different geographic segments in 2026? - Management expects net sales growth in every region except China, which is anticipated to be a 2027 event [40] Question: What are the expectations for sales contribution from Pro2col? - Very little top-line contribution is built into the current guidance, with more upside than risk anticipated from the Pro2col program [41][42] Question: How did the energy, sports, and fitness category perform in 2025? - This category has consistently outpaced overall company performance, with successful product launches contributing to growth [51] Question: What is the strategy for expanding the nutrition club infrastructure? - The company is conducting training in various regions, including Europe, to expand the nutrition club model [53][54] Question: What factors contributed to improved Sales Leaders retention rates in 2025? - Various training programs and support initiatives have contributed to the retention of Sales Leaders [56][57] Question: How does the company plan to approach product-customer fit with evolving offerings? - The company aims to attract a more sophisticated customer base while deepening engagement with existing customers [70][73]

Financial Data and Key Metrics Changes - In 2025, Carvana achieved a record net income of $951 million, an increase of $792 million from the previous year, with a net income margin of 17.0%, up from 4.5% [15] - Adjusted EBITDA reached $511 million, an increase of $152 million, with an adjusted EBITDA margin of 9.1%, down from 10.1% [15] - Revenue for Q4 was $5.603 billion, a 58% increase, driven by improved customer offerings and increased inventory selection [12] Business Line Data and Key Metrics Changes - Retail units sold grew by 43% in 2025, totaling 596,641 units, with Q4 retail units sold also increasing by 43% to 163,522 units [11][12] - Non-GAAP retail gross profit per unit (GPU) decreased by $255, while non-GAAP wholesale GPU decreased by $148, attributed to higher non-vehicle costs and faster retail unit growth [12] - Non-GAAP other GPU increased by $49, driven by improvements in cost of funds and higher finance attach rates [13] Market Data and Key Metrics Changes - Carvana holds approximately 1.6% market share of the used vehicle retail market, indicating significant growth potential as e-commerce adoption in non-automotive retail verticals is around 20% [14] - The company integrated 10 additional ADESA locations and expanded digital auction capabilities nationwide, contributing to growth [11] Company Strategy and Development Direction - Carvana aims to reach 3 million retail units sold annually and achieve a 13.5% adjusted EBITDA margin, with a focus on scaling operations and improving customer experience [6][7] - The company is investing in technology and operational efficiency, particularly in vehicle reconditioning, to support growth and maintain competitive advantages [8][9] - Carvana's strategy includes leveraging fixed cost efficiencies and enhancing customer offerings to drive long-term growth [7][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving significant growth in retail units sold and adjusted EBITDA in 2026, assuming a stable environment [16] - The company acknowledged challenges in reconditioning operations but emphasized a commitment to improving efficiency and scaling production [20][53] - Management highlighted the importance of maintaining a strong customer experience and operational excellence to differentiate from competitors [26][79] Other Important Information - Carvana ended 2025 with $2.3 billion in cash and equivalents, having retired $709 million in corporate notes, and reduced net debt to trailing twelve-month adjusted EBITDA ratio to 1.3x [16] - The company released a valuation allowance against tax assets, resulting in a significant deferred tax benefit in Q4, positively impacting net income [83] Q&A Session Questions and Answers Question: Can you discuss the challenges faced in reconditioning as you grow? - Management acknowledged that scaling reconditioning is operationally challenging, especially with new locations and management changes, but expressed confidence in addressing these issues [20][53] Question: What are the early uses of AI in your operations? - Management highlighted that 30% of retail customers complete the process without human interaction, thanks to intuitive systems powered by AI, improving customer experience and efficiency [25][26] Question: How do you view the depreciation environment and its impact on GPU? - Management expects a sequential increase in retail GPU despite cost headwinds, emphasizing ongoing efforts to drive strong growth in both top and bottom lines [34][39] Question: Can you clarify related party transactions regarding loans? - Management confirmed that Carvana does not sell loans to related parties and that all related party transactions are disclosed in financial statements [45] Question: What is the company's approach to customer affordability? - Management stated that while affordability is a concern, the focus is on improving the quality of offerings and operational efficiency to provide better value to customers [77][79]

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