UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q


ý ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2017March 31, 2023


OR


¨ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______




Commission File Number: 001-38073

CARVANA CO.
(Exact name of registrant as specified in its charter)

Delaware
81-4549921
Delaware81-4549921
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1930 W.300 E. Rio Salado Parkway Tempe, ArizonaTempeArizona85281
(Address of principal executive offices)(Zip Code)

(602) 852-6604
(Registrant's telephone number, including area code)



N/A
(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, Par Value $0.001 Per ShareCVNANew York Stock Exchange
Preferred Stock Purchase Rights—New York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý ☒Yes  ¨ ☐No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý ☒Yes  ¨ ☐No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
  Emerging growth company☐
Large accelerated filer   ¨
Accelerated filer  ¨
Non-accelerated filer  ý (Do not check if a smaller reporting company)
Smaller reporting company   ¨
Emerging growth company ý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes  ý No☐Yes  ☒No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of November 3, 2017,May 1, 2023, the registrant had 15,908,195106,182,391 shares of Class A common stock outstanding and 116,824,38382,900,276 shares of Class B common stock outstanding.





INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Page
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2023 and December 31, 20162022
31
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017March 31, 2023 and 20162022
42
Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the NineThree Months Ended September 30, 2017March 31, 2023 and 2022
53
Unaudited Condensed Consolidated Statements of Cash Flows for the NineThree Months Ended September 30, 2017March 31, 2023 and 20162022
65
Notes to Unaudited Condensed Consolidated Financial Statements
76
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
2635
Item 3.Quantitative and Qualitative Disclosures about Market Risk
4454
Item 4.Controls and Procedures
4554
PART II.OTHER INFORMATION
Item 1.Legal Proceedings
4656
Item 1A.Risk Factors
4656
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
4656
Item 3.Defaults Upon Senior Securities
4656
Item 4.Mine Safety Disclosures
4656
Item 5.Other Information
4656
Item 6.Exhibits
4757








PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)millions, except number of shares, which are reflected in thousands, and par values)


September 30, 2017 December 31, 2016March 31, 2023December 31, 2022
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$103,454
 $39,184
Cash and cash equivalents$488 $434 
Restricted cash11,755
 10,266
Restricted cash206 194 
Accounts receivable, net11,639
 5,692
Accounts receivable, net342 253 
Finance receivables held for sale, net37,519
 24,771
Finance receivables held for sale, net1,606 1,334 
Vehicle inventory192,242
 185,506
Vehicle inventory1,485 1,876 
Other current assets9,598
 9,822
Beneficial interests in securitizationsBeneficial interests in securitizations312 321 
Other current assets, including $6 and $6, respectively, due from related partiesOther current assets, including $6 and $6, respectively, due from related parties177 182 
Total current assets366,207
 275,241
Total current assets4,616 4,594 
Property and equipment, net125,996
 60,592
Property and equipment, net3,195 3,244 
Other assets2,969
 —
Operating lease right-of-use assets, including $13 and $14, respectively, from leases with related partiesOperating lease right-of-use assets, including $13 and $14, respectively, from leases with related parties519 536 
Intangible assets, netIntangible assets, net65 70 
Other assets, including $1 and $1, respectively, due from related partiesOther assets, including $1 and $1, respectively, due from related parties251 254 
Total assets$495,172
 $335,833
Total assets$8,646 $8,698 
LIABILITIES, TEMPORARY EQUITY & STOCKHOLDERS' EQUITY / MEMBERS’ DEFICIT  
LIABILITIES & STOCKHOLDERS' DEFICITLIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:  
Current liabilities:
Accounts payable and accrued liabilities$43,813
 $28,164
Accounts payable due to related party2,142
 1,884
Floor plan facility195,083
 165,313
Accounts payable and accrued liabilities, including $13 and $16, respectively, due to related partiesAccounts payable and accrued liabilities, including $13 and $16, respectively, due to related parties$864 $777 
Short-term revolving facilitiesShort-term revolving facilities1,703 1,534 
Current portion of long-term debt3,375
 1,057
Current portion of long-term debt201 201 
Other current liabilities, including $4 and $4, respectively, from leases with related partiesOther current liabilities, including $4 and $4, respectively, from leases with related parties82 80 
Total current liabilities244,413
 196,418
Total current liabilities2,850 2,592 
Long-term debt, excluding current portion16,363
 4,404
Long-term debt, excluding current portion6,553 6,574 
Operating lease liabilities, excluding current portion, including $9 and $9, respectively, from leases with related partiesOperating lease liabilities, excluding current portion, including $9 and $9, respectively, from leases with related parties493 507 
Other liabilities6,920
 —
Other liabilities72 78 
Total liabilities267,696
 200,822
Total liabilities9,968 9,751 
Commitments and contingencies (Note 13)

 

Temporary equity - Class C redeemable preferred units - 0 and 43,089 units authorized and outstanding as of September 30, 2017 and December 31, 2016, respectively—
 250,972
Stockholders' equity / members' deficit:   
Members' deficit—
 (115,961)
Preferred stock, $.01 par value - 50,000 shares authorized, none issued and outstanding as of September 30, 2017—
 —
Class A common stock, $0.001 par value - 500,000 shares authorized, 15,513 shares issued and outstanding as of September 30, 201716
 —
Class B common stock, $0.001 par value - 125,000 shares authorized, 117,236 shares issued and outstanding as of September 30, 2017117
 —
Additional paid in capital35,447
 —
Commitments and contingencies (Note 17)Commitments and contingencies (Note 17)
Stockholders' deficit:Stockholders' deficit:
Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of March 31, 2023 and December 31, 2022Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of March 31, 2023 and December 31, 2022— — 
Class A common stock, $0.001 par value - 500,000 shares authorized; 106,047 and 106,037 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectivelyClass A common stock, $0.001 par value - 500,000 shares authorized; 106,047 and 106,037 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively— — 
Class B common stock, $0.001 par value - 125,000 shares authorized; 82,900 shares issued and outstanding as of March 31, 2023 and December 31, 2022Class B common stock, $0.001 par value - 125,000 shares authorized; 82,900 shares issued and outstanding as of March 31, 2023 and December 31, 2022— — 
Additional paid-in capitalAdditional paid-in capital1,576 1,558 
Accumulated deficit(7,419) —
Accumulated deficit(2,236)(2,076)
Total stockholders' equity / members' deficit attributable to Carvana Co.28,161
 (115,961)
Total stockholders' deficit attributable to Carvana Co.Total stockholders' deficit attributable to Carvana Co.(660)(518)
Non-controlling interests199,315
 —
Non-controlling interests(662)(535)
Total stockholders' equity / members’ deficit227,476
 (115,961)
Total liabilities, temporary equity & stockholders' equity / members’ deficit$495,172
 $335,833
Total stockholders' deficitTotal stockholders' deficit(1,322)(1,053)
Total liabilities & stockholders' deficitTotal liabilities & stockholders' deficit$8,646 $8,698 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, exceptand per share amounts)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Sales and operating revenues:       
Used vehicle sales, net$208,113
 $92,115
 $550,442
 $241,098
Wholesale vehicle sales7,459
 2,870
 21,003
 6,904
Other sales and revenues, including $2,414, $0, $6,070 and $0, respectively, from related parties9,807
 3,859
 22,372
 10,319
Net sales and operating revenues225,379
 98,844
 593,817
 258,321
Cost of sales204,963
 92,078
 547,616
 241,561
Gross profit20,416
 6,766
 46,201
 16,760
Selling, general and administrative expenses58,676
 27,995
 156,595
 71,971
Interest expense, including $0, $0, $1,382 and $0, respectively, to related parties838
 725
 5,404
 2,231
Other expense (income), net671
 31
 1,280
 (24)
Net loss before income taxes(39,769) (21,985) (117,078) (57,418)
Income tax provision—
 —
 —
 —
Net loss(39,769) (21,985) (117,078) (57,418)
Less: net loss attributable to non-controlling interests(35,389) —
 (59,717) —
Net loss attributable to Carvana Co.$(4,380) $(21,985) $(57,361) $(57,418)
        
Net loss per share of Class A common stock, basic and diluted(1)
$(0.29) $(0.16) $(0.86) $(0.42)
Weighted-average shares of Class A common stock, basic and diluted(1)(2)
15,045
 15,000
 15,024
 15,000

Three Months Ended March 31,
20232022
Sales and operating revenues:
Retail vehicle sales, net$1,827 $2,732 
Wholesale sales and revenues, including $5 and $14, respectively, from related parties618 575 
Other sales and revenues, including $36 and $48, respectively, from related parties161 190 
Net sales and operating revenues2,606 3,497 
Cost of sales, including $1 and $9, respectively, to related parties2,265 3,199 
Gross profit341 298 
Selling, general and administrative expenses, including $8 and $6, respectively, to related parties472 727 
Interest expense159 64 
Other (income) expense, net(2)13 
Net loss before income taxes(288)(506)
Income tax (benefit) provision(2)— 
Net loss(286)(506)
Net loss attributable to non-controlling interests(126)(246)
Net loss attributable to Carvana Co.$(160)$(260)
Net loss per share of Class A common stock, basic and diluted$(1.51)$(2.89)
Weighted-average shares of Class A common stock outstanding, basic and diluted (1)
106,011 90,095 
(1) Amounts for periods prior to the initial public offering have been retrospectively adjusted to give effect to 15.0 million shares of Class A common stock issued in the initial public offering and the Organizational Transactions described in Note 1.
(2) Weighted-average shares of Class A common stock outstanding have been adjusted for unvested restricted stock awards.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



2


CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS' EQUITY / MEMBERS' DEFICIT(DEFICIT)
(Unaudited)
(In millions, except number of shares, which are reflected in thousands)


Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated DeficitNon-controlling InterestsTotal Stockholders' Equity
Balance, December 31, 202189,930 $— 82,900 $— $795 $(489)$219 $525 
Net loss— — — — — (260)(246)(506)
Exchanges of LLC Units27 — — — 1 — (1)— 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 1 — — 1 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (1)— — (1)
Contribution of Class A common stock from related party(97)— — — — — — — 
Issuance of Class A common stock to settle vested restricted stock units139 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes— — — — (12)— — (12)
Options exercised63 — — — 2 — — 2 
Equity-based compensation— — — — 43 — — 43 
Balance, March 31, 202290,062 $— 82,900 $— $829 $(749)$(28)$52 


3


   Class A Class B        
 Members' Deficit Shares Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Non-controlling Interests Total Stockholders' Equity
Balance, December 31, 2016$(115,961) —
 $—
 —
 $—
 $—
 $—
 $—
 $—
Equity-based compensation expense prior to Organizational Transactions158
 —
 —
 —
 —
 —
 —
 —
 —
Accrued return on Class C Redeemable Preferred Units prior to Organizational Transactions(9,439) —
 —
 —
 —
 —
 —
 —
 —
Net loss prior to Organizational Transactions(49,942) —
 —
 —
 —
 —
 —
 —
 —
Conversion of Class C Redeemable Preferred Units for Class A Units260,411
 —
 —
 —
 —
 —
 —
 —
 —
Effect of Organizational Transactions(85,227) —
 —
 117,236
 117
 (174,255) —
 259,365
 85,227
Issuance of Class A common stock sold in initial public offering, net of underwriters' discounts and commissions and offering expenses—
 15,000
 15
 —
 —
 205,910
 —
 —
 205,925
Net loss subsequent to Organizational Transactions—
 —
 —
 —
 —
 —
 (7,419) (59,717) (67,136)
Adjustments to non-controlling interests—
 —
 —
 —
 —
 333
 —
 (333) —
Issuance of restricted stock awards, net of forfeitures—
 538
 1
 —
 —
 (1) —
 —
 —
Restricted stock surrendered in lieu of withholding taxes—
 (27) —
 —
 —
 (399) —
 —
 (399)
Options exercised  2
       28
     28
Equity-based compensation expense recognized subsequent to Organizational Transactions—
 —
 —
 —
 —
 3,831
 —
 —
 3,831
Balance, September 30, 2017$—
 15,513
 $16
 117,236
 $117
 $35,447
 $(7,419) $199,315
 $227,476
CARVANA CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - (Continued)
(Unaudited)
(In millions, except number of shares, which are reflected in thousands)

Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated DeficitNon-controlling InterestsTotal Stockholders' Equity (Deficit)
Balance, December 31, 2022106,037 $— 82,900 $— $1,558 $(2,076)$(535)$(1,053)
Net loss— — — — — (160)(126)(286)
Exchanges of LLC Units14 — — — 1 — (1)— 
Contribution of Class A common stock from related party(16)— — — — — — — 
Issuance of Class A common stock to settle vested restricted stock units39 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(30)— — — — — — — 
Options exercised3 — — — — — — — 
Equity-based compensation— — — — 17 — — 17 
Balance, March 31, 2023106,047 $— 82,900 $— $1,576 $(2,236)$(662)$(1,322)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
millions)
 Nine Months Ended September 30,
 2017 2016
Cash Flows from Operating Activities:   
Net loss$(117,078) $(57,418)
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation and amortization expense7,746
 3,020
Loss on disposal of property and equipment882
 —
Provision for bad debt and valuation allowance805
 1,299
Gain on loan sales(14,982) (6,169)
Equity-based compensation expense3,989
 421
Amortization and write-off of debt issuance costs1,407
 —
Originations of finance receivables(361,265) (160,713)
Proceeds from sale of finance receivables361,659
 228,480
Proceeds from sale of finance receivables to related party—
 1,531
Purchase of finance receivables from related party—
 (74,589)
Changes in assets and liabilities:   
Accounts receivable(6,159) (1,509)
Prepayment to related parties—
 (1,404)
Vehicle inventory(5,962) (62,335)
Other current assets(1,206) (3,449)
Other assets(1,722) —
Accounts payable and accrued liabilities8,694
 9,493
Accounts payable to related party258
 (21,436)
Other liabilities6,920
 —
Net cash used in operating activities(116,014) (144,778)
Cash Flows from Investing Activities:   
Purchases of property and equipment(59,408) (21,021)
Change in restricted cash(1,489) (2,299)
Net cash used in investing activities(60,897) (23,320)
Cash Flows from Financing Activities:   
Proceeds from floor plan facility674,411
 246,880
Payments on floor plan facility(644,641) (200,870)
Proceeds from Verde Credit Facility35,000
 —
Payments on Verde Credit Facility(35,000) —
Proceeds from long-term debt7,596
 —
Payments on long-term debt(1,137) (107)
Payments of debt issuance costs, including $1,000 and $0 to related parties, respectively(1,000) (228)
Proceeds from exercise of stock options28
 —
Tax withholdings related to restricted stock awards(399) —
Proceeds from issuance of Class C redeemable preferred units—
 159,725
Class C redeemable preferred units issuance costs—
 (82)
Net proceeds from initial public offering206,323
 —
Net cash provided by financing activities241,181
 205,318
Net increase in cash and cash equivalents64,270
 37,220
Cash and cash equivalents at beginning of period39,184
 43,134
Cash and cash equivalents at end of period$103,454
 $80,354
    
Supplemental cash flow information:   
Cash payments for interest to third parties$4,668
 $1,844
Cash payments for interest to related parties$382
 $30
Non-cash investing and financing activities:   
Capital expenditures included in accounts payable and accrued liabilities$11,006
 $3,284
Capital expenditures financed through long-term debt$7,988
 $2,328
Accrual of return on Class C redeemable preferred units$9,439
 $13,224
Conversion of Class C redeemable preferred units to Class A units$260,411
 $—


Three Months Ended March 31,
20232022
Cash Flows from Operating Activities:
Net loss$(286)$(506)
Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization expense93 37 
    Equity-based compensation expense15 28 
    Loss on disposal of property and equipment1 1 
    Provision for bad debt and valuation allowance10 5 
    Amortization and write-off of debt issuance costs8 6 
    Unrealized loss on warrants to acquire Root's Class A common stock— 5 
    Unrealized (gain) loss on beneficial interests in securitization(1)10 
Changes in finance receivable related assets:
    Originations of finance receivables(1,428)(1,985)
    Proceeds from sale of finance receivables, net1,116 1,906 
    Gain on loan sales(64)(105)
    Principal payments received on finance receivables held for sale73 61 
Other changes in assets and liabilities:
    Vehicle inventory385 (133)
    Accounts receivable(91)(5)
    Other assets3 (43)
    Accounts payable and accrued liabilities101 117 
    Operating lease right-of-use assets17 (106)
    Operating lease liabilities(12)113 
    Other liabilities(6)1 
Net cash used in operating activities(66)(593)
Cash Flows from Investing Activities:
    Purchases of property and equipment(32)(220)
    Proceeds from disposal of property and equipment12 — 
    Payments for acquisitions, net of cash acquired(7)— 
    Principal payments received on and proceeds from sale of beneficial interests8 12 
Net cash used in investing activities(19)(208)
Cash Flows from Financing Activities:
    Proceeds from short-term revolving facilities1,858 5,231 
    Payments on short-term revolving facilities(1,689)(4,498)
    Proceeds from issuance of long-term debt19 20 
    Payments on long-term debt(37)(36)
    Proceeds from equity-based compensation plans— 2 
    Tax withholdings related to restricted stock units and awards— (12)
Net cash provided by financing activities151 707 
Net increase (decrease) in cash, cash equivalents and restricted cash66 (94)
Cash, cash equivalents and restricted cash at beginning of period628 636 
Cash, cash equivalents and restricted cash at end of period$694 $542 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



NOTE 1 — BUSINESS ORGANIZATION


Description of Business


Carvana Co. and its wholly-owned subsidiary Carvana Co. Sub LLC (collectively, "Carvana Co."), together with its consolidated subsidiaries (the “Company”"Company"), is athe leading eCommercee-commerce platform for buying and selling used cars. The Company is transforming the used car buyingsales experience by giving consumers what they want - a wide selection, great value and quality, transparent pricing, and a simple, no pressure transaction. Using the Company’s website, consumerscustomers can research and identifycomplete all phases of a used vehicle inspect it using the Company’s proprietary 360-degree vehicle imaging technology, obtaintransaction, including financing and warranty coverage,their purchase, thetrading in their current vehicle, and schedule delivery or pick-up, allpurchasing complementary products such as vehicle service contracts ("VSC"), auto insurance, and GAP waiver coverage. Each element of the Company's business, from their desktop or mobile devices.inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.


Organization and Initial Public Offering


Carvana Co. is a holding company that was formed as a Delaware corporation on November 29, 2016, for the purpose of completing anits initial public offering ("IPO") and related transactions in order to operate the business of Carvana Group, LLC and its subsidiaries (collectively, "Carvana Group"). Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Carvana Group. Group, except the Company's Senior Notes (as defined in Note 10 — Debt Instruments) which were issued by Carvana Co. and are guaranteed by its and Carvana Group's existing domestic restricted subsidiaries, excluding ADESA US Auction, LLC ("ADESA"), and its subsidiaries, which the Company designated as unrestricted subsidiaries under the Indentures (as defined below) in March 2023.


In accordance with Carvana Group, was formed as aLLC's amended and restated limited liability company by DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates “DriveTime”) and commenced operations in 2012. Prior to November 1, 2014, Carvana Group was a wholly-owned subsidiary of DriveTime. On November 1, 2014 (the “Distribution Date”), DriveTime distributed its member units in Carvana Group to the unit holders of DriveTime on a pro rata basis (the “Distribution”). Carvana Group accounted for the Distribution as a spinoff transaction in accordance with ASC 505-60, Equity — Spinoffs and Reverse Spinoffs and reflected assets and liabilities before and after the Distribution Date at their historical basis.

On May 3, 2017, Carvana Co. completed its IPO of 15.0 million shares of Class A common stock at a public offering price of $15.00 per share. Carvana Co. received approximately $205.9 million in proceeds, net of underwriting discounts and commissions and offering expenses, which it used to purchase approximately 18.8 million newly-issued membership interests of Carvana Group at a price per unit equal to 0.8 times the initial public offering price less underwriting discounts and commissions and offering expenses.

Also in connection with the IPO, the Company completed the following organizational transactions (the “Organizational Transactions”):

Carvana Group amended and restated its limited liability company operating agreement (the "LLC Agreement") to, among other things, (i) eliminate a class of preferred membership interests, (ii) provide for two classes of common ownership interests in Carvana Group held by the then-existing holders of LLC units (the "Existing LLC Unitholders") consisting of Class B common units (the “Class B Units”) and Class A common units (the “Class A Units”), and (iii) appoint Carvana Co. asis the sole manager of Carvana Group;

Carvana Co. amended and restated its certificate of incorporation to authorize (i) 50.0 million shares of Preferred Stock, par value $0.01 per share, (ii) 500.0 million shares of Class A common stock, par value $0.001 per share, and (iii) 125.0 million shares of Class B common stock, par value $0.001 per share. Each share of Class A common stock generally entitles its holder to one vote on all matters to be voted on by stockholders. Each share of Class B common stock held by Ernest Garcia, II, Ernie Garcia, III and entities controlled by one or both of them (collectively, the "Garcia Parties") generally entitles its holder to ten votes on all matters to be voted on by stockholders. All other shares of Class B common stock generally entitle their holders to one vote per share on all matters to be voted on by stockholders;

Carvana Group converted its outstanding Class C redeemable preferred units into approximately 43.1 million Class A Units;

Carvana Co. issued approximately 117.2 million shares of Class B common stock to holders of Class A Units, on a four-to-five basis with the number of Class A Units they owned, for nominal consideration; and,
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




Carvana Co. transferred approximately 0.2 million Class A Units to Ernest Garcia, II in exchange for his 0.1% ownership interest in Carvana, LLC, a majority-owned subsidiary of Carvana Group.

In accordance with the LLC Agreement, Carvana Co. has all management powers over the business and affairs of Carvana Group and conducts, directs and exercises full control over the activities of Carvana Group. There are two classes of common ownership interests in Carvana Group, Class A common units (the "Class A Units") and Class B common units (the "Class B Units"). As further discussed in Note 11 — Stockholders' Equity (Deficit), the Class A Units and Class B Units (the(collectively, the "LLC Units") do not hold voting rights, which results in Carvana Group being considered a variable interest entity ("VIE"). Due to Carvana Co.'s power to control and its significant economic interest in Carvana Group, it is considered the primary beneficiary of the VIE and the Company consolidates the financial results of Carvana Group. As of March 31, 2023, Carvana Co. owned approximately 55.9% of Carvana Group and the LLC Unitholders (as defined in Note 11 — Stockholders' Equity (Deficit)) owned the remaining 44.1%.

The Organizational Transactions described above are considered transactions between entities under common control. As a result, the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes.


NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“("U.S. GAAP”GAAP") for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and fornotes thereto included within the year ended December 31, 2016 included in the final prospectus for Carvana Co.’s IPOCompany's most recent Annual Report on Form 10-K filed April 28, 2017 pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the SEC.on February 23, 2023.
    
The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of September 30, 2017, itsMarch 31, 2023, results of operations and changes in stockholder's equity (deficit) for the three and nine months ended September 30, 2017March 31, 2023 and 2016, its2022, and cash flows for the ninethree months ended September 30, 2017March 31, 2023 and 2016, and the changes in its stockholders' equity for the nine months ended September 30, 2017. The Company discloses all material changes in its members’ equity for the nine months ended September 30, 2016 throughout the accompanying notes, and, therefore, does not separately present a statement of changes in members’ equity for this period in its unaudited condensed consolidated financial statements.2022. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.


As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary. The Company reviews subsidiaries and affiliates, as well as other entities, to determine if it should be considered variable interest entities, and whether it should change the consolidation determinations based on changes in its characteristics. The Company considers an entity a VIE if its equity investors own an interest therein that lacks the characteristics of a controlling financial interest or if such investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or if the entity is structured with non-substantive voting interests. To determine whether or not the entity is consolidated with the Company’s results, the Company also evaluates which interests are variable interests in the VIE and which party is the primary beneficiary of the VIE.


Liquidity
6


The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. From inception, the Company has funded operations through the sale of Class A Units, its IPO completed on May 3, 2017 for net proceeds of approximately $205.9 million, the sale of Class C Redeemable Preferred Units, capital contributions from DriveTime and short-term funding from the Company’s majority owner.  The Company has historically funded vehicle inventory purchases through its Floor Plan Facility, described in further detail in Note 7 — Debt Instruments, and has approximately $79.9 million available under the Floor Plan Facility to fund future vehicle inventory purchases as of September 30, 2017. The Company has also funded some of its capital expenditures through long-term financing with third parties as described in further detail in Note 7 —
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)


Liquidity


Debt Instruments.Since inception, the Company has incurred losses, and expects to incur additional losses in the future as it shifts priorities to focus on driving profitability through operating efficiency and reducing expenses. Historically, the Company's capital and liquidity needs were primarily satisfied through its debt and equity financings, results of operations, floor plan facility, and Finance Receivable Facilities (as defined below), certain of which facilities expire within the next twelve months. The Company plans to extend the maturity date of these facilities within the next year by amending its existing facilities or by entering into new agreements. In January 2023, the Company amended its Master Purchase and Sale Agreement for the purchaser to purchase up to a maximum of $4.0 billion of the Company's finance receivables from the amendment date through January 2024, and such facility had approximately $3.3 billion of unused capacity as of March 31, 2023. In addition, the Company has a $2.2 billion floor plan facility through September 22, 2023, and an additional $2.0 billion floor plan facility thereafter through March 22, 2024, with such facility having approximately $1.7 billion of unused capacity as of March 31, 2023. Management believes that current working capital, cash flows from operations, and expected continued capital expenditureor new financing isarrangements are sufficient to fund operations for at least one year from the financial statement issuance date.


Use of Estimates


The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations.


Comprehensive Loss

During the three and nine months ended September 30, 2017 and 2016, the Company did not have any other comprehensive income and, therefore, the net loss and comprehensive loss were the same for all periods presented.

Restricted Cash

The restricted cash includes the deposit required under the Company's Floor Plan Facility, which is 5% of the outstanding floor plan facility principal balance, as explained in Note 7 — Debt Instruments and amounts held as restricted cash as required under letter of credit agreements, as explained in Note 13 — Commitments and Contingencies.

Income Taxes

The Company accounts for income taxes pursuant to the asset and liability method, which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment. A valuation allowance is recognized if the Company determines it is more likely than not that all or a portion of a deferred tax asset will not be recognized.

Adoption of NewRecently Issued But Not Yet Adopted Accounting Standards


In October 2016,March 2023, the FASB issued ASU 2016-17, Interests Held through Related Parties That Are Under2023-01, Leases (Topic 842): Common Control (" Arrangements. ASU 2016-17"), which updates2023-01 clarifies the consolidation requirements when evaluating whether or not the entity is the primary beneficiary of a VIEaccounting for leasehold improvements associated with regard to interests held by related parties under common control. Under ASU 2016-17, entities will consider all indirect economic interests in a VIE held by related parties on a proportionate basis regardless of whether or not the related parties are under common control. Thecontrol leases. This update is effective for fiscal years and forbeginning after December 15, 2023, including interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. Since the Company has adopted ASU 2015-02, ASU 2016-17 requires retrospective application to all periods presented.years. The Company adopted ASU 2016-17 on January 1, 2017 and it diddoes not expect the update to have an impacta material effect on its consolidated financial statements.

In January 2017,
NOTE 3 — BUSINESS COMBINATIONS

Acquisition of ADESA U.S. Physical Auction Business
On May 9, 2022, the FASB issued ASU 2017-01, Business Combinations ("ASU 2017-01"), which narrows the definitionCompany completed its acquisition of a business and assists entities to evaluate whether transactions should be accounted for as acquisitions of assets or businesses. Under ASU 2017-01, when substantially all the fair value100% of the gross assets acquired is concentratedequity interests in a single identifiable asset or a groupthe U.S. physical auction business of similar identifiable assets,ADESA from KAR Auction Services, Inc. for approximately $2.2 billion in cash (the "ADESA Acquisition"). Proceeds from the purchaseissuance and sale of the assets are not deemed2030 Notes (as defined below) were used to comprisefund the acquisition. The acquisition included 56 auction sites throughout the U.S. with 6.5 million square feet of buildings on more than 4,000 acres of land, significantly expanding the Company's infrastructure and enhancing its customer offering by facilitating a business. The update is effective for fiscal years,broader selection of vehicles and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2017-01 on January 1, 2017 and it did not have a material impact on its consolidated financial statements.faster delivery times.


7

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)



Accounting Standards Issued But Not Yet Adopted

Since May 2014, the FASB has issued several accounting standards updates related to revenue recognition including ASC 606, Revenue from Contracts with Customers ("ASC 606"), which amends the guidance in ASC 605, Revenue Recognition ("ASC 605"), and provides a single, comprehensive revenue recognition model for all contracts with customers. ASC 606 contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The entity will recognize revenue to reflect the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. ASC 606 addresses how entities should identify goods and services being provided to a customer, the unit of account for a principal versus agent assessment, how to evaluate whether a good or service is controlled before being transferred to a customer and how to assess whether an entity controls services performed by another party. ASC 606 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 with early adoption permitted. The Company will adopt ASC 606 for interim and annual periods beginning January 1, 2018 and plans to use the modified retrospective method.

The Company is continuing to evaluate all potential impacts of ASC 606. Thus far,following table summarizes the Company's assessment has included gaining an understandingallocation of the new standard, inventorying its revenue streams, analyzingpurchase price consideration to identifiable assets acquired and mapping contract featuresliabilities assumed as of December 31, 2022:
Purchase Price Allocation
(in millions)
Assets Acquired
Current assets$208 
Property and equipment1,281 
Operating lease right-of-use assets188 
Intangible assets79 
Other assets1 
Total Assets Acquired1,757 
Liabilities Assumed
Current liabilities233 
Operating lease liabilities167 
Total Liabilities Assumed400 
Net Assets Acquired1,357 
Purchase price consideration2,195 
Goodwill$838 

Identifiable intangible assets acquired consist of the following:
Fair ValueUseful Life
Customer relationships$50 10 years
Developed technology$29 3 years

Customer relationships were valued using the multi-period excess earnings method of the income approach. Developed technology was valued using the replacement cost method of the cost approach. Significant assumptions used in the valuations were forecasted revenues and attrition rate and are classified as Level 3 due to revenue streamsthe lack of observable market data. No residual values were assigned to the customer relationships and consideringdeveloped technology intangible assets and they are amortized on an economic useful life basis commensurate with future anticipated cash flows and straight line, respectively. As of March 31, 2023, the enhancementremaining weighted-average amortization period for the intangible assets acquired was approximately 6.3 years.

Real property was valued using market comparable transactions of disclosures related to revenue. While the Company has not completed its evaluation, it expects similar performance obligations to result under ASC 606 as compared with deliverables and separate units of accounting currently identified under ASC 605. The Company expects adoption of ASC 606 to impact the presentation of returns on its consolidated balance sheet. Based on the evaluation to date and the manner inmarket approach, for which the Company recognizes revenue,key assumption is the Company does not anticipate a material impact onsimilarity of the amount or timingacquired property to market comparable transactions. Personal property was valued using the replacement cost method of its revenue recognition as a resultthe cost approach, for which the key assumptions are the costs of adopting ASC 606.similar personal property in new condition and economic obsolescence rates.


In February 2016, the FASB issued ASU 2016-02, Leases(Topic 842) (“ASU 2016-02”) related to the accounting for leases. This ASU introduces a lessee model that requires a right-of-use asset and lease obligation to be presented on the balance sheet for all leases, whether operating or financing. The ASU eliminates the requirementacquisition resulted in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. Expense recognition on the income statement remains similar to current lease accounting guidance. The ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The Company plans to adopt this ASU for its fiscal year beginning January 1, 2019. The adoption of this ASU will require the recognition of a right-of-use asset$838 million of goodwill, which is deductible for tax purposes and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition, including an assembled workforce, non-contractual relationships and other agreements.

For the three months ended March 31, 2023, the Company recognized $211 million of wholesale sales and revenues, $185 million of cost of sales, and a lease obligationnet loss of $18 million from ADESA operations, which includes $31 million of depreciation and amortization, including acquired intangible assets amortization expense of $5 million.

8

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following unaudited pro forma combined results of operations information for the Company’s leases (see Note 13 — Commitmentsthree months ended March 31, 2022 have been prepared as if the ADESA Acquisition occurred on January 1, 2021:
Unaudited
Three Months Ended March 31,
2022
(in millions)
Revenues$3,712 
Net loss(590)
Net loss attributable to non-controlling interests(262)
Net loss attributable to Carvana Co.$(328)
Net loss per share of Class A common stock - basic and diluted$(3.10)
Weighted-average shares of Class A common stock - basic and diluted105,720 

The unaudited pro forma combined results of operations information reflect the following pro forma adjustments:
Unaudited
Three Months Ended March 31,
2022
(in millions)
Interest expense$87 
Lease expense$4 
Depreciation and amortization expense$6 
Intercompany revenues and cost of sales$(5)

The unaudited pro forma combined results of operations information is provided for informational purposes only and Contingencies). is not necessarily intended to represent the results that would have been achieved had the ADESA Acquisition been consummated on January 1, 2021 or indicative of the results that may be achieved in the future.


NOTE 34 — PROPERTY AND EQUIPMENT, NET


The following table summarizes property and equipment, net as of September 30, 2017March 31, 2023 and December 31, 2016 (in thousands):2022:

March 31,
2023		December 31,
2022
(in millions)
Land and site improvements$1,333 $1,331 
Buildings and improvements1,299 1,267 
Transportation fleet652 673 
Software267 245 
Furniture, fixtures and equipment153 158 
Total property and equipment excluding construction in progress3,704 3,674 
Less: accumulated depreciation and amortization on property and equipment(612)(564)
Property and equipment excluding construction in progress, net3,092 3,110 
Construction in progress103 134 
Property and equipment, net$3,195 $3,244 

9

September 30, 2017 December 31, 2016
Land and site improvements$11,474
 $9,355
Buildings and improvements52,458
 14,750
Transportation fleet29,262
 16,520
Software15,673
 10,065
Furniture, fixtures and equipment10,728
 3,704
Total property and equipment excluding construction in progress119,595
 54,394
Less: accumulated depreciation and amortization(16,391) (9,752)
Property and equipment excluding construction in progress, net103,204
 44,642
Construction in progress22,792
 15,950
Property and equipment, net$125,996
 $60,592


Depreciation and amortization expense was approximately $3.1 million and $1.2 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $7.7 million and $3.0 million for the nine months ended September 30, 2017 and 2016, respectively. These amounts primarily relate to assets associated with selling, general and
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)



administrative activitiesDepreciation and are included as a component of selling, generalamortization expense on property and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

The Company capitalized internal use software costs totaling approximately $7.7equipment was $100 million and $2.9 million during the nine months ended September 30, 2017 and 2016, respectively, which is included in software and construction in progress in the table above. The Company capitalized approximately $1.9 million and $1.1$54 million for the three months ended September 30, 2017March 31, 2023 and 2016,2022, respectively, of which $44 million and $36 million were recorded to selling, general and administrative expense, respectively, $12 million and $10 million were capitalized to vehicle inventory, respectively, and approximately $5.5$44 million and $2.4$8 million forwere recorded to cost of sales, respectively, including $19 million and $8 million previously capitalized to vehicle inventory.

NOTE 5 — INTANGIBLE ASSETS

The following table summarizes intangible assets, net as of March 31, 2023 and December 31, 2022:

March 31,
2023		December 31,
2022
(in millions)
Intangible assets:
Customer relationships$50 $50 
Developed technology41 41 
Non-compete agreements1 1 
Intangible assets, acquired cost92 92 
Less: accumulated amortization(27)(22)
Intangible assets, net$65 $70 

Amortization expense was $5 million and less than $1 million during the ninethree months ended September 30, 2017March 31, 2023 and 2016, respectively,2022, respectively. As of payroll and payroll-related costsMarch 31, 2023, the remaining weighted-average amortization period for employees who are directly associated with and who devote timedefinite-lived intangible assets was approximately 5.7 years. The anticipated annual amortization expense to the developmentbe recognized in future years as of software products for internal use.March 31, 2023, is as follows:
Expected Future
Amortization
(in millions)
Remainder of 2023$13 
202418 
202514 
20267 
20275 
Thereafter8 
Total$65 

10

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

NOTE 46 — ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES


The following table summarizes accounts payable and other accrued liabilities as of September 30, 2017March 31, 2023 and December 31, 2016 (in thousands):2022:
March 31,
2023		December 31,
2022
(in millions)
Accounts payable, including $13 and $16, respectively, due to related parties$264 $232 
Accrued interest expense198 99 
Sales taxes and vehicle licenses and fees80 76 
Accrued compensation and benefits71 65 
Reserve for returns and cancellations60 60 
Customer deposits34 23 
Accrued advertising costs7 7 
Accrued property and equipment3 10 
Other accrued liabilities147 205 
Total accounts payable and other accrued liabilities$864 $777 

 September 30, 2017 December 31, 2016
Accounts payable$11,543
 $6,208
Accrued property and equipment9,749
 3,045
Sales taxes and vehicle licenses and fees7,635
 4,265
Accrued compensation and benefits2,419
 3,398
Accrued inventory costs2,173
 3,480
Accrued advertising costs1,689
 1,281
Other accrued liabilities8,605
 6,487
Total accounts payable and other accrued liabilities$43,813
 $28,164

NOTE 57 — RELATED PARTY TRANSACTIONS


Shared Services Agreement with DriveTimeLease Agreements


In November 2014, the Company and DriveTime Automotive Group (together with its consolidated affiliates, collectively, “DriveTime”) a related party of the Company due to Ernest Garcia II, Ernest Garcia III, and entities controlled by one or both of them (collectively the "Garcia Parties") controlling and owning substantially all of the interests in DriveTime, entered into a shared serviceslease agreement whereby(the "DriveTime Lease Agreement") that governs the Company’s access to and utilization of temporary storage, reconditioning, offices and parking space at various DriveTime provided certain accountingfacilities, including hubs and tax, legalinspection and compliance, information technology, telecommunications, benefits, insurance, real estate, equipment, corporate communications, software and production and other services to facilitate the transition of these services to the Company on a standalone basis (the “Shared Services Agreement”).reconditioning centers. The Shared ServicesDriveTime Lease Agreement was most recently amended in December 2018. Lease duration varies by location, with leases expiring between 2023 and restated in April 2017 and operates on a year-to-year basis after February 2019, with the Company having the right to terminate any or all services with 30 days' prior written notice and DriveTime having the right terminate certain services effective December 2017 and other services effective July 2018, in each case with 90 days' prior written notice. DriveTime provides the Company with certain benefits, tax reporting and compliance, telecommunications and information technology services under the amended agreement. Charges allocated to the Company are based on the Company’s actual use of the specific services detailed in the Shared Services Agreement. Total expenses related to the shared services agreement were approximately $0.0 million and $0.1 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $0.1 million and $0.5 million for the nine months ended September 30, 2017 and 2016, respectively, which are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.2026.

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Aircraft Time Sharing Agreement

The Company entered into an agreement to share usage of two aircraft operated by Verde Investments, Inc., an affiliate of DriveTime, (“Verde”) on October 22, 2015, and the agreement was subsequently amended on May 15, 2017. Pursuant to the agreement, the Company agreed to reimburse Verde for actual expenses for each of its flights. The original agreement was for 12 months, with perpetual 12-month automatic renewals. Either the Company or Verde can terminate the agreement with 30 days’ prior written notice. The Company reimbursed Verde approximately $0.0 million and $0.1 million under this agreement during the three months ended September 30, 2017 and 2016, respectively, and approximately $0.4 million and $0.3 million under this agreement during the nine months ended September 30, 2017 and 2016, respectively.

Lease Agreements


In November 2014,March 2017, the Company and DriveTime entered into a lease agreement that governs the Company’sCompany's access to and utilization of temporary storage, reconditioning, office and parking space at various DriveTime inspection and reconditioning centers ("IRCs") and retail facilities (the "DriveTime Hub Lease Agreement"). The DriveTime Hub Lease Agreement was most recently amended in August 2017. Lease duration varies by location, withJuly 2021. There is one facility remaining under the earliest expiration occurring in 2017. Most delivery hubs have two-year terms and the Company is entitled to exercise up to two consecutive one-year renewal options at up to ten of these locations. The DriveTime Hub Lease Agreement, provides that thewhich expires in 2023. The Company may take over DriveTime's leases for the inspection and reconditioning centers that the Company uses as IRCs in their entirety on July 31, 2018, subjectintends to the Company obtaining releases of DriveTime's liabilityallow this last facility to expire without renewal.

The hub locations under the applicable leases and causing DriveTime to be paid for any unamortized costs.

Under the DriveTime Lease Agreement and the DriveTime Hub Lease Agreement both have cancellable lease terms of less than twelve months with rights to terminate at the Company's election with 60 days' prior written notice and certain one-year renewal options provided. At non-reconditioning locations, it is not reasonably certain that the Company payswill exercise its options to extend the leases or abstain from exercising its termination rights within these lease agreements to create a lease term greater than one year and therefore the Company accounts for them as short-term leases. For these locations, the Company makes variable monthly rental fee related tolease payments based on its pro rata utilization of space at each facility plus a pro rata share of each facility’s actual insurance costs and real estate taxes. Management has determined that the costs allocated to the Company are based on a reasonable methodology, and the Company is currently the sole occupant under both lease agreements. The DriveTime Lease Agreement includes the Blue Mound and Delanco inspection and reconditioning centers. At both of these locations, the Company expects the lease to continue beyond twelve months, therefore those locations are not considered short-term leases. The Company occupies all of the space at these inspection and reconditioning centers and makes monthly lease payments based on DriveTime's actual rent expense. In addition, the Company is responsible for the actual insurance costs and real estate taxes at these inspection and reconditioning centers locations.

At all locations, the Company is additionally responsible for paying for any tenant improvements it requires to conduct its operations and its share of estimated costs incurred by DriveTime related to preparing these sites for use. As it relates to locations where the Company reconditions vehicles, the Company’s share of facility and shared reconditioning supplies expenses are calculated monthly by multiplying the actual costs for operating the inspection centers by the Company’s pro rata share of total reconditioned vehicles and parking spaces at such inspection centers in a given month.operations. Management has determined that the costs allocated to the Company are based on a reasonable methodology.


Separate from the DriveTime Lease Agreement, in December 2016,
11

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
In February 2017, the Company entered into a lease agreement related to a vehicle inspection and reconditioning center in Tolleson, Arizona, with Verde, with an initial term of approximately 15 years. The lease agreement requires monthly rental payments and can be extended for four additional five-year periods. In February 2017, the Company also entered into a lease with DriveTime for sole occupancy of a fully-operationalfully operational inspection and reconditioning center in Winder, Georgia, where the Company previously maintained partial occupancy.Georgia. The lease has an initial term of eight years, subject to the Company's ability to exercise three renewal options of five years each. The base rent for both of these leases will be subject to adjustment each year beginning January 1, 2018, increasing in an amount equal to the percentage increase in the Consumer Price Index, which amount shall not exceed 5% and shall not be less than 2%.


Expenses related to these operating lease agreements are allocated based on usage to inventory and selling, general and administrative expenses in the accompanying unaudited condensed consolidated balance sheets and statements of operations. Costs allocated to inventory are recognized as cost of sales when the inventory is sold. DuringTotal costs related to these operating lease agreements, including those noted above, were $1 million during each of the three months ended September 30, 2017, total costs related to these lease agreements were approximately $1.8 million with approximately $0.6 millionMarch 31, 2023 and $1.2 million2022, allocated tobetween inventory and selling, general and administrative expenses, respectively. During the nine months ended September 30, 2017, total costs related to these lease agreements were approximately $5.2 million with approximately $1.8 million and $3.4 million allocated to inventory and selling, general and administrative expenses, respectively. During the three months ended September 30, 2016, total costs related to these lease agreements were approximately $0.7 million with approximately $0.4 million and $0.3 million allocated to inventory and selling, general and administrative expenses, respectively. During the nine months ended September 30, 2016, total costs related to these lease agreements were approximately $1.8 million with approximately $1.1 million and $0.7 million allocated to inventory and selling, general and administrative expenses, respectively.expenses.


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Corporate Office Leases


In November 2015, the Company entered into a lease agreement with Verde for its then corporate headquarters. The rent expense incurred related to this lease for the three and nine months ended September 30, 2016 was approximately $0.2 million and $0.6 million. In December 2016,Verde sold the building and assigned the lease to a third party.

During the first quarter of 2017, the Company subleased additional office space at DriveTime’s corporate headquarters in Tempe, Arizona. Pursuant to this arrangement, the Company incurred rent of approximately $0.1 million during the three and nine months ended September 30, 2017. This arrangement terminated in March 2017.

As discussed in Note 13 — Commitments and Contingencies, in September 2016, the Company entered into a lease with a third party for the second floor of its corporate headquartersoffice space in Tempe, Arizona. DriveTime guarantees up to $0.5 million of the Company's rent payments under that lease through September 2019. In connection with that lease, the Company entered into a sublease with DriveTime for the use of the firstanother floor ofin the same building. Pursuant to thisThe lease and sublease which haseach have a term of 83 months, and is co-terminus with DriveTime's master lease, subject to the right to exercise three five-year extension options,options. Pursuant to the sublease, the Company will pay DriveTimethe rent equal to the amounts due under DriveTime's master lease. During the three and nine months ended September 30, 2017, thelease directly to DriveTime's landlord. The rent expense incurred related to this first floor sublease was approximately $0.2less than $1 million during each of the three months ended March 31, 2023 and 2022.

In December 2019, Verde Investments, Inc., an affiliate of DriveTime ("Verde") purchased an office building in Tempe, Arizona that the Company leased from an unrelated landlord prior to Verde's purchase. In connection with the purchase, Verde assumed that lease. The lease has an initial term of ten years, subject to the right to exercise two five-year extension options. The rent expense incurred under the lease with Verde was less than $1 million during each of the three months ended March 31, 2023 and 2022.

Wholesale Sales and Revenues

DriveTime purchases and sells wholesale vehicles from and to the Company through competitive online auctions that are managed by an unrelated third party, and through the Company's wholesale marketplace platform. The Company recognized $5 million and $0.5$14 million of wholesale sales and revenues from DriveTime during the three months ended March 31, 2023 and 2022, respectively.


Retail Vehicle Inventory PurchasesAcquisitions and Reconditioning


Through September 2016,During the second quarter of 2021, the Company selectedbegan acquiring reconditioned retail vehicles from DriveTime. The purchase price of each vehicle inventorywas equal to the wholesale price of the vehicle plus a fee for transportation and used DriveTime's auction numbers to facilitate purchases under a non-interest bearing agreement requiring periodic repayments. Vehicles purchased under this agreement were acquired byreconditioning services. In addition, DriveTime performs reconditioning services for the Company at DriveTime'sDriveTime reconditioning centers. As of March 31, 2023 and 2022, less than $1 million and $16 million, respectively, related to vehicles and reconditioning services were included in vehicle inventory in the accompanying unaudited condensed consolidated balance sheets. The Company also recognized less than $1 million and $9 million of cost of goods sold during the vehicles purchased with no markup. Beginning October 1, 2016, the Company purchased its vehicle inventory independentlythree months ended March 31, 2023 and made the payments itself through its vehicle inventory financing and security agreement. See Note 7 — Debt Instruments for further information.2022, respectively.

Repurchase of Finance Receivables from DriveTime

On January 20, 2016, the Company repurchased approximately $72.4 million of finance receivables from DriveTime related to loans the Company originated and previously sold under the terms of the DriveTime receivable purchase agreement (the “DriveTime Receivable Purchase Agreement”) discussed below for a price of approximately $74.6 million. Such receivables were immediately sold by the Company to third party purchasers under the transfer and note purchase and security agreements for the same price of approximately $74.6 million.

DriveTime Receivable Purchase Agreement

In June 2014, the Company entered into the DriveTime Receivable Purchase Agreement pursuant to which the Company may sell to DriveTime and DriveTime may purchase from the Company finance receivables that the Company originates in conjunction with the sale of vehicles. As of September 30, 2017 and December 31, 2016, the Company did not have any receivables due from DriveTime for the sales of such receivables. As of September 30, 2017, DriveTime is not obligated to make any additional purchases under the agreement.


Master Dealer Agreement


In December 2016, the Company entered into a master dealer agreement with DriveTime (the "Master Dealer Agreement"), pursuant to which the Company may sell certain ancillary products, including vehicle service contracts ("VSCs"),VSCs to customers purchasing a vehicle from the Company through its transaction platform.Company. The Company earns a commission on each VSC sold to its customers and DriveTime is obligated by and subsequently administers the VSCs. The Company collects the retail purchase price of the VSCs from its customers and remits the purchase price net feeof commission to DriveTime on a periodic basis.DriveTime. During the three and nine months ended September 30, 2017,March 31, 2023 and 2022, the Company recognized approximately $2.4$35 million and $6.1$47 million, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime.DriveTime, net of a reserve for estimated contract cancellations. The commission earned on the sale of these VSCs is included in other sales and revenues in the accompanying unaudited condensed consolidated statementstatements of operations. In November 2018, the Company amended the Master Dealer Agreement to allow the Company to receive payments for excess reserves based on the performance of the VSCs versus the reserves held by the VSC administrator, once a required claims period for such VSCs has passed. In August 2020 and April 2021, the Company and DriveTime amended the Master Dealer Agreement to adjust excess reserve payment calculations and timing and the scope of DriveTime's after-sale administration services, respectively. During each of the three

12

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)


months ended March 31, 2023 and 2022, the Company recognized $1 million related to payments for excess reserves to which it expects to be entitled, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.


Credit FacilityBeginning in 2017, DriveTime also administers the Company's limited warranty provided to all customers and a portion of the Company's GAP waiver coverage under the Master Dealer Agreement. The Company pays a per-vehicle fee to DriveTime to administer the limited warranty included with Verdeevery purchase and prior to the first quarter of 2020 paid a per-contract fee to DriveTime to administer a portion of the GAP waiver coverage it sells to its customers. Since the first quarter of 2020, the Company's GAP waiver coverage sales have been administered by an unrelated party. The Company incurred $4 million during each of the three months ended March 31, 2023 and 2022, respectively, related to the administration of limited warranty.


On February 27, 2017,Profit Sharing Agreement

In June 2018, the Company entered into an agreement with an unaffiliated third party, pursuant to which the Company would sell certain Road Hazard ("RH") and Pre-Paid Maintenance ("PPM") contracts. Under this agreement, third parties would administer the RH and PPM contracts, including providing customer and administrative services, and pay a profit sharing component to the Company. In 2022, the Company began selling equivalent offerings from DriveTime, pursuant to the Master Dealer Agreement discussed above, and all rights and obligations in connection with existing RH and PPM contracts were transferred to DriveTime (the "Transferred Contracts"). Finally, in December 2022, the Company entered into a credit facilityprofit sharing agreement with Verde for an amount upDriveTime with regard to $50.0the Transferred Contracts (the "Profit Sharing Agreement"). During the three months ended March 31, 2023, the Company recognized less than $1 million (the "Verde Credit Facility").in revenues under the Profit Sharing Agreement.

Servicing and Administrative Fees

DriveTime provides servicing and administrative functions associated with the Company's finance receivables. The Company could draw up to five loans in minimum amountsincurred expenses of $10.0$4 million eachand $2 million during the termthree months ended March 31, 2023 and 2022, respectively, related to these services.

Aircraft Time Sharing Agreement

The Company entered into an agreement to share usage of two aircraft owned by Verde and operated by DriveTime on October 22, 2015, and the agreement. Amounts outstanding accrued interest at a rate of 12.0% per annum, compounding semi-annually and payableagreement was subsequently amended in kind and scheduled2017. Pursuant to mature in August 2018. Upon execution of the agreement, the Company paid Verde a commitment feeagreed to reimburse DriveTime for actual expenses for each of $1.0 million. Immediatelyits flights. The original agreement was for 12 months, with perpetual 12-month automatic renewals. Either the Company or DriveTime can terminate the agreement with 30 days’ prior towritten notice. The Company reimbursed DriveTime less than $1 million under this agreement during each of the Company's IPO, the outstanding balance under the Verde Credit Facility was $35.0 million. The outstanding principal balance of $35.0 millionthree months ended March 31, 2023 and accrued interest of approximately $0.4 million were repaid in full and the Verde Credit Facility agreement terminated in connection2022.

Shared Services Agreement with the IPO completed on May 3, 2017.DriveTime

IP License Agreement


In February 2017,November 2014, the Company and DriveTime entered into a licenseshared services agreement that governswhereby DriveTime provided certain accounting and tax, legal and compliance, information technology, telecommunications, benefits, insurance, real estate, equipment, corporate communications, software and production, and other services primarily to facilitate the rightstransition of certain intellectual property owned bythese services to the Company on a standalone basis (the "Shared Services Agreement"). The Shared Services Agreement was most recently amended and restated in February 2021 and operates on a year-to-year basis, with the rights of certain intellectual property owned by DriveTime. The license agreement generally provides that each party grantsCompany having the right to terminate any or all services with 30 days' prior written notice and DriveTime having the right to terminate any or all services with 90 days' prior written notice. Charges allocated to the other certain limited exclusive (other than with respect toCompany are based on the licensor party and its affiliates) and non-exclusive licenses toCompany’s actual use certain of its intellectual property and each party agrees to certain covenants not to sue the other party, its affiliates and certain of its service providers in connection with various patent claims. The exclusive license to DriveTime is limited to the business that is primarily of subprime used car sales to retail customers. However, upon a change of control of either party, both parties’ license rights as to certain future improvements to licensed intellectual property and all limited exclusivity rights are terminated. The agreement does not provide a license to any of the Company's patents, trademarks, logos, customers’ personally identifiable information or any intellectual propertyspecific
13

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
services detailed in the Shared Services Agreement. The Company incurred less than $1 million in expenses related to the Company's vending machine, automated vehicle photography or certain other elementsShared Services Agreement during each of the Company's brand.three months ended March 31, 2023 and 2022.


Accounts Payable Due to Related Party


Amounts payable to DriveTime and Verde under the agreements explained above, as well as invoices DriveTime initially paid on behalf of the Company for vehicle reconditioning costs and general and administrative expenses, are included in accounts payable to related party in the accompanying unaudited condensed consolidated balance sheets. As of September 30, 2017March 31, 2023 and December 31, 2016, approximately $2.12022, $13 million and $1.9$16 million, respectively, was due to related parties primarily related to leasethe agreements shared service fees, net VSC fees collected from customersmentioned above, and repayments to DriveTime for invoices paid on behalfis included in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.

Contributions of Class A Common Stock From Ernest Garcia III

On January 5, 2022, in recognition of the Company.Company selling its 1 millionth vehicle in the fourth quarter of 2021, the Company's CEO, Ernest Garcia III ("Mr. Garcia"), committed to giving then-current employees 23 shares of Class A common stock each from his personal shareholdings once employees reach their two-year employment anniversary ("CEO Milestone Gift" or "Gift"). As a result and during the three months ended March 31, 2022, the Company granted 23 restricted stock units ("RSUs") to each current employee, which vest after they complete their second year of employment, for a total of 435,035 RSUs granted during the period. For every gift that vests, and pursuant to a contribution agreement (the "Contribution Agreement") entered into by and between the Company and Mr. Garcia on February 22, 2022, Mr. Garcia contributes to the Company, at the end of each fiscal quarter, the number of shares of Class A common stock, granted pursuant to the CEO Milestone Gift, that have vested during such quarter. The shares contributed shall be shares of Class A common stock that Mr. Garcia individually owns, at no charge. The contribution is intended to fund RSU awards to certain employees of the Company upon their satisfying the applicable employment tenure requirements. During the three months ended March 31, 2023 and 2022, 15,847 and 97,336 RSUs, respectively, vested and were contributed by Mr. Garcia. Although the Company does not expect Mr. Garcia to incur any tax obligations related to the contribution, the Company has agreed to indemnify Mr. Garcia from any such obligations that may arise.


NOTE 68 — FINANCE RECEIVABLE SALE AGREEMENTS


Transfer AgreementsThe Company originates loans for its customers and Notesells them to partners and investors pursuant to finance receivable sale agreements. Historically, the Company has sold loans through two types of arrangements: forward flow agreements and fixed pool loan sales, including securitization transactions.

Master Purchase and Security AgreementsSale Agreement


In JanuaryDecember 2016, the Company entered into transfer agreements pursuanta master purchase and sale agreement (the "Master Purchase and Sale Agreement" or "MPSA") with Ally Bank and Ally Financial Inc. (collectively the "Ally Parties"). Pursuant to which it soldthe MPSA, the Company sells finance receivables meeting certain underwriting criteria to certain third party purchasers who engage DriveTime as servicer of such receivables. Pursuant to certain note purchase and security agreements, entered into in connection with the transfer agreements, such third party purchasers of receivables issued notes to certain parties, including Delaware Life Insurance Company (“Delaware Life”), in which Mark Walter hasunder a substantial ownership interest. Mark Walter also indirectly controls CVAN Holdings, LLC, an Existing LLC Unitholder, and has non-controlling ownership interests in the other note purchasers under the note purchase and security agreements. On February 27, 2017, Delaware Life sold its interest in the notes under the note purchase and security agreements to an unrelated third party, but remains the administrative agent and paying agent for the note purchasers. Pursuantcommitted forward flow arrangement without recourse to the noteCompany for their post-sale performance. The Company and the Ally Parties amended the MPSA at various times throughout 2021 and 2022, and on January 13, 2023 and January 20, 2023 the MPSA was further amended to extend the scheduled commitment termination date to January 12, 2024, and establish a commitment by the Ally Parties to purchase and security agreements, Delaware Life advanced $63.0 million through December 31, 2016up to the trusts that purchased the Company's automotive finance receivables. Under this agreement through September 30, 2016, the Company had sold $220.0 milliona maximum of $4.0 billion of principal balances of finance receivables including approximately $72.4 millionbetween January 13, 2023 and the scheduled commitment termination date. Finally, the Company and the Ally Parties entered into an additional amendment to the MPSA on March 24, 2023 to broaden the scope of finance receivables repurchased from DriveTime. eligible for sale to the Ally Parties.

During the three months ended March 31, 2023 and 2022, the Company sold $0.7 billion and $0.5 billion, respectively, in principal balances of finance receivables under the MPSA and had $3.3 billion of unused capacity as of March 31, 2023.

Securitization Transactions

The Company recognizedsponsors and establishes securitization trusts to purchase finance receivables from the Company. The securitization trusts issue asset-backed securities, some of which are collateralized by the finance receivables that the Company sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on loan sales of approximately $2.4finance receivables. The net proceeds from the sales are the fair value of the assets obtained as part of the transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply
14

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
with the Risk Retention Rules (as defined below), as further discussed in Note 9 — Securitizations and Variable Interest Entities.

During the three months ended March 31, 2023 and 2022, the Company sold $0.4 billion and $1.4 billion, respectively, in principal balances of finance receivables through securitization transactions.

Gain on Loan Sales

The total gain related to finance receivables sold to financing partners and pursuant to securitization transactions was $64 million and $6.2$105 million during the three and nine months ended September 30, 2016,March 31, 2023 and 2022, respectively, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

NOTE 9 — SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

As noted in Note 8 — Finance Receivable Sale Agreements, the Company sponsors and establishes securitization trusts to purchase finance receivables from the Company. The securitization trusts issue asset-backed securities, some of which are collateralized by the finance receivables that the Company sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables. The net proceeds from the sales are the fair value of the assets obtained as part of the transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules"). The beneficial interests retained by the Company include, but are not limited to, rated notes and certificates of the securitization trusts. The holders of the certificates issued by the securitization trusts have rights to cash flows only after the holders of the notes issued by the securitization trusts have received their contractual cash flows. The securitization trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the securitization trusts can look only to the assets of the securitization trusts that issued their securities for payment. The beneficial interests held by the Company are subject principally to the credit and prepayment risk stemming from the underlying finance receivables.

The securitization trusts established in connection with asset-backed securitization transactions are VIEs. For each VIE that the Company establishes in its role as sponsor of securitization transactions, it performs an analysis to determine whether or not it is the primary beneficiary of the VIE. The Company’s continuing involvement with the VIEs consists of retaining a portion of the securities issued by the VIEs and performing ministerial duties as the trust administrator. As of September 30, 2017, there was no unused capacity under the note purchase and security agreements.

Master Purchase and Sale Agreement and Master Transfer Agreement

In December 2016,March 31, 2023, the Company entered into a master purchaseis not the primary beneficiary of these securitization trusts because its retained interests in the VIEs do not have exposures to losses or benefits that could potentially be significant to the VIEs. As such, the Company does not consolidate the securitization trusts.

The assets the Company retains in the unconsolidated VIEs are presented as beneficial interests in securitizations on the accompanying unaudited condensed consolidated balance sheets, which as of March 31, 2023 and sale agreement (the "PurchaseDecember 31, 2022 were $312 million and Sale Agreement")$321 million, respectively. The Company held no other assets or liabilities related to its involvement with unconsolidated VIEs as of March 31, 2023 and a master transfer agreement (the "Master Transfer Agreement") pursuantDecember 31, 2022.

The following table summarizes the carrying value and total exposure to losses of its assets related to unconsolidated VIEs with which it sells finance receivables meetingthe Company has continuing involvement, but is not the primary beneficiary at March 31, 2023 and December 31, 2022. Total exposure represents the estimated loss the Company would incur under severe, hypothetical circumstances, such as
15

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)


if the value of the interests in the securitization trusts and any associated collateral declined to zero. The Company believes the possibility of this is remote. As such, the total exposure presented below is not an indication of the Company's expected losses.


certain underwriting criteria
March 31, 2023December 31, 2022
Carrying ValueTotal ExposureCarrying ValueTotal Exposure
(in millions)
Rated notes$247 $247 $252 $252 
Certificates and other assets65 65 69 69 
Total unconsolidated VIEs$312 $312 $321 $321 

The beneficial interests in securitizations are considered securities available for sale subject to certain third party purchasers, including Ally. DriveTime isrestrictions on transfer pursuant to the servicer of finance receivables soldCompany’s obligations as a sponsor under both agreements. Under the Purchase and Sale Agreement and the Master Transfer Agreement,Risk Retention Rules. As described in Note 10 — Debt Instruments, the Company can sell uphas entered into secured borrowing facilities through which it finances certain of these retained beneficial interests in securitizations. These securities are interests in securitization trusts, thus there are no contractual maturities. The amortized cost and fair value of securities available for sale as of March 31, 2023 and December 31, 2022 were as follows:

March 31, 2023December 31, 2022
Amortized CostFair ValueAmortized CostFair Value
(in millions)
Rated notes$261 $247 $268 $252 
Certificates and other assets48 65 43 69 
Total securities available for sale$309 $312 $311 $321 

NOTE 10 — DEBT INSTRUMENTS

Debt instruments, excluding finance leases, which are discussed in Note 16 — Leases, as of March 31, 2023 and December 31, 2022 consisted of the following:
March 31,
2023		December 31,
2022
(in millions)
Asset-based financing:
Floor plan facility$543 $569 
Finance receivable facilities1,160 965 
Financing of beneficial interest in securitizations261 268 
Notes payable2 3 
Real estate financing486 486 
Total asset-based financing2,452 2,291 
Senior notes5,725 5,725 
Total debt8,177 8,016 
Less: current portion(1,809)(1,638)
Less: unamortized debt issuance costs (1)
(78)(82)
Total included in long-term debt, net$6,290 $6,296 
(1) The unamortized debt issuance costs related to an aggregate of $375.0 million, and $292.2 million, respectively, in principal balances of finance receivables subject to adjustment as described in the respective agreements. During the nine months ended September 30, 2017, the Company sold approximately $241.3 million in principal balances of finance receivables under the Purchase and Sale Agreement, and approximately $106.6 million in principal balances of finance receivables under the Master Transfer Agreement. As of September 30, 2017, there was approximately $112.4 million and $177.1 million of unused capacity under the Purchase and Sale Agreement and the Master Transfer Agreement, respectively.

In December 2016, the Company incurred approximately $0.9 million of costs directly attributable to establishing the Purchase and Sale Agreement and the Master Transfer Agreement. These costslong-term debt are includedpresented as a componentreduction of the carrying amount of the corresponding liabilities on the accompanying unaudited condensed consolidated balance sheets. Unamortized debt issuance
16

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
costs related to revolving debt arrangements are presented within other assets on the accompanying unaudited condensed consolidated balance sheets and are expensed as a component of selling, general and administrative expenses over the period the Company sells finance receivables under these agreements.not included here.


The total gain on loan sales related to finance receivables sold to third parties under these agreements during the three and nine months ended September 30, 2017 was approximately $6.6 million and $15.0 million, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.Short-Term Revolving Facilities

NOTE 7 — DEBT INSTRUMENTS


Floor Plan FacilityFacilities


The Company haspreviously entered into a floor plan facility with a third partylender to finance its used vehicle inventory (the "Original Floor Plan Facility"), which iswas secured by substantially all of its assets, other than the Company's interests in real property (the "Floor Plan Facility").Carvana LLC's vehicle inventory, general intangibles, accounts receivable, and finance receivables. The Company most recently amended theOriginal Floor Plan Facility in August 2017was amended at various times and effective September 22, 2022, the Company amended and restated the facility (the "12-Month Floor Plan Facility") to among other things, extend the maturity date to December 31, 2018,September 22, 2023 with a line of credit of $2.2 billion and increasetie the available creditinterest rate to $275.0 million through December 31, 2017a prime rate plus 1.00%.

On September 22, 2022, the Company also entered into a separate floor plan facility (the "18-Month Floor Plan Facility", and to $350.0 million from January 1, 2018 through December 31, 2018. The Company is required to make monthly interest payments at a rate per annum equal to one-month LIBOR plus 3.65%, effective August 1, 2017. Thetogether with the 12-Month Floor Plan Facility, requires that at least 5%the "Floor Plan Facilities") with a lender. The line of credit under the 18-Month Floor Plan Facility is $2.0 billion, which becomes available following the maturity and repayment of the total principal amount owed12-Month Floor Plan Facility, and its maturity date is March 22, 2024. The interest rate under the 18-Month Floor Plan Facility is tied to a prime rate plus 1.00%.

Under the lender is held as restricted cash.

Repayment in an amount equal toFloor Plan Facilities, repayment of amounts drawn for the amountpurchase of the advance or loan musta vehicle should generally be made within five businessseveral days ofafter selling or otherwise disposing of the underlying vehicle inventory. For sales involving financing originated by the Company and sold under either the Purchase and Sale Agreement or the Master Transfer Agreement as mentioned in Note 6 — Finance Receivable Sale Agreements, the lender has extended repayment to the earlier of fifteen business days after the sale of the used vehicle or one day following the sale of the related finance receivable.vehicle. Outstanding balances related to vehicles held in inventory for more than 180150 days require monthly principal payments equal to 10% of the original principal amount of that vehicle until the remaining outstanding balance is equal to the lesser of i)(i) 50% of the original principal amount or ii)(ii) 50% of the wholesale value. Prepayments may be made without incurring a premium or penalty. Additionally, the Company is permitted to make prepayments to the lender to be held as principal payments under the Floor Plan FacilityFacilities and subsequently re-borrowreborrow such amounts. The Floor Plan Facilities also require monthly interest payments and that at least 12.5% of the total principal amount owed to the lender is held as restricted cash.


The Company is also required to pay the lender an availability fee based on the average unused capacity during the prior calendar quarter under the Floor Plan Facilities.

As of September 30, 2017,March 31, 2023, the Company had $543 million outstanding under the 12-Month Floor Plan Facility, unused capacity of $1.7 billion, and held $68 million in restricted cash related to this facility. As of March 31, 2023, the Company had no amount outstanding under the 18-Month Floor Plan Facility, which becomes available following the maturity and repayment of the 12-Month Floor Plan Facility, unused capacity of $2.0 billion, and held no amount in restricted cash related to this facility. During the three months ended March 31, 2023, the Company's effective interest rate on the 12-Month Floor Plan Facility was approximately 4.88%,7.55%.

As of December 31, 2022, the Company had an$569 million outstanding balance under this facilitythe 12-Month Floor Plan Facility, unused capacity of approximately $195.1 million, borrowing capacity available of approximately $79.9 million$1.6 billion, and held approximately $9.8$71 million in restricted cash related to this facility. As of December 31, 2016,2022, the Company had no amount outstanding under the 18-Month Floor Plan Facility, which becomes available following the maturity and repayment of the 12-Month Floor Plan Facility, unused capacity of $2.0 billion, and held approximately $8.4 millionno amount in restricted cash related to this facility. For the year ended December 31, 2022, the Company's effective interest rate on the 12-Month Floor Plan Facility was approximately 3.57%.


Active Finance Receivable Facilities

The Company has various short-term revolving credit facilities to fund certain finance receivables originated by the Company prior to selling them, which are typically secured by the finance receivables pledged to them (the "Finance Receivable Facilities").

In January 2020, the Company entered into an agreement pursuant to which a lender agreed to provide a revolving credit facility, which was subsequently increased to $500 million, to fund certain finance receivables originated by the Company. In June 2021, the Company amended its agreement to, among other things, extend the maturity date to January 24, 2023. In January 2023, the Company amended its agreement to, among other things, adjust the line of credit to $300 million, and extend the maturity date to January 24, 2024.
17

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)



In February 2020, the Company entered into an agreement pursuant to which a second lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. In December 2021, the Company amended its agreement to, among other things, increase the line of credit to $600 million, and extend the maturity date to December 8, 2023.

In April 2021, the Company entered into an agreement pursuant to which a third lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. In December 2021, the Company amended its agreement to, among other things, increase this line of credit to $600 million. In September 2022, the Company amended its agreement to extend the maturity date to March 30, 2024.

In October 2021, the Company entered into an agreement pursuant to which a fourth lender agreed to provide a $350 million revolving credit facility to fund certain finance receivables originated by the Company. The commitment termination date for this facility occurred on April 15, 2023 and it was not extended.

In March 2022, the Company entered into an agreement pursuant to which a fifth lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. The Company can draw upon this facility until September 18, 2023.

The Finance Receivable Facilities require that any undistributed amounts collected on the pledged finance receivables be held as restricted cash. The Finance Receivable Facilities require monthly payments of interest and fees based on usage and unused facility amounts. The Finance Receivable Facilities self-amortize from the end of the draw period until maturity, offer full prepayment rights, and have no credit sublimits or aging restrictions, subject to negotiated concentration limits. The subsidiaries that entered into these Finance Receivable Facilities are each wholly-owned, special purpose entities whose assets are not available to the general creditors of the Company. As of March 31, 2023 and December 31, 2022, the Company had $1.2 billion and $965 million, respectively, outstanding under these Finance Receivable Facilities, unused capacity of $1.2 billion and $1.6 billion, respectively, and held $43 million and $36 million, respectively, in restricted cash related to these Finance Receivable Facilities. During the three months ended March 31, 2023, the Company's effective interest rate on these Finance Receivable Facilities was approximately 6.18%. For the year ended December 31, 2022, the Company's effective interest rate on these Finance Receivable Facilities was approximately 2.93%.

Long-Term Debt

Senior Unsecured Notes

The Company has issued various tranches of senior unsecured notes (collectively, the "Senior Notes") each under a separate indenture (collectively, the "Indentures"), as further described below.

The following table summarizes components of the Company's senior unsecured notes:
March 31,
2023		December 31,
2022		Interest Rate
(in millions, except percentages)
2025 Senior Unsecured Notes due October 1, 2025 ("2025 Notes")$500 $500 5.625 %
2027 Senior Unsecured Notes due April 15, 2027 ("2027 Notes")600 600 5.500 %
2028 Senior Unsecured Notes due October 1, 2028 ("2028 Notes")600 600 5.875 %
2029 Senior Unsecured Notes due September 1, 2029 ("2029 Notes")750 750 4.875 %
2030 Senior Unsecured Notes due May 1, 2030 ("2030 Notes")3,275 3,275 10.250 %
Total principal amount5,725 5,725 
Less: unamortized debt issuance cost(73)(76)
Total debt$5,652 $5,649 

Each of the 2025 Notes, the 2027 Notes, the 2028 Notes and the 2029 Notes were issued pursuant to an indenture entered into by and among the Company, each of the guarantors party thereto and U.S. Bank National Association, as trustee. The 2030
18

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Notes were issued pursuant to an indenture entered into by and among the Company, each of the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. Interest on each of the Senior Notes is payable semi-annually, beginning on April 1, 2021 for the 2025 Notes and 2028 Notes, October 15, 2021 for the 2027 Notes, March 1, 2022 for the 2029 Notes, and November 1, 2022 for the 2030 Notes. The Senior Notes mature as specified in the table above unless earlier repurchased or redeemed and are guaranteed by the Company's existing domestic restricted subsidiaries (other than the subsidiaries formed for inventory, finance receivables, securitization facilities, immaterial subsidiaries, or unrestricted subsidiaries). In March 2023, the Company designated ADESA and its subsidiaries as unrestricted subsidiaries under the
Indentures.

The Company may redeem some or all of each issuance of Senior Notes at redemption prices set forth in each respective indenture, plus any accrued and unpaid interest to the redemption date. Prior to those redemption dates, the Company may redeem up to 35% of the aggregate principal amount at a redemption price equal to 100% plus the respective interest rate specified in the table above, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings. With respect to the 2030 Notes, the Company may, at its option, redeem in the aggregate of up to 10% of the original aggregate principal amount of the 2030 Notes during the period from, and including, May 1, 2025 to, but excluding May 1, 2027, at a redemption price equal to 105.125% of the 2030 Notes to be redeemed, plus accrued and unpaid interest thereon to the relevant redemption rate. In addition, the Company may, at its option, redeem some or all of the Senior Notes prior to its redemption date, by paying a make-whole premium plus any accrued and unpaid interest to, but not including, the redemption date. If the Company experiences certain change of control events, it must make an offer to purchase all of the Senior Notes at 101% of the principal amount thereof, plus any accrued and unpaid interest, to the repurchase date.

The Indentures contain restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things and subject to certain exceptions, incur additional debt or issue preferred stock, create new liens, make intercompany payments, pay dividends and make other distributions in respect of the Company's capital stock, redeem or repurchase the Company’s capital stock or prepay subordinated indebtedness, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers or consolidations. Certain of these covenants may be suspended if any of the Senior Notes are assigned an investment grade rating from any two of Moody’s Investors Service, Inc., Standard & Poor’s Rating Services, and Fitch Ratings.

In the first quarter of 2023, the Company launched offers to eligible holders of Senior Notes to exchange any and all of their Senior Notes for up to an aggregate principal amount of $1.0 billion of new 9.0%/12.0% Cash/PIK Toggle Senior Secured Second Lien Notes due 2028. Subsequent to March 31, 2023, the Company increased the exchange offer consideration for certain Senior Notes and extended the scheduled expiration of the offers to May 17, 2023.

Notes Payable


From time to time, theThe Company entershas entered into promissory note and disbursement agreements to finance certain equipment for its transportation fleet.fleet and building improvements. The assets financed with the proceeds from these notes serve as the collateral for each note and certain security agreements related to these assets have cross collateralization and cross default provisions with respect to one another. Each note has a fixed annual interest rate, a two- to five-year term and requires monthly payments. As of September 30, 2017,March 31, 2023 and December 31, 2022, the outstanding principal of these notes had a weighted-average interest rate of 5.8%7.9% and 7.5%, respectively, and totaled approximately $16.7$2 million and $3 million, respectively, net of unamortized debt issuance costs, of which approximately $3.4less than $1 million isand $1 million, respectively, was due within the next twelve months and is included in current portion of long-term debt in the accompanying unaudited condensed consolidated balance sheets.

Real Estate Financing

The Company finances certain purchases and construction of its property and equipment through various sale and leaseback transactions. As of March 31, 2023, none of these transactions have qualified for sale accounting due to meeting the criteria for finance leases, or forms of continuing involvement, such as repurchase options or renewal periods that extend the lease for substantially all of the asset's remaining useful life, and are therefore accounted for as financing transactions. These arrangements require monthly payments and have initial terms of 20 to 25 years. Some of the agreements are subject to renewal options of up to 25 years and some are subject to base rent increases throughout the term. As of March 31, 2023 and December 31, 2022, the outstanding liability associated with these sale and leaseback arrangements, net of unamortized debt
19

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
issuance costs, was $483 million for both periods and was included in long-term debt in the accompanying unaudited condensed consolidated balance sheets.

Financing of Beneficial Interests in Securitizations

As discussed in Note 9 — Securitizations and Variable Interest Entities, the Company has retained certain beneficial interests in securitizations pursuant to the Company’s obligations as a sponsor under the Risk Retention Rules. Beginning in June 2019, the Company entered into secured borrowing facilities through which it finances certain retained beneficial interests in securitizations whereby the Company sells such interests and agrees to repurchase them for their fair value at a stated time of repurchase.

As of March 31, 2023 and December 31, 2022, the Company has pledged $261 million and $268 million, respectively, of its beneficial interests in securitizations as collateral under the repurchase agreements with expected repurchases ranging from April 2023 to March 2030. The securitization trusts distribute payments related to the Company's pledged beneficial interests in securitizations directly to the lenders, which reduces the beneficial interests in securitizations and the related debt balance. Pledged collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral, the repurchase price of the pledged collateral will be increased by the amount of the decline.

The outstanding balance of these facilities, net of unamortized debt issuance costs, was $258 million and $265 million as of March 31, 2023 and December 31, 2022, respectively, of which $102 million for both periods was included in current portion of long-term debt in the accompanying unaudited condensed consolidated balance sheets.


Other Long-Term Debt

The Company has financed certain purchases of its property and equipment through a sale and leaseback transaction which is treated as a financing transaction in accordance with applicable accounting guidance. As of September 30, 2017,March 31, 2023, the liability associatedCompany was in compliance with this arrangement is approximately $3.0 million and is included in long-termall debt in the accompanying unaudited condensed consolidated balance sheet.covenants.


NOTE 811 — STOCKHOLDERS' EQUITY (DEFICIT)


Organizational Transactions


Immediately prior to the IPO, Carvana Co.'s amended and restated its certificate of incorporation, to, among other things, authorizeauthorizes (i) 50.050 million shares of Preferred Stock, par value $0.01 per share, (ii) 500.0500 million shares of Class A common stock, par value $0.001 per share, and (iii) 125.0125 million shares of Class B common stock, par value $0.001 per share. Each share of Class A common stock generally entitles its holder to one vote on all matters to be voted on by stockholders. Each share of Class B common stock held by the Garcia Parties generally entitles its holder to ten votes on all matters to be voted on by stockholders, for so long as the Garcia Parties maintain direct or indirect beneficial ownership of at least 25% of the outstanding shares of Carvana Co.'s Class A common stock determined on an as-exchanged basis assuming that all of the Class A Units and Class B common stockUnits were exchanged for Class A common stock. All other shares of Class B common stock generally entitle their holders to one vote per share on all matters to be voted on by stockholders. Holders of Class B common stock are not entitled to receive dividends and would not be entitled to receive any distributions upon the liquidation, dissolution or winding down of the Company. Holders of Class A and Class B common stock vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by applicable law.


As described in Note 1 — Business Organization, Carvana GroupGroup's amended and restated its LLC Agreement to, among other things, provideprovides for two classes of common ownership interests in Carvana Group. Carvana Group’s two remaining classes of membership interests areGroup: (i) Class A Units and (ii) Class B Units.Units (together, the "LLC Units"). Carvana Co. is required to, at all times, maintain (i) a four-to-five ratio between the number of shares of Class A common stock issued and outstanding by Carvana Co. and the number of Class A Units owned by Carvana Co. (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities and subject to adjustment as set forth in the exchange agreement (the "Exchange Agreement") further discussed below, and taking into account Carvana Sub’sCo. Sub LLC's 0.1% ownership interest in Carvana, LLC) and (ii) a four-to-five ratio between the number of shares of Class B common stock owned by the Existingoriginal holders of LLC Unitholdersunits prior to the IPO (the "Original LLC Unitholders") and the number of Class A Units owned by the ExistingOriginal LLC Unitholders. The Company may issue shares of Class B common stock only to the extent necessary to maintain these ratios. Shares of Class B common stock are transferable only if an Original LLC Unitholder elects to exchange them, together with an equal number of LLC Units if Carvana Co., at the election of an Existing LLC Unitholder, exchanges1.25 times as many LLC Units, for consideration from the Company. Such consideration from the Company can be, at the Company’s election, either shares of Class A common stock.stock or cash.


As part of the Organizational Transactions, Carvana Co. issued approximately 117.2 million shares of Class B common stock to holders of Class A Units on a four-to-five basis with the number of Class A Units they owned.
20


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of September 30, 2017,March 31, 2023 and December 31, 2022, there were approximately 165.8 million and 5.6236 million Class A Units and 1 million Class B Units (as adjusted for the participation thresholds), respectively,thresholds and closing price of Class A common stock on March 31, 2023 and December 31, 2022) issued and outstanding. As discussed in Note 1013 — Equity-Based Compensation, Class B Units arewere issued under the Company’s LLC Equity Incentive Plan (the “Equity"LLC Equity Incentive Plan”Plan") and are subject to a participation threshold, and are earned over the requisite service period.


CARVANA CO. AND SUBSIDIARIESEquity Offerings
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Initial Public Offering

As described in Note 1 — Business Organization, on May 3, 2017, Carvana Co.On April 26, 2022, the Company completed its IPOa public offering of 15.015.625 million shares of its Class A common stock at a publican offering price of $15.00 per share. Carvana Co. received approximately $205.9 million in$80 for total net proceeds net of $1.2 billion, after deducting underwriting discounts and commissions and offering expenses. Carvana Co.The Garcia Parties purchased an aggregate of 5.4 million shares of the Class A common stock offered at the public offering price. The Company used the net proceeds to purchase approximately 18.819.5 million newly-issued membership interests of Carvana Group at a price per unit equal to 0.8 times the initial public offering price less underwriting discounts and commissions. In connection with the IPO, Carvana Co. transferred approximately 0.2 million Class ALLC Units to Ernest Garcia, II in exchange for his 0.1% ownership interest in Carvana LLC, a majority-owned subsidiary of Carvana Group. After the transfer Carvana Co. owned approximately 18.6 million Class A Units.

The Company incurred approximately $4.7 million of legal, accounting, printing and other professional fees directly related to the IPO, including $1.3 million incurred during 2016, of which$0.4 million were paid during 2016. Upon completion of the IPO, the total costs incurred for the IPO were charged against additional paid-in capital.


Exchange Agreement


Carvana Co. and the ExistingOriginal LLC Unitholders together with any holders of LLC Units issued subsequent to the IPO (together, the "LLC Unitholders") entered into an Exchange Agreement under which each Existing LLC Unitholder (and certain permitted transferees thereof) may exchange their LLC Units forreceive shares of the Company's Class A common stock in exchange for their LLC Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to (i) conversion ratio adjustments for stock splits, stock dividends, reclassifications and similar transactions, (ii) vesting for certain LLC Units, and subject to vesting and(iii) the respective participation threshold for Class B Units. To the extent such owners also hold Class B common stock, they will beare required to deliver to Carvana Co. a number of shares of Class B common stock equal to the number of shares of Class A common stock being exchanged for. Any shares of Class B common stock so delivered will beare canceled. The number of exchangeable Class B Units is determined based on the value of Carvana Co.'s Class A common stock and the applicable participation threshold.


During the three months ended March 31, 2023 and 2022, certain LLC Unitholders exchanged less than 1 million LLC Units and no shares of Class B common stock for less than 1 million newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, Carvana Co. received less than 1 million LLC Units during each of the three months ended March 31, 2023 and 2022, increasing its total ownership interest in Carvana Group.

Class C RedeemableA Non-Convertible Preferred Units


On July 27, 2015, the Company authorizedOctober 2, 2018, Carvana Group, LLC amended its LLC Agreement to create a class of non-convertible preferred units (the "Class A Non-Convertible Preferred Units"), effective September 21, 2018. The Class A Non-Convertible Preferred Units were created in connection with Carvana Co.'s issuance of its Senior Notes, as discussed further and defined in Note 10 — Debt Instruments. On October 2, 2020, Carvana Group, LLC amended and restated its LLC Agreement to, among other things, authorize the issuance of and sold approximately 14.11.1 million Class C RedeemableA Non-Convertible Preferred Units to CVAN Holdings, LLC, for approximately $65.0 million. On April 27, 2016, the Company authorizedbe sold to Carvana Co. in connection with the issuance of its 2025 and sold approximately 18.3 million Class C Redeemable Preferred Units for approximately $100.0 million to Mr. Garcia. On July 12, 2016, the Company authorized2028 Notes and authorize the issuance of and sold approximately 8.6additional Class A Non-Convertible Preferred Units, in each case in consideration for the capital contribution made or deemed to have been made by Carvana Co. of the net proceeds of senior unsecured notes issuances. On March 29, 2021, Carvana Group, LLC issued 0.6 million Class C RedeemableA Non-Convertible Preferred Units to CVAN Holdings, LLC, and approximately 1.7 million Class C Redeemable Preferred Units to GV Auto I, LLC for approximately $50.0 million and $9.7 million, respectively. On December 9, 2016, the Company authorizedin connection with the issuance of and sold approximately 0.5its 2027 Notes. On August 16, 2021, Carvana Group LLC issued 0.8 million Class C RedeemableA Non-Convertible Preferred Units in connection with the issuance of its 2029 Notes. On May 6, 2022, Carvana Group LLC issued 3.3 million Class A Non-Convertible Preferred Units in connection with the issuance of its 2030 Notes. Carvana Co. used its net proceeds from certain Senior Unsecured Notes due 2023, (which have since been repurchased), the 2025 and 2028 Notes, the 2027 Notes, the 2029 Notes, and the 2030 Notes to purchase 0.6 million, 1.1 million, 0.6 million, 0.8 million, and 3.3 million, respectively, of Class A Non-Convertible Preferred Units.

When Carvana Co. makes payments on the Senior Notes, Carvana Group makes an equal cash distribution, as necessary, to the Fidel Family TrustClass A Non-Convertible Preferred Units. For each $1,000 principal amount of Senior Notes that Carvana Co. repays or otherwise retires, one Class A Non-Convertible Preferred Unit is canceled and retired.

Tax Asset Preservation Plan

On January 16, 2023, the Company entered into a Section 382 Rights Agreement (the “Tax Asset Preservation Plan”) designed to preserve shareholder value and the value of certain tax assets primarily associated with federal net operating loss carryforwards and built-in losses under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The Tax
21

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Asset Preservation Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of the Company's outstanding Class A common stock (any such person an “Acquiring Person”), without the approval of the Company’s board of directors (the "Board").

In connection therewith, the Board declared a dividend of one preferred share purchase right (a “Right”) for approximately $2.7 million. The Company recorded the issuance and saleeach share of Class C RedeemableA common stock, par value $0.001 per share, of the Company. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series B Preferred Units at fairStock, par value net$0.01 per share, of issuance costs.

In accordance with the Company’s Operating Agreement, the Class C Redeemable Preferred Units accrued a returnCompany (the “Class C Return”“Preferred Shares”) at a coupon rateprice of 12.5% compounding annually$50.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. The Rights will separate and begin trading separately from the Class A common stock, and right certificates will be caused to evidence the Rights, on the aggregate amountearlier to occur of capital contributions made with respect to(i) the Class C Redeemable Preferred Units.

On May 3, 2017,Close of Business (as such term is defined in the Company closed its IPO atTax Asset Preservation Plan) on the tenth day following a pricepublic announcement, or the public disclosure of facts indicating, that a Person (as such thatterm is defined in the CompanyTax Asset Preservation Plan) or group of affiliated or associated Persons has acquired Beneficial Ownership (as such term is no longer liable fordefined in the accrued Class C Return, andTax Asset Preservation Plan) of 4.9% or more of the outstanding Class C Redeemable Preferred Units convertedA common stock (or, in the event that the Board determines to effect an exchange in accordance with Section 24 of the Tax Asset Preservation Plan and the Board determines that a later date is advisable, then such later date) and (ii) the close of business on the tenth business day (or such later date as may be determined by action of the Board prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the Beneficial Ownership by a Person or group of 4.9% or more of the outstanding Class A Units on a one-to-one basis. As of September 30, 2017, all Class C Redeemable Preferred Units had converted tocommon stock. If issued, each Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void) will become exercisable for Class A Units andcommon stock having a value equal to two times the related balance becameexercise price of the Right. However, prior to exercise, a componentRight does not give its holder any rights as a stockholder of permanent equity on the accompanying unaudited condensed consolidated balance sheet.Company, including without limitation any dividend, voting or liquidation rights.


NOTE 912 — NON-CONTROLLING INTERESTS


As discussed in Note 1 — Business Organization, Carvana Co. consolidates the financial results of Carvana Group and reports a non-controlling interest related to the portion of Carvana Group owned by the Existing LLC Unitholders. Changes in the ownership interest in Carvana Group while Carvana Co. retains its controlling interest will be accounted for as equity transactions.

Future direct exchanges Exchanges of LLC Units will result in a change in ownership and reduce the amount recorded as non-controlling interests and increase additional paid-in capital.

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




Upon the issuance of shares of Class A common stock by Carvana Co. related to the Company’s equity compensation plans such as the exercise of options, issued by Carvana Co., or the issuance of other types of equity compensation by Carvana Co. such as the issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock, Carvana Group is required to issue to Carvana Co. a number of Class A Units equal to 1.25 times the number of shares of Class A common stock being issued in connection with the exercise of such options or issuance of other types of equity compensation, subject to adjustment for stock splits, stock dividends, reclassifications, and similar transactions. Activity related to the Company's equity compensation plans may result in a change in ownership which will impact the amount recorded as non-controlling interest and additional paid-in capital.


The non-controlling interest related to the Class B Units is determined based on the respective participation thresholds and the share price of Class A common stock on an as-converted basis. To the extent that the number of as-converted Class B Units change or Class B Units are forfeited, the resulting difference in ownership will be accounted for as equity transactions adjusting the non-controlling interest and additional paid-in capital.


ForDuring the three and nine months ended September 30, 2017,March 31, 2023 and 2022, the total adjustments related to equity compensation issued by Carvana Co., changes in the numberexchanges of as-converted Class BLLC Units and forfeitures of Class B Units was an increase in non-controlling interests and a corresponding decrease in additional paid-in capital of approximately $0.5 million andwere a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of approximately $0.3$1 million respectively,each, which hashave been included in adjustments to the non-controlling interestsexchanges of LLC Units in the accompanying unaudited condensed consolidated statementstatements of stockholders' equity.equity (deficit).


As of September 30, 2017,March 31, 2023, Carvana Co. owned approximately 11%55.9% of Carvana Group with the Existing LLC Unitholders owning the remaining 89%44.1%. The net loss attributable to the non-controlling interests on the accompanying unaudited condensed consolidated statements of operations represents the portion of the net loss attributable to the economic interest in Carvana Group held by the non-controlling Existing LLC Unitholders calculated based on the weighted average non-controlling interests' ownership during the periods presented.

The following table summarizes the effects of changes in ownership in Carvana Group on the Company's equity (in thousands):
22
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Transfers (to) from non-controlling interests:
 
Decrease in additional paid-in capital as a result of the Organizational Transactions$—
 $(174,255)
(Decrease) increase in additional paid-in capital as a result of adjustments to the non-controlling interests(513) 333
Total transfers to non-controlling interests$(513) $(173,922)


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)


Three Months Ended March 31,
20232022
(in millions)
Transfers from non-controlling interests:
Increase as a result of exchanges of LLC Units$1 $1 
Total transfers from non-controlling interests$1 $1 


NOTE 1013 — EQUITY-BASED COMPENSATION


Equity-based compensation expense is recognized based on amortizing the grant-date fair value on a straight-line basis over the requisite service period, which is generally the vesting period of the award, less actual forfeitures. A summary of equity-based compensation expense recognized during the three and nine months ended September 30, 2017March 31, 2023 and September 30, 20162022 is as follows (in thousands):follows:

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Class B Units$597
 138
 $1,237
 $421
Restricted Stock Awards823
 —
 1,973
 —
Options467
 —
 835
 —
Total equity-based compensation expense$1,887
 $138
 $4,045
 $421
Three Months Ended March 31,
20232022
(in millions)
Restricted Stock Units and Awards excluding those granted in relation to the CEO Milestone Gift$14 $9 
Restricted Stock Units granted in relation to the CEO Milestone Gift(1)31 
Options4 3 
Total equity-based compensation17 43 
Equity-based compensation capitalized to property and equipment(2)(2)
Equity-based compensation capitalized to inventory— (13)
Equity-based compensation, net of capitalized amounts$15 $28 


As of March 31, 2023, the total unrecognized compensation related to outstanding equity awards was $253 million, which the Company expects to recognize over a weighted-average period of approximately 3.3 years. Total unrecognized equity-based compensation will be adjusted for actual forfeitures.

2017 Omnibus Incentive Plan


In connection with the IPO, the Company adopted the 2017 Omnibus Incentive Plan (the "2017 Incentive Plan"). UnderThe number of shares authorized for issuance under the 2017 Incentive Plan 14.0is subject to an automatic annual increase of the lesser of two percent of the Company's outstanding common stock or an amount determined by the Compensation and Nominating Committee of the Board. While the Compensation and Nominating Committee determined not to increase the number of shares authorized for issuance in prior years, the automatic annual increase on January 1, 2023 was approved. As a result, in February 2023, the Company registered approximately 2 million additional shares (the "Automatic Increase"). In addition, on February 22, 2023, the Board approved an amendment, subject to stockholder approval, to increase the number of shares available under the 2017 Incentive Plan by 20 million shares (the "Amendment Increase"). On February 22, 2023, Ernest Garcia II also granted the Board an irrevocable proxy to vote the shares of Class A and Class B common stock directly held and beneficially owned by Mr. Garcia II in favor of the Amendment Increase. The Company's stockholders approved the Amendment Increase at the annual stockholder meeting on May 1, 2023. After taking into account the Automatic Increase and the Amendment Increase, approximately 36 million shares of Class A common stock are available for issuance under the 2017 Incentive Plan, which the Company may grant as stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-basedequity-based awards to employees, directors, officers and consultants. The majority of equity granted by the Company vests over four-year periods based on continued employment with the Company. As of September 30, 2017,March 31, 2023, prior to the effectiveness of the Amendment Increase, approximately 12.91 million shares remain available for future equity-based award grants under this plan, excluding equity award grants.awards granted to certain employees contingent upon stockholder approval of the Amendment Increase, as disclosed in the Company's definitive proxy statement filed with the SEC on March 21, 2023.


23

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)


Employee Stock Purchase Plan


During the three and nine months ended September 30, 2017,In May 2021, the Company issued certainadopted an employee stock purchase plan (the "ESPP"). On July 1, 2021, the ESPP went into effect. The ESPP allows substantially all employees, and consultants an aggregateexcluding members of approximately 0.0 million and 0.6 million restrictedsenior management, to acquire shares of the Company’s Class A common stock respectively, pursuantthrough payroll deductions over six-month offering periods, commencing on January 1 and July 1 of each year. The per share purchase price is equal to the terms90% of the 2017 Incentive Plan with a weighted-average grant-date fair market value of $16.95. Duringa share of the threeCompany’s Class A common stock on the last day of the offering period. Participant purchases are limited to maximums that may vary between $10,000 and nine months ended September 30, 2017, the$25,000 of stock per calendar year. The Company also awarded optionsis authorized to purchase an aggregate of approximately 0.1 million and 0.6grant up to 0.5 million shares of Class A common stock respectively, to employees, consultants and directors, with a weighted-average grant-date fair value of $8.64 and $8.35, respectively. The Company determinedunder the grant-date fair value of the options using the Black-Scholes valuation model with the following weighted-average assumptions:ESPP.
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Expected volatility(1)
63.0% 63.0%
Expected dividend yield—% —%
Expected term (in years)(2)
6.25
 6.26
Risk-free interest rate1.9% 1.9%
(1) Measured using selected high-growth guideline companies and considering the risk factors that would influence the range of expected volatility because the Company does not have sufficient historical data to provide a reasonable basis upon which to estimate the expected volatility.
(2) Expected term represents the estimated period of time until an option is exercised and was determined using the simplified method because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Class B Units


During the ninethree months ended September 30, 2017,March 31, 2023 and 2022, the Company issued an aggregatedid not issue any shares of approximately 0.8Class A common stock and recognized less than $1 million of equity-based compensation expense in each period. As of March 31, 2023, 411,154 shares remained available for future issuance.

Class BA Units

During 2018, the Company granted certain employees Class A Units with service-based vesting over two- to executive officers and certain other employees with a participation threshold of $12.00four-year periods and a grant-date fair value of $7.04.$18.58 per Class A Unit. The grantees entered into the Exchange Agreement under which each LLC Unitholder (and certain permitted transferees thereof) may receive shares of the Company's Class A common stock in exchange for their LLC Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to conversion ratio adjustments for stock splits, stock dividends, reclassifications, and similar transactions and subject to vesting.

Class B Units

In March 2015, Carvana Group adopted the LLC Equity Incentive Plan. Under the LLC Equity Incentive Plan, Carvana Group could grant Class B Units to eligible employees, non-employee officers, consultants and directors with service-based vesting, typically four to five years. In connection with the completion of the IPO, Carvana Group discontinued the grant of new awards under the LLC Equity Incentive Plan, however the LLC Equity Incentive Plan will continue in connection with administration of existing awards that remain outstanding. Grantees may receive shares of the Company's Class A common stock in exchange for Class B Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to conversion ratio adjustments for stock splits, stock dividends, reclassifications, and similar transactions and subject to vesting and the respective participation threshold for Class B Units. Class B Units do not expire. There were no Class B Units issued during the three months ended September 30, 2017. During the three and nine months ended September 30, 2016, the Company issued approximately 0.4 million and 0.9 millionMarch 31, 2023 or 2022. As of March 31, 2023, outstanding Class B Units respectively. The Class B Units issued during the nine months ended September 30, 2016 have per unithad participation thresholds of $4.8780between $0.00 to $5.8114 and a grant-date fair value of $0.22 to $0.44. The Company determined the grant-date fair value of the Class B Units using an option pricing valuation model with the following weighted-average assumptions:$12.00.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Expected volatility(1)
n/a 70.3% 63.0% 67.1%
Expected dividend yieldn/a —% —% —%
Expected term (in years)(2)
n/a 1.25
 6.25
 2.00
Risk-free interest raten/a 0.6% 1.9% 1.0%

(1) Measured using selected high-growth guideline companies and considering the risk factors that would influence the range of expected volatility because the Company does not have sufficient historical data to provide a reasonable basis upon which to estimate the expected volatility.
(2) In 2017, the expected term represents the estimated period of time determined using the simplified method because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Company Performance Plan

The Company created the Performance Plan on July 25, 2016, whereby the Company was authorized to grant up to 1.0 million performance units (the “Performance Units”) to certain employees and consultants. The Performance Units granted were subject to continued employment and were only exercisable upon a qualifying transaction, which included an initial public offering, as defined in the Performance Plan. The IPO completed on May 3, 2017 constituted a qualifying transaction under the terms of the Performance Plan. The Company chose to settle the outstanding Performance Units in equity awards of Carvana Co. and recognized compensation expense related to the vested portion of these equity awards upon completion of the IPO.

As of September 30, 2017, the total unrecognized compensation expense related to outstanding equity awards was approximately $18.3 million, which the Company expects to recognize over a weighted-average period of approximately 3.5 years. Total unrecognized equity-based compensation expense will be adjusted for actual forfeitures.

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



NOTE 1114 — LOSS PER SHARE


Basic and diluted net loss per share is computed by dividing the net loss attributable to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive shares. For all periods presented, potentially dilutive shares are excluded from diluted net loss per share because they have an anti-dilutive impact. Therefore, basic and diluted net loss per share attributable to Class A common stockholders are the same for all periods presented.

As discussed in Note 1 — Business Organization, the Organizational Transactions are considered transactions between entities under common control and the financial statements Net loss for all periods priorpresented is attributable only to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes. For purposes of calculating both the numerator and denominator of net loss per share for periods prior to the IPO, the Company has retroactively reflected the 15.0 million shares issued in the IPO and the LLC Units outstanding as of the Organizational Transactions as if they had been issued and outstanding as of the beginning of each period presented. These calculations for periods prior to the IPO do not consider the options or shares of Class A common stockholders, due to no activity related to convertible preferred stock issued on the IPO date under the 2017 Incentive Plan.during those periods.

24

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):during the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(in millions, except number of shares, which are reflected in thousands, and per share amounts)
Numerator:
Net loss$(286)$(506)
Net loss attributable to non-controlling interests(126)(246)
Net loss attributable to Carvana Co. Class A common stockholders, basic and diluted$(160)$(260)
Denominator:
Weighted-average shares of Class A common stock outstanding106,060 90,095 
Nonvested weighted-average restricted stock awards(49)— 
Weighted-average shares of Class A common stock outstanding, basic and diluted106,011 90,095 
Net loss per share of Class A common stock, basic and diluted$(1.51)$(2.89)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Numerator:       
Net loss$(39,769) $(21,985) $(117,078) $(57,418)
Less: Net loss attributable to non-controlling interests(35,389) (19,589) (104,232) (51,159)
Net loss attributable to Carvana Co., basic and diluted$(4,380) $(2,396) $(12,846) $(6,259)
Denominator:       
Weighted-average shares of Class A common stock outstanding15,520
 15,000
 15,254
 15,000
Less: unvested weighted-average restricted stock awards475
 —
 230
 —
Weighted-average shares of Class A common stock to compute basic and diluted net loss per Class A common share15,045
 15,000
 15,024
 15,000
Net loss per share of Class A common stock, basic and diluted$(0.29) $(0.16) $(0.86) $(0.42)


Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted net loss per share of Class B common stock under the two-class method has not been presented. LLC Units (adjusted for the Exchange Ratio and participation thresholds) are considered

The following table presents potentially dilutive sharessecurities, as of the end of the period, excluded from the computations of diluted net loss per share of Class A common stock because they are exchangeable into shares of Class A common stock.

Weighted-average as-converted Class A Units of approximately 117.2 million together with the related Class B common stock for the three and nine months ended September 30, 2017March 31, 2023 and September 30, 2016 were evaluated under2022.

Three Months Ended March 31,
20232022
(in thousands)
Options (1)
1,234 1,268 
Restricted Stock Units and Awards (1)
92 320 
Class A Units (2)
82,963 82,963 
Class B Units (2)
723 1,989 
_________________________
(1) Represents number of instruments outstanding at the if-converted method for potentially dilutive effects and were determined to be anti-dilutive. Outstanding Class B Unitsend of approximately 7.5 million and 6.5 million at September 30, 2017 and September 30, 2016, respectively, were evaluated for potentially dilutive effects and were determined to be anti-dilutive. Potentially dilutive restricted stock awards of approximately 0.5 million and 0.2 million for the three and nine months ended September 30, 2017, respectively,period that were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. AsThese numbers exclude options granted to certain employees contingent upon stockholder approval of September 30, 2017, 0.6 million optionsthe Amendment Increase, as discussed above.
(2) Represents the weighted-average as-converted LLC units that were outstanding and evaluated under the treasury stockif-converted method for potentially dilutive effects and were determined to be anti-dilutive.


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



NOTE 1215 — INCOME TAXES


As described in Note 1 — Business Organization and Note 11 — Stockholders' Equity (Deficit), as a result of the IPO, and Organizational Transactions, Carvana Co. owns a portion ofbegan consolidating the LLC Unitsfinancial results of Carvana Group. Carvana Group which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its economic interest held in accordance with the terms of the LLC Agreement.Carvana Group. Carvana Co. was formed on November 29, 2016 and did not engage in any operations prior to the IPO. Carvana Co. is taxed as a corporation and is subject to U.S. federal, income taxes, in addition to state and local income taxes with respect to theits allocable share of any taxable income or loss of Carvana Group.Group, as well as any stand-alone income or loss generated by Carvana Co.


The
25

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As described in Note 11 — Stockholders' Equity (Deficit), the Company recognizesacquired less than 1 million LLC Units during each of the three months ended March 31, 2023, and 2022, in connection with exchanges with LLC Unitholders. During the three months ended March 31, 2023, and 2022, the Company recorded a gross deferred tax assetsasset of less than $1 million and $1 million, respectively, associated with the basis difference in its investment in Carvana Group related to the extentacquisition of the LLC Units which is reflected as an increase to additional paid-in capital in the accompanying unaudited condensed consolidated statements of stockholders' equity (deficit).

During the three months ended March 31, 2023, management performed an assessment of the recoverability of deferred tax assets. Management determined, based on the accounting standards applicable to such assessment, that there was sufficient evidence as a result of the Company’s cumulative losses to conclude it believes these assets are more-likely-than-not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. Based on Carvana Co.'s limited operating history and future projections of taxable income, it believes there is significant uncertainty as to whetherwas more likely than not that its deferred tax assets willwould not be realized; therefore, Carvana Co.realized and has recorded a full valuation allowance against its deferred tax assets. Additionally, Carvana Co. did not take benefit forIn the event that management was to determine that the Company would be able to realize its portiondeferred tax assets in the future in excess of taxable losses incurred by Carvana Group during the three and nine months ending September 30, 2017 subsequenttheir net recorded amount, an adjustment to the IPO and Organizational Transactions.valuation allowance would be made which would reduce the provision for income taxes.


The Company recognizes uncertain income tax positions when it is more-likely-than-not the position will be sustained upon examination. As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the Company has not identified any uncertain tax positions and has not recognized any related reserves.


The Company's effective tax rate for the three months ended March 31, 2023 and 2022 was a benefit of 0.7% and an expense of 0.1%, respectively, related to its wholly-owned subsidiaries.

Tax Receivable Agreement


Carvana Co. expects to obtain an increase in its share of the tax basis in the net assets of Carvana Group when LLC Units are exchanged by the Existing LLC Unitholders and other qualifying transactions. As described in Note 811 — Stockholders' Equity (Deficit), each change in outstanding shares of Class A common stock results in a corresponding increase or decrease in Carvana Co.'s ownership of LLC Units. The Company intends to treat any exchanges of LLC Units as direct purchases of LLC interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that Carvana Co. would otherwise pay in the future to various taxing authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.


In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”(the "TRA"). Under the TRA, the Company generally will be required to pay to the Existing LLC Unitholders 85% of the amount of cash savings, if any, in U.S. federal, state or local tax that the Company actually realizes directly or indirectly (or are deemed to realize in certain circumstances) as a result of (i) certain tax attributes created as a result of any sales or exchanges (as determined for U.S. federal income tax purposes) to or with the Company of their interests in Carvana Group for shares of Carvana Co.'s Class A common stock or cash, including any basis adjustment relating to the assets of Carvana Group and (ii) tax benefits attributable to payments made under the TRA (including imputed interest). The Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. To the extent that the Company is unable to timely make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid.


If the Internal Revenue Service or a state or local taxing authority challenges the tax basis adjustments that give rise to payments under the TRA and the tax basis adjustments are subsequently disallowed, the recipients of payments under the agreement will not reimburse the Company for any payments the Company previously made to them. Any such disallowance would be taken into account in determining future payments under the TRA and would, therefore, reduce the amount of any such future payments. Nevertheless, if the claimed tax benefits from the tax basis adjustments are disallowed, the Company’s payments under the TRA could exceed its actual tax savings, and the Company may not be able to recoup payments under the TRA that were calculated on the assumption that the disallowed tax savings were available.


The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, (ii) there is a material breach of any material obligations under the TRA; or (iii) itthe Company elects an early termination of the TRA, then the TRA will terminate and the Company's obligations, or the Company's successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any LLC
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Units that have not been exchanged are deemed exchanged for the fair market value of the Company's Class A common stock at the time of termination.
26

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of September 30, 2017, there have been no exchanges of LLC Units andMarch 31, 2023, the Company has concluded, based on applicable accounting standards, that it was more likely than not that its deferred tax assets subject to the TRA would not be realized; therefore, the Company has not recorded a liability related to the TRA.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Lease Commitments

tax savings it may realize from utilization of such deferred tax assets. As of September 30, 2017,March 31, 2023, the total unrecorded TRA liability is approximately $1.6 billion. If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recognized as expense within its consolidated statements of operations.

NOTE 16 — LEASES

The Company is party to various lease agreements for real estate and transportation equipment. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company also assesses whether each lease is an operating or finance lease at the lease commencement date. Rent expense of operating leases is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances.

Operating Leases

As of March 31, 2023, the Company is a tenant under various operating leases with third parties related to certain of its delivery hubs, vending machines, inspection and reconditioning centers, auction locations with reconditioning capacity, storage, parking and corporate offices. The initial terms expire at various dates between 20172023 and 2037.2038. Many of the leases include one or more renewal options ranging from threeone to thirty years. Rent expense for thesetwenty years and some contain purchase options.

The Company's operating leases was approximately $1.1 millionare included in operating lease right-of-use assets, other current liabilities, and $0.2 million foroperating lease liabilities on the three months ended September 30, 2017 and 2016, respectively, and approximately $2.9 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.accompanying unaudited condensed consolidated balance sheets.


In September 2016, the Company entered into a lease with a third party for the second floor of a new corporate headquarters in Tempe, Arizona. The lease has an initial term of 83 months and has three five-year extension options. At the request of the landlord, DriveTime agreedRefer to partially guarantee the lease payments until September 2019. The Company started incurring rent expense for this lease in April 2017, and it is included within the third party rent expense discussed above.
The Company also has lease agreements with DriveTime that provide the Company access to and utilization of space at various DriveTime inspection and reconditioning centers, temporary storage locations and retail facilities. Additionally, the Company entered into a sublease with DriveTime for the use of the first floor of its new corporate headquarters in Tempe, Arizona. See Note 57 — Related Party Transactions for further discussion of operating leases with related party lease information.parties.


Letters of CreditFinance Leases


In October 2016, the Company obtained an unconditional, irrevocable, stand-by letter of credit for $1.9 million to satisfy a condition of a new lease agreement. The Company is required to maintain a cash deposit of $1.9 million with the financial institution that issued the stand-by letter of credit until February 2018, at which point the cash deposit requirement will be reduced by approximately $1.0 million until November 30, 2018, at which time the letter of credit shall expire. The Company has earned interestfinance leases for certain equipment in its transportation fleet. The leases have initial terms of two to five years, some of which include extension options for up to four additional years, and require monthly payments. The Company's finance leases are included in long-term debt on this letterthe accompanying unaudited condensed consolidated balance sheets.

27

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Lease Costs and Activity

The Company's lease costs and activity during the three months ended March 31, 2023 and 2022 were as follows:
Three Months Ended March 31,
20232022
(in millions)
Lease costs:
Finance leases:
Amortization of finance lease assets$28 $17 
Interest obligations under finance leases5 3 
Total finance lease costs$33 $20 
Operating leases:
Fixed lease costs to non-related parties$18 $25 
Fixed lease costs to related parties1 1 
Total operating lease costs$19 $26 
Cash payments related to lease liabilities included in operating cash flows:
Operating lease liabilities to non-related parties$26 $12 
Operating lease liabilities to related parties$1 $2 
Interest payments on finance lease liabilities$5 $3 
Cash payments related to lease liabilities included in financing cash flows:
Principal payments on finance lease liabilities$32 $34 

28

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Maturity Analysis of credit, andLease Liabilities

The following table summarizes maturities of lease liabilities as of September 30, 2017March 31, 2023:

Operating Leases (1)
Finance Leases
Related Party (2)
Non-Related PartyTotal OperatingTotal
(in millions)
Remainder of 2023$87 $4 $70 $74 $161 
2024104 3 96 99 203 
202593 2 92 94 187 
202676 2 89 91 167 
202734 1 80 81 115 
Thereafter5 2 304 306 311 
Total minimum lease payments399 14 731 745 1,144 
Less: amount representing interest(41)(2)(190)(192)(233)
Total lease liabilities$358 $12 $541 $553 $911 
_________________________
(1) Leases that are on a month-to-month basis, short-term leases, and lease extensions that the Company does not expect to exercise are not included.
(2) Related party lease payments exclude rent payments due under the DriveTime Lease Agreement and the DriveTime Hub Lease Agreement for locations where the Company shares space with DriveTime, as those are variable lease payments contingent upon the Company's utilization of the leased assets.

As of March 31, 2023 and December 31, 2016,2022, none of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.

Lease Terms and Discount Rates

The weighted-average remaining lease terms and discount rates as of March 31, 2023 and 2022 were as follows, excluding short-term operating leases:
As of March 31,
20232022
Weighted-average remaining lease terms (years)
Operating leases8.39.2
Finance leases4.04.5
Weighted-average discount rate
Operating leases7.1 %7.0 %
Finance leases5.8 %5.3 %

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Accrued Limited Warranty

As part of its retail strategy, the Company provides a 100-day or 4,189-mile limited warranty to customers to repair certain broken or defective components of each retail vehicle sold. As such, the Company accrues for such repairs based on actual claims incurred to-date and repair reserves based on historical trends. The liability was $17 million and $19 million as of March 31, 2023 and December 31, 2022, respectively, and is included in accounts payable and other accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.

29

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Purchase Obligations

The Company has purchase obligations for certain customary services related to operating a wholesale auction business of $161 million in aggregate over the next six years, as of March 31, 2023. These purchase obligations are recorded as liabilities when the services are rendered.

Legal Matters

From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business for a publicly traded auto retail and e-commerce company. For example, the Company is currently a party to legal and regulatory disputes, including putative class action and shareholder derivative lawsuits, alleging, among other things, the violation of federal securities and antitrust laws and state laws regarding consumer protection, stockholders' rights and the titling and registration of vehicles sold to its customers. These disputes include, but are not limited to, In re Carvana Co. Securities Litigation, United States District Court for the District of Arizona (Case No. CV-22-2126-PHX-MTL); City of Warwick Retirement System v. Carvana Co., et al., Maricopa County, Arizona Superior Court (Case No. CV2022-013054); In re Carvana Co. Stockholders Litigation, Delaware Chancery Court (Case No. 2020-0415-KSJM); Neal Vestal v. Carvana Co., et al., Delaware Chancery Court (Case No. 2022-0609-KSJM); Taiae Bradley v. Carvana, LLC, United States District Court for the Eastern District of Pennsylvania (Case No. 2:22-cv-02525-MMB); Dana Jennings, et al. v. Carvana, LLC, United States District Court for the Eastern District of Pennsylvania (Case No. 5:21-cv-05400-EGS); Mountaineer Motors of Lenoir, LLC v. Carvana, LLC, et al., United States District Court for the Western District of North Carolina (Case No. 5:22-cv-00171); and Brittany Fischer v. Carvana, LLC, Lee County, Florida Circuit Court (Case No. 2022-007133-CA-01).

The Company believes the claims in these matters are not material or are without merit and intends to defend the matters vigorously. The Company also continues to work closely with government agencies to respond to their requests. It is not possible to determine the probability of loss or estimate damages, if any, for any of the above matters, and therefore, the Company has not established reserves for any of these proceedings. If the Company determines that a loss is both probable and reasonably estimable, the Company will record a liability, and, if the liability is material, disclose the amount of the liability reserved. If an unfavorable ruling or development were to occur, there exists the possibility of a material adverse impact on the Company's business, results of operations, financial institution was approximately $2.0 million. This balance iscondition or cash flows.

Future litigation may be necessary to defend the Company and its partners by determining the scope, enforceability and validity of third party proprietary rights or to establish its proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

NOTE 18 — FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company holds certain assets that are required to be measured at fair value on a recurring basis, and beneficial interests in securitizations for which it elected the fair value option. A description of the fair value hierarchy and the Company's methodologies are included in Note 2 — Summary of Significant Accounting Policies in its most recent Annual Report on Form 10-K.

30

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following tables are a summary of fair value measurements and hierarchy level at March 31, 2023 and December 31, 2022:
March 31, 2023
Carrying ValueLevel 1Level 2Level 3
(in millions)
Assets:
Money market funds (1)
$268 $268 $— $— 
Beneficial interests in securitizations312 — — 312 
December 31, 2022
Carrying ValueLevel 1Level 2Level 3
(in millions)
Assets:
Money market funds (1)
$272 $272 $— $— 
Beneficial interests in securitizations321 — — 321 
_________________________
(1) Consists of highly liquid investments with original maturities of three months or less and classified asin cash and cash equivalents and restricted cash in the accompanying unaudited condensed consolidated balance sheets.

Legal Matters

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or cash flows.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




NOTE 14 — FAIR VALUE OF FINANCIAL INSTRUMENTS


As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the Company held certain assets that were required to be measuredhas purchase price adjustment receivables of $39 million and $37 million, respectively, which are carried at fair value on a recurring basis. The following is a summary of fair value measurements at September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017:
 Carrying Value Level 1 Level 2 Level 3
Assets:       
Money market funds (1)
$105,747
 $105,747
 $—
 $—
Purchase price adjustment receivable (2)
1,247
 —
 —
 1,247

As of December 31, 2016:
 Carrying Value Level 1 Level 2 Level 3
Assets:       
Money market funds (1)
$20,088
 $20,088
 $—
 $—
___________________________
(1) Classified in cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets.
(2) Classifiedclassified as other assets in the accompanying unaudited condensed consolidated balance sheet and as a componentsheets. Under the MPSA, the purchaser will make future cash payments to the Company based on the performance of other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

finance receivables sold. The fair value of the purchase price adjustment receivable isreceivables are determined based on the extent to which the Company’s estimated performance of the underlying finance receivables exceeds the purchaser’s estimateda mutually agreed upon performance threshold of the underlying finance receivables as of measurement dates specified in the Master Purchase and Sale Agreement.MPSA. The Company develops its estimate of future cumulative losses based on the historical performance of finance receivables it originated with similar characteristics as well as general macro-economic trends. The Company then utilizes a discounted cash flow model to calculate the present value of the expected future payment amounts. Such fair value measurement is consideredDue to the lack of observable market data these receivables are classified as Level 3 under3. The adjustments to the fair value hierarchy.of the purchase price adjustment receivables were a gain of $2 million and $3 million during the three months ended March 31, 2023 and 2022, respectively, and are reflected in other (income) expense, net in the accompanying unaudited condensed consolidated statements of operations.


Beneficial Interests in Securitizations

Beneficial interests in securitizations include notes and certificates of the securitization trusts, the same securities as issued to other investors as described in Note 9 — Securitizations and Variable Interest Entities. Beneficial interests in securitizations are initially treated as Level 2 assets when the securitization transaction occurs in close proximity to the end of the period and there is a lack of observable changes in the economic inputs. When the securitization transaction does not occur in close proximity to the end of the period and there have been observable changes in the economic inputs, beneficial interests in securitizations are classified as Level 3.

The Company's beneficial interests in securitizations include rated notes and certificates and other assets, all of which are classified as Level 3 due to the lack of observable market data. The Company determines the fair value of its rated notes based on non-binding broker quotes. The non-binding broker quotes are based on models that consider the prevailing interest rates, recent market transactions, and current business conditions. The Company determines the fair value of its certificates and other assets using a combination of non-binding market quotes and internally developed discounted cash flow models. The discounted cash flow models use discount rates based on prevailing interest rates and the characteristics of the specific instruments. As of March 31, 2023 and December 31, 2022, the range of discount rates were 7.3% to 15.2% and 7.1% to 11.3%, respectively. Significant increases or decreases in the inputs to the models could result in a significantly higher or lower fair value measurement. The Company elected the fair value option on its beneficial interests in securitizations, which allows it to recognize changes in the fair value of these assets in the period the fair value changes. Changes in the fair value of the
31

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
beneficial interests in securitizations are reflected in other (income) expense, net in the accompanying unaudited condensed consolidated statements of operations.

For beneficial interests in securitizations measured at fair value on a recurring basis, the Company's transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period on a quarterly basis. There were no transfers out of Level 3 during the three months ended March 31, 2023 or 2022.

In December 2021, the Company began selling certain of its beneficial interests in securitizations that meet the criteria for sale set forth in the Risk Retention Rules. For the three months ended March 31, 2023, the Company sold no beneficial interests in securitizations. For the three months ended March 31, 2022, the Company sold beneficial interests in securitizations for a purchase price totaling $1 million.

The following table presents additional information about Level 3 beneficial interests in securitizations measured at fair value on a recurring basis for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,
20232022
(in millions)
Opening Balance$321 $382 
Received in securitization transactions23 87 
Payments received(33)(42)
Change in fair value1 (10)
Sales of beneficial interests— (1)
Ending Balance$312 $416 

Fair Value of Financial Instruments

The carrying amounts of restricted cash, accounts receivable, accounts payable and accrued liabilities, and accounts payable to related party approximate fair value becausedue to their respective maturities are less than three months.short-term maturities. The carrying value of the Floor Plan Facility wasshort-term revolving facilities were determined to approximate fair value due to itstheir short-term duration and variable interest raterates that approximatesapproximate prevailing interest rates as of each reporting period. The carrying value of notes payable wasand sale leasebacks were determined to approximate fair value as each of the notes hastransactions were entered into at prevailing interest rates whichduring each respective period and they have not materially changed as of September 30, 2017. or during the periods ended March 31, 2023 and December 31, 2022. The carrying value of the financing of beneficial interests in securitizations was determined to approximate fair value because in the event of a decline in the fair value of the pledged collateral of the financing, the repurchase price of the pledged collateral will be increased by the amount of the decline.

The fair value of the Senior Notes, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined using Level 2 inputs based on quoted market prices for the identical liability. The fair value of the Senior Notes as of March 31, 2023 and December 31, 2022 was as follows:

March 31,
2023		December 31,
2022
(in millions)
Carrying value, net of unamortized debt issuance costs$5,652 $5,649 
Fair value3,040 2,533 

The fair value of finance receivables, netwhich are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined to be approximately $39.1 million and $25.6 million as of September 30, 2017 and December 31, 2016, respectively, utilizing the estimated sales price based on the historical experience of the
32

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Company. Such fair value measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy. The carrying value and fair value of the finance receivables as of March 31, 2023 and December 31, 2022 were as follows:


March 31,
2023		December 31,
2022
(in millions)
Carrying value$1,606 $1,334 
Fair value1,706 1,437 
NOTE 15 — SUBSEQUENT EVENTS

Investment in Equity Securities
LLC Unit Exchanges

SubsequentIn October 2021, the Company purchased Series A convertible preferred shares in Root, Inc. ("Root"), an equity security that does not have a readily determinable fair value. The Company elected to September 30, 2017, certain LLC Unitholdersmeasure this investment using a measurement alternative pursuant to the accounting standards and recorded the investment at its cost of $126 million which will subsequently be adjusted for observable price changes. The Company considered all relevant transactions since the date of its investment and has not recorded any impairments or upward or downward adjustments to the carrying amount of its investment in Root, as there have collectively exchanged approximately 0.5 million LLC Unitsnot been changes in the observable price of Carvana Group together with approximately 0.4 million sharesits equity interest through March 31, 2023. On August 12, 2022, Root effected a reverse stock split of Carvana Co.'sits Class A common stock and Class B common stock for approximately 0.4 millionat a ratio of 18:1, whereby each 18 shares of Carvana Co.'sRoot’s Class A common stock underand Class B common stock were automatically combined into one share of Class A common stock or Class B common stock, respectively (the “Reverse Stock Split”). The shares of Root's Class A common stock issuable to the Exchange Agreement.Company on the conversion of the Series A convertible preferred shares were adjusted proportionally.


Floor Plan Facility

On November 2, 2017,Also in October 2021, the Company entered into a lettercommercial agreement with Ally BankRoot, under which the Root auto insurance products were to be embedded into the Company's e-commerce platform. In accordance with the provisions of the commercial agreement, the Company received eight tranches of warrants to purchase shares of Root's Class A common stock (the "Warrants"). On September 1, 2022, the integrated auto insurance solution, which embedded into the Company's e-commerce platform (the "Integrated Platform"), was completed. One tranche of the Warrants, consisting of 2.4 million shares, as adjusted pursuant to the Reverse Stock Split, became exercisable upon completion of the Integrated Platform, and Ally Financial (the "Ally Parties")is considered a derivative instrument. The other tranches vest based on insurance product sales through the Integrated Platform and are considered derivative instruments. The Company used a Monte Carlo simulation to extend repaymentestimate the fair value of amounts due underthese Warrants, which are classified as Level 3. At contract inception, the Floor Plan FacilityCompany recognized an asset of $30 million for sales involving financing originatedthe Warrants and deferred revenue, classified in other assets and other liabilities, respectively in the accompanying consolidated balance sheets. During 2022, the Company determined it was probable that the volume of insurance products required to earn the Warrants would be achieved and recorded an additional $75 million of Warrants and deferred revenue based on the contract inception date fair value as determined by the Monte Carlo simulation. The Warrants and deferred revenue are classified in other assets and other liabilities, respectively, in the accompanying unaudited condensed consolidated balance sheets.

The following table presents changes in the Company's Level 3 Warrants measured at fair value:
2023
(in millions)
Balance at December 31, 2022$2 
Total unrealized loss (1)
(1)
Balance at March 31, 2023$1 
(1) The Company that are not sold to or financed byrecognized the Ally Parties.  With respect to such vehicles, the Ally Parties agree to extend repayment of the advance or the loan for such vehicledecrease in fair value in relation to the earlierWarrants to acquire Root's Class A common stock through other (income) expense, net in the accompanying consolidated statements of fifteen business days afteroperations. The Company recognized a decrease in fair value of $1 million and $5 million during the salethree months ended March 31, 2023 and 2022, respectively.

Derivative Instruments

The Company utilizes non-designated cash flow hedges including interest rate cap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings. Interest rate caps provide that the counterparty will pay the purchaser at the end of each contractual period in which the vehicle or two businessindex interest rate exceeds the contractually agreed upon cap rate.
33

CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —- (Continued)
(Unaudited)




days followingIn the sale or fundingfirst quarter of the retail installment contract.

Finance Receivable Sale Agreements

On November 3, 2017, the Company amended its Purchase and Sale Agreement to increase the aggregate amount of principal balances of finance receivables it can sell from $375.0 million to $1.5 billion. Also on November 3, 2017, the Company terminated the remaining capacity under the Master Transfer Agreement and replaced this facility by entering into a new master transfer agreement with an unrelated third party under which the third party has committed to purchase up to an aggregate of $357.1 million in principal balances of finance receivables.

Master Sale-Leaseback Agreement

On November 3, 2017,2023, the Company entered into one interest rate cap agreement to limit exposure to interest rate risk on variable rate debt associated with finance receivables. The interest rate cap has a Master Sale-Leaseback Agreement pursuantcap rate of 5.0% with a notional amount of $364 million. The interest rate cap expires in July 2027.

The fair value of the Company's interest rate cap is impacted by the credit risk of both the Company and its counterparty. The Company has an agreement with its derivative financial instrument counterparty that contains provisions providing that if the Company defaults on the indebtedness associated with its derivative financial instrument, then the Company could also be declared in default on its derivative financial instrument obligation. In addition, the Company minimizes nonperformance risk on its derivative instrument by evaluating the creditworthiness of its counterparty, which is limited to which it may sellmajor banks and lease back upfinancial institutions.

The Company does not apply hedge accounting to $75.0the interest rate cap and records all mark-to-market adjustments directly to other (income) expense, net in the accompanying unaudited condensed consolidated statements of operations. The fair value of the interest rate cap is categorized as Level 2 in the fair value hierarchy as they are based on well-recognized financial principles and available market data. For the three months ended March 31, 2023, the Company recognized a mark-to-market adjustment of $1 million of its real property interests, including costsexpense within other (income) expense, net in the accompanying unaudited condensed consolidated statements of operations. As of March 31, 2023, the fair value of the interest rate cap is recorded in the accompanying unaudited condensed consolidated balance sheets within other current assets and was $2 million.

NOTE 19 — SUPPLEMENTAL CASH FLOW INFORMATION

The following table summarizes supplemental cash flow information for construction improvements. At any time the Company may elect to,three months ended March 31, 2023 and beginning November 2, 2019,2022:

Three Months Ended March 31,
20232022
(in millions)
Supplemental cash flow information:
Cash payments for interest$56 $48 
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities$3 $73 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$— $118 
Property and equipment acquired under finance leases$19 $149 
Equity-based compensation expense capitalized to property and equipment$2 $2 
Fair value of beneficial interests received in securitization transactions$23 $87 
Reductions of beneficial interests in securitizations and associated long-term debt$25 $31 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the purchaser has the right to demandaccompanying unaudited condensed consolidated balance sheets that the Company repurchase one or more sold real property interests for an amount equalsum to the repurchase price providedtotal of the same amounts shown in the applicable lease and any amounts due and owing under such lease. The Company expects to sell and lease back manyaccompanying unaudited condensed consolidated statements of its real estate holdings and improvements pursuant to this agreement. cash flows for all periods presented:


March 31,
2023		December 31,
2022		March 31,
2022
(in millions)
Cash and cash equivalents$488 $434 $247 
Restricted cash206 194 295 
Total cash, cash equivalents and restricted cash$694 $628 $542 

34

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


Unless the context requires otherwise, references in this report to "Carvana," the “Company,” “we,” “us”"Company," "we," "us," and “our”"our" refer to Carvana Group, LLC and its consolidated subsidiaries prior to the initial public offering described in this report and to Carvana Co. and its consolidated subsidiaries following the Organizational Transactions and the initial public offering.subsidiaries. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“("MD&A”&A") is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our prospectusmost recent Annual Report filed with the SEC on April 28, 2017,Form 10-K, as well as our unaudited condensed consolidated financial statements and the accompanying notes included in Part I, Item 1 of this Form 10-Q.


Overview


Carvana is athe leading eCommercee-commerce platform for buying and selling used cars. We are transforming the used car buying and selling experience by giving consumers what they want —- a wide selection, great value and quality, transparent pricing, and a simple, no pressure transaction. Each element of our business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.

On May 3, 2017, we completed our IPO of 15.0 million shares of Class A common stock at a public offering price of $15.00 per share. We received $205.9 million in proceeds, net of underwriting discounts and commissions and offering expenses. We used a portion of the net proceeds to repay the $35.0 million of outstanding borrowings plus accrued interest under the Verde Credit Facility, and will use the remainder for general working corporate purposes. We expect these general corporate purposes to include funding working capital, operating expenses and the selective pursuit of business development opportunities, including to expand our current business through acquisitions of, or investments in, other businesses, products or technologies.

Since the launch of our first market in January 2013 through September 30, 2017, we have purchased, reconditioned, sold and delivered approximately 58,300 vehicles to customers through our website, generating $1.1 billion in revenue.


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


•Purchase a usedretail vehicle.    As of September 30, 2017,March 31, 2023, we listed approximately 6,700 vehicles for sale41,000 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 used vehicles to retail customers is the primary driver of our business. Selling usedretail vehicles generates revenue equal to the selling price of the vehicle, less an allowance for returns, and also enables multiple additional revenue streams, including vehicle service contracts (“VSCs”("VSCs"), GAP waiver coverage, other ancillary products, and trade-ins.


•Finance their purchase.    Customers can pay for their Carvana vehicle using cash, our proprietary loan origination platform or financing from thirdother parties such as banks or credit unions.unions, or financing with us using our proprietary loan origination platform. Customers who choose to apply for our in-house financing fill out a short applicationprequalification form, select from a range of financing terms we provide and, if approved, apply the financing to their purchase in our online checkout process. We generally seek to sell the automotive finance receivablesloans we originate to third party financing partners or pursuant to a securitization transaction and, in each case, we generally earn a premium on eachupon sale.


•Protect their purchase.    Customers have the option to protect their vehicle with a CarvanaCare-branded VSC as part of our online checkout process. VSCs provide customers with insuranceprotection 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 and, prior to December 2016, third parties,Automotive Group (together with its consolidated affiliates, collectively, “DriveTime”), who areis the obligorsobligor under these VSCs. We generally have no contractual liability to customers for claims under these agreements. We also recently began offeringoffer GAP waiver coverage to customers in most states. This product contractually obligates usstates in which we operate. We have also partnered with Root, Inc. ("Root") to canceloffer an integrated auto insurance solution, through which customers in most states may conveniently access auto insurance directly from the remaining principal outstanding after insurance proceeds in a total loss event.
Carvana e-commerce platform.


•Sell us their car.    We allow our customers to trade-in a vehicle and apply the trade-in value to their purchase, or to sell us a vehicle independent of a purchase. Using our digital appraisal tool, customers can complete a short appraisal

form and receive an offer for their trade-invehicle nearly instantaneously.instantaneously from our site simply by answering a few questions about the vehicle condition and features. We generate trade-in offers using a proprietary valuation algorithm supported by extensive used vehicle market and customer behaviorcustomer-behavior data. When customers accept our offer, wethey can schedule a time to have the vehicle picked up at their home or elsewhere within one of our markets and receive payment, eliminating the need to visit a dealership or negotiate a private sale. We take their vehicles into inventory and sell them either at auction as a wholesale sale or through our website as a retail sale. Vehicles sold at auction typically do not meet the quality or condition standards required to be included in retail inventory displayed for sale on our website.


35

To enable a seamless customer experience, we have built a vertically-integrated used vehicle supply chain, supported by proprietary software systems and data.


•Vehicle sourcing and acquisition.    We primarily acquire the majority of our used vehicle inventory from wholesale auctions. We also, to a lesser extent, acquire vehicles from consumers and directly from usedcustomers when they trade in or sell us their vehicles and through the large and liquid national used-car auction market. Acquiring directly from customers eliminates auction fees and provides more diverse vehicles. The remainder of our inventory is acquired from vehicle suppliers, including franchisefinance and independent dealers, leasing companies, rental car companies, and car rental companies. Usingother suppliers, which suppliers may also provide reconditioning services. We use proprietary machine learning algorithms to determine which cars to bid on at auction and data from a variety of internalhow much to bid. Our software sifts through over 100,000 vehicles per day and external sources, wefilters out vehicles with reported accidents, poor condition ratings, or other unacceptable attributes, and can evaluate the tens of thousands of potential vehicle purchases that remain per day, creating a competitive advantage versus in-person sourcing methods generally used by traditional dealerships. Once our algorithms have identified a suitable vehicle for purchase, bids are verified and executed by a centralized team of inventory-sourcing professionals. For vehicles dailysold to us through our website, we use proprietary algorithms to determine theiran appropriate offer. We assess vehicles on the basis of quality, inventory fit, with consumer demand, internal profitability targets,desirability, relative value, expected reconditioning costs, and vehicle location to identify what we believe represent the most in-demand and profitable vehicles to acquire for inventory. We utilize a broad range of data sources, including proprietary site data, and a variety of external data sources to support our existing inventory mix.
assessments.


•Inspection and reconditioning.    After acquiring   Once we acquire a vehicle from a customer, we leverage our in-house logistics or a vendor to transport itthe vehicle to one of oura greenfield inspection and reconditioning centers (“IRCs”center or auction location with reconditioning capacity ("IRC"), where it undergoesat which point the vehicle is entered into our inventory management system. We then begin a 150-point inspection process covering controls, features, brakes, tires, and cosmetics. Each IRC includes trained technicians, vehicle lifts, paint-less dent repair, and paint capabilities and receives on-site support from vendors with whom we have integrated systems to ensure ready access to parts and materials. When an inspection is reconditionedcomplete, we estimate the necessary reconditioning cost for accident-free vehicles to meet “Carvana Certified” standards. This process is supported by a custom usedbe deemed "Carvana Certified" and expected timing for that vehicle inventory management system, which tracks vehicles through each stage of the process and is seamlessly integrated with auto parts suppliers to facilitate the procurement of required parts.
be made available for sale on our website.


•Photography and merchandising.    We photograph vehicles using    To provide transparency to our proprietarycustomers, our patented, automated photo booths located at each of our IRCs. This allows us to display interactive,capture a 360-degree imagesexterior and interior virtual tour of each vehicle in our website inventory. Our photo booths photograph the interior and exterior of the vehicle while technicians annotate material defects based on our website.visibility-threshold category. We also annotate each vehicle image with a list of features and imperfections to assist our customers in their evaluation of each vehicle for purchase. Our 360-degree photo and annotation processes are enabled by proprietary imaging technology andfeature integrations with various vehicle data providers for vehicle feature and option information.
We have instituted a unified cosmetic standard across all IRCs and certain auction sites to better ensure a consistent customer experience.


Logistics•Transportation and fulfillment.    We transport vehicles purchased by our customers to their local market for home delivery or pick-up. In markets where    Third-party vehicle transportation is often slow, expensive, and unreliable. To address these challenges, we have launched operations, delivery to the customer is completedbuilt an in-house auto logistics network backed by a Carvana employee in a branded delivery truck. In a subset of these markets, customers have the option of picking up their car at one of our vending machines. These vending machines are multi-story glass towers where our customers deposit a token into a coin slot and an automated platform delivers the purchased vehicle to a garage bay where the customer is waiting. Our vending machines provide an attractive and unique customer pick-up experience, developing brand awareness while lowering our variable vehicle delivery expense. Our logistics and fulfillment operations are supported by our proprietary vehicle transportation management system ("TMS") to transport our vehicles to customers in our markets. The system is based on a "hub and spoke" model, which optimizesconnects all IRCs to vending machines and hubs via our owned and leased fleet of multi-car and single car haulers. Our TMS allows us to efficiently manage locations, routes, route capacities, trucks, and drivers while also dynamically optimizing for speed and cost. We store inventory primarily at the schedulingIRCs and other sites, and when a vehicle is sold, it is delivered directly to customers in our markets or transported to a vending machine or certain hubs for pick-up by the customer. Due to our robust and proprietary logistics infrastructure, we are able to offer our customers and operations team highly accurate predictions of transport routesvehicle availability, minimizing unanticipated delays and delivery slots.
ensuring a seamless and reliable customer experience.


Retail Vehicle Unit Sales


Since launching to customers in Atlanta, Georgia in January 2013, we have historically experienced rapid growth in sales through our website. Duringwebsite www.carvana.com. Due to profitability initiatives and macroeconomic impacts, including rising used car
36

prices and interest rates, during the ninethree months ended September 30, 2017,March 31, 2023, the number of vehicles we sold to retail customers grewdecreased by 133.5%24.7% to 30,735,79,240 compared to 13,161105,185 in the ninethree months ended September 30, 2016.March 31, 2022.


WeWhile our current focus is on profitability, we view the number of vehicles we sell to retail customers as the most important long-term measure of our growth,performance, and we expect to continue to focus on building a scalable platform to efficiently increase our retail units sold. This focus on retail units sold is motivated by several factors:


•Retail units sold enable multiple revenue streams, including the sale of the vehicle itself, the sale of automotive finance receivables originated to finance the vehicle, the sale of VSCs, the sale of GAP waiver coverage, other ancillary products, and the sale of vehicles acquired from customers as trade-ins.customers.


•Retail units sold are the primary driver of customer referrals and repeat sales. Each time we sell a vehicle to a new customer, that customer becomes a candidate tomay refer future customers and can become a repeat buyer in the future.


•Retail units sold isare an important driver of the average number of days between when we acquire the vehicle acquisition by us and the sale to a customer.when we sell it. Reducing average days to sale impacts gross profit on our vehicles because used carsvehicles depreciate over time.


•Retail unit salesunits sold allow us to benefit from economies of scale due to our centralized online sales model. We believe our model provides meaningful operating leverage in acquisition, reconditioning, transport, customer service, and delivery.


WeWhile our near-term objectives are geared towards a reduction in our selling, general and administrative ("SG&A") expenses, in the long-term, we plan to invest in technology and infrastructure to support efficient growth in unit sales.retail units sold. This includes continued investment in our vehicle acquisition, reconditioning and logistics network, as well as continued investment in product development and engineering to deliver customers a best-in-class experience.


Markets and Population Coverage


Our historical growth in retail units sold ishas been driven by expansion into new markets and increased penetration in our existing markets and expansion into new markets. We define a market as a metropolitan area in which we have commenced local advertising and generally offer free home delivery to customers with a Carvana employee andin a branded delivery truck. We define our population coverage as the percentage of U.S. population that lives within those markets. Opening a new market involves hiring a market operations manager and a team of customer advocates, connecting the market to our existing logistics network and initiating local advertising. Each new market has typically required approximately $0.5 million in capital expenditures, primarily related to the acquisition of 1 to 2 branded delivery trucks, a multi-car hauler to connect the market to our logistics network, and furniture, fixtures and equipment in a local office space. As a market scales, we may elect to build a vending machine in the market to improve fulfillment and further increase customer awareness. Each new vending machine has required on average $5.0 million of capital expenditures, depending on the number of stories in the vending machine towerawareness and local market conditions.enhance our fulfillment operations.


Our capital- and headcount-light expansion model has historically enabled us to increase our ratenumber of market openingsmarkets, resulting in servicing more of the U.S. population, in each of the past fourten years. After opening Atlanta, GeorgiaOur market openings increased the total percentage of the U.S. population served to 81.1% in 2013, we opened two316 markets in 2014, six in 2015, twelve in 2016, and 18 in the first three quarters of 2017, bringing our total number of markets to 39 as of September 30, 2017.March 31, 2023 from 81.0% in 313 markets as of March 31, 2022. Over this period,time, we have continually improved our market expansion playbook, which we believe provides us with the capability to accelerate this rate ofefficiently execute our long-term growth plan. We continually evaluate consumer demand and our operational capacity and necessary efficiencies to determine our market openings in the future.opening and vending machine launch strategy.


When we open a market, we commence advertising using a blend of brand and direct advertising channels. Our advertising spend in each market is approximately proportionate to each market’s population, subject to adjustments based on specific characteristics of the market, used vehicle market seasonality, and special events such as vending machine openings. This historically has led to increased market penetration over time following the market opening. Beginning in the second quarter of 2017, we increasedWe also advertise on national television advertising spend. ​With our growth into new markets, national television advertising is becoming more economically efficient compared to purchasing several local television advertising campaigns.increase brand awareness. 


Revenue and Gross Profit


Our expansion into new markets and increased penetration in existing ones has led to growth in retail unit sales. We generate revenue on retail units sold from four primary sources: the sale of the vehicle,retail vehicles, wholesale sales of vehicles we acquire from customers, including sales through our wholesale marketplace, gains on the sales of loans originated to finance the vehicle, wholesale sales of vehicles, we acquire from customers as trade-ins, and sales of ancillary products such as VSCs and GAP waiver coverage.


Our largest source of revenue, usedretail vehicle sales, totaled $208.1 million$1.8 billion and $550.4 million$2.7 billion during the three and nine months ended September 30, 2017,March 31, 2023 and 2022, respectively. As we continue to expand to new markets and increase penetration in existing ones, weWe generally expect usedretail vehicle sales to increase as we increasetrend proportionately with retail units sold.sold, absent any material changes in macroeconomic conditions. We generate gross profit on usedretail vehicle sales from the difference
37

between the retail selling price of the vehicle and our cost of sales associated with acquiring the vehicle and preparing it for sale.


Wholesale sales and revenues includes sales of trade-ins and other vehicles acquired from customers as well asthat do not meet the requirements for our retail inventory. Subsequent to our acquisition of the U.S. physical auction business of ADESA U.S. Auction, LLC ("ADESA") from KAR Auction Services, Inc. on May 9, 2022 (the "ADESA Acquisition"), 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 of certain retail units listed on our website and revenues. Wholesale sales and revenues totaled $7.5$618 million and $21.0$575 million during the three and nine months ended September 30, 2017,March 31, 2023 and 2022, respectively. We generally expect wholesale sales to increasetrend proportionately with retail units sold through trade-ins and as we expand our suite of product offerings tofrom customers who may wish to trade-in or to sell us a car independent of a retail sale.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.


Other sales and revenues, which primarily includes gains on the sales of loansfinance receivables we originate, sales commissions on ancillary products such as VSCs, and GAP waiver coverage, and auto insurance, totaled $9.8$161 million and $22.4$190 million during the three and nine months ended September 30, 2017,March 31, 2023 and 2022, respectively. We generally expect other sales and revenues to trend proportionately with retail units sold. We also expect other sales and revenues to increase with retail units sold and 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.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.


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


•Increase the purchase of vehicles from customers. Over time, we plan to grow the number of vehicles that we purchase from our customers either as trade-ins or independent of a retail sale. This will provide additional vehicles for our retail business, which on average are more profitable compared to the same vehicle acquired at auction, and expand our inventory selection. In addition, this in turn will grow our wholesale business.

•Reduce average days to sale.Our goal is generally to increase both our number of markets and our sales growth 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 thingsfactors being equal. Higher average selling prices in turn lead to higher gross profit per unit sold, all other factors being equal.


•Leverage existing IRCinspection and reconditioning infrastructure. Aswe scale, we intend to more fully utilize the capacity inat our existing IRCs, which collectively have capacity to inspect and recondition approximately 200,0001.1 million vehicles per year.
year at full utilization. We also intend to use existing capacity in the facilities acquired in the ADESA Acquisition.


•Increase utilization onof our logistics network.As we scale, we intend to more fully utilize our in-house logistics network to transport cars to our IRCs or other sites after acquisition from customers or wholesale auctions or customers.
auctions.


•Increase conversion on existing products. We plan to continue to improve our website to highlight the benefits of our complementary product offerings, including financing, VSCs, GAP waiver coverage, other ancillary products, and trade-ins.


•Add new products and services. We plan to utilize our online sales platform to offer additional complementary products and services to our customers.

38


•Increase monetization of our finance receivables. We plan to continue selling finance receivables in securitization transactions and otherwise expand our base of financial partners who purchase the finance receivables originated on our platform to reduce our effective cost of funds.

•Optimize purchasing and pricing.We are constantly improving the ways in which we predict customer demand, value vehicles sight unseen and optimize what we pay to acquire those vehicles. We also regularly test different pricing of our products, including vehicle sticker prices, trade-in and independent vehicle offers, and ancillary product prices, and we believe we can improve by further optimizing prices over time.


Seasonality


UsedRetail and wholesale used vehicle sales generally exhibit seasonality with sales peaking late in the first calendar quarter and diminishing through the rest of the year, with the lowest relative level of vehicle sales expected to occur in the fourth calendar quarter. Due to our historical rapid growth, our overall sales patterns to datein the past have not always reflected the general seasonality of the used vehicle industry, but we expect this to change onceindustry. However, as our business and markets mature.have and continue to mature, our results have become more reflective of typical market seasonality. Used vehicle prices also exhibit seasonality, with used vehicles depreciating at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year. Historically, this has led our gross profit per unityear, all other factors being equal. We expect to be higher on average in the first half of the year than in the second half of the year. We may experience seasonal and other fluctuations in our quarterly operating results, including as a result of macroeconomic conditions, which may not fully reflect the underlying performance of our business.


Investment in Growth
Relationship with DriveTime


We were foundedhave historically aggressively invested in the growth of our business. Due to the current macroeconomic environment, we are focused on driving profitability through operating efficiency and reducing expenses. While we intend to become increasingly efficient over time, we also anticipate that our operating expenses will increase substantially in the long-term as a subsidiarywe continue to expand our logistics network, increase our advertising spending, and serve more of DriveTime in 2012 and subsequently spun out of DriveTime as a standalone entity in November 2014. DriveTime consolidatedthe U.S. population. There is no guarantee that we will be able to realize the desired return on our financial results in its financial statements through July 2015. DriveTime is controlled by our controlling shareholder, who is also the father of Ernie Garcia, III, our Chief Executive Officer.investments.


Relationships with Related Parties

For further discussion about our relationshiprelationships with DriveTime and other related parties, refer to Note 57 — Related Party Transactions of our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1, Unaudited Condensed and Consolidated Financial Statements of this Quarterly Report on Form 10-Q.


Key Operating Metrics


We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our progress and make strategic decisions. Our key operating metrics reflect the key drivers of our growth, including opening new markets, increasing brand awareness, and enhancing the selection of vehicles we make available to our customers.customers, and serving more of the U.S. population. Our key operating metrics also demonstrate our ability to translate these drivers into retail sales and to monetize these retail sales through a variety of product offerings.


Three Months Ended March 31,
20232022
Retail units sold79,240 105,185 
Average monthly unique visitors (in thousands)14,695 24,729 
Total website units41,314 89,011 
Total gross profit per unit$4,303 $2,833 
Total gross profit per unit, non-GAAP$4,796 $2,985 

 Three Months Ended September 30, Nine Months Ended September 30,

 2017 2016 2017 2016
Retail units sold 11,719
 5,023
 30,735
 13,161
Number of markets 39
 16
 39
 16
Average monthly unique visitors 1,168,693
 388,673
 941,162
 350,983
Inventory units available on website 6,689
 4,565
 6,689
 4,565
Average days to sale 97
 92
 99
 90
Total gross profit per unit $1,742
 $1,347
 $1,503
 $1,273


Retail Units Sold


We define retail units sold as the number of vehicles sold to customers in a given period, net of returns under our seven-day return policy. We view retail units sold as a key measure of our growth for several reasons. First, retail units sold is the primary driver of our revenues and, indirectly, gross profit, since retail unit sales enable multiple complementary revenue streams, including financing, VSCs, GAP waiver coverage, other ancillary products, and trade-ins. Second, growth in retail units sold
39

increases the base of available customers for referrals and repeat sales. Third, growth in retail units sold is an indicator of our ability to successfully scale our logistics, fulfillment, and customer service operations.

Number of Markets

We define a market as a metropolitan area in which we have commenced local advertising and offer free home delivery to customers with a Carvana employee and branded delivery truck. We view the number of markets we serve as a key driver of our growth. As we increase our number of markets, the population of consumers who have access to our fully-integrated customer experience increases, which in turn helps to increase the number of vehicles we sell.


Average Monthly Unique Visitors


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.awareness of our brand.

InventoryTotal Website Units Available


We define inventorytotal website units available as the number of vehicles listed for sale on our website on the last day of a given reporting period. Until we reach an optimal pooled inventory level, weperiod, including vehicles available for sale, vehicles currently engaged in a purchase or reserved by a customer, and vehicles that can be reserved that generally have not yet completed the inspection and reconditioning process. We view inventorytotal website units available as a key measure of our growth. Growth in inventorytotal website units available increases the selection of vehicles available to consumers in all of our markets simultaneously,consumers, which we believe will allow us to increase the number of vehicles we sell.sell over time. Moreover, growth in inventorytotal website units available is an indicator ofindicates our ability to scale our vehicle purchasing, inspection and reconditioning operations. As part of our inventory strategy, over time we may choose not to expand total website units while continuing to grow sales, thereby improving other key operating metrics of the business.


Average Days to Sale

We define average days to sale as the average number of days between vehicle acquisition by us and delivery to a customer for all retail units sold in a period. However, this metric does not include any retail units that remain unsold at period end. We view average days to sale as a useful metric due to its impact on used vehicle average selling price.


Total Gross Profit per Unit


We define total gross profit per unit as the aggregate gross profit in a given period, divided by retail units sold in that period. Totalperiod including gross profit per unit is driven by salesgenerated from the sale of usedretail vehicles, each of which generates additional revenue sources including: wholesale sales of vehicles we acquire from customers as trade-ins, gains on the sales of loans originated to finance the vehicle, revenue fromvehicles, commissions on sales of VSCs, GAP waiver coverage and commissions onother ancillary products, and gross profit generated from wholesale sales of VSCs.vehicles. We believeoperate an integrated business with the objective of increasing the number of retail units sold and total gross profit per unit. Gross profits generated from the sale of retail and wholesale units are interrelated. For example, our nationwide reconditioning and inspection centers are designed to produce vehicles for both retail and wholesale sales, our vehicle storage locations have shared parking for both retail and wholesale vehicles, and our integrated multi-vehicle logistics and last mile delivery network is operated in service of both retail and wholesale sales. Such interrelationships require us to share finite operational capacity and optimize joint decisions between retail and wholesale sales, in order to position us to achieve our objective of increasing total gross profit per unit. As a result, the inclusion of gross profit generated from wholesale sales of vehicles in total gross profit per unit reflects our integrated business model and the interrelationship between wholesale and retail vehicle sales. We believe the total gross profit per unit metrics provide investors with the greatest opportunity to view our performance through the same lens that our management does, and therefore assists investors to best evaluate our business and measure our progress.

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 a key measuredefined as gross profit plus depreciation and amortization in cost of sales, share-based compensation including the CEO Milestone Gift in cost of sales, and restructuring costs, minus revenue related to our growth and long-term profitability.Root warrants. Refer to "Non-GAAP Financial Measures" for more information, including the reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures.



Components of Results of Operations


UsedRetail Vehicle Sales


UsedRetail vehicle sales represent the aggregate sales of used vehicles to customers through our website. Revenue from usedretail vehicles sales is recognized upon delivery to the customer or pick-uppick up of the vehicle by the customer, and is reported net of a reserve for expected returns. Factors affecting usedretail vehicle sales revenue include the number of retail units sold and the average selling price of these vehicles. At our current stage of growth, changesChanges in retail units sold are a much larger driver of changes in revenue than are changes in average selling price.


The number of usedretail vehicles we sell depends on the number of markets we serve, our volume of traffic to our website, traffic in these markets,our population coverage, our inventory selection, the effectiveness of our branding and marketing efforts, the quality of our customer salescustomer's purchase experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition from other used car dealerships
40

and general economic conditions. On a quarterly basis, the number of usedretail vehicles we sell is also affected by seasonality, with demand for usedretail vehicles generally reaching a seasonal high point late in the first halfquarter of each year, commensurate with the timing of tax refunds, and diminishing through the rest of the year, with the lowest relative level of usedretail vehicle sales generally expected to occur in the fourth calendar quarter. However, in 2022, heightened inflation and rising interest rates resulted in lower demand for used vehicles. These trends continued into the first quarter of 2023, in which retail vehicles sales were also affected by a lower inventory size, lower advertising expense, and a focus on profitability initiatives. These trends may continue through the remainder of the year.


Our retail average selling price depends on the mix of vehicles we acquire, and hold in inventory, retail market prices in our markets, our pricing strategy, and our average days to sale, and our pricing strategy.sale. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalances, which could temporarily lead to average selling prices increasing or decreasing. We anticipate that ouralso generally expect lower average days to sale will decline over time as we continue to launch new markets, which we believe will have a positive impact on ourbe associated with higher retail average selling price,prices due to decreased vehicle depreciation prior to sale, all other thingsfactors being equal.


Wholesale Vehicle Sales and Revenues


Wholesale vehicle sales is equal toand revenues includes the aggregate proceeds we receive on vehicles soldwe acquire and sell to wholesalers.wholesalers, and beginning in 2022, 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, and to a lesser extent, vehicles we acquire from customers who do not purchase another vehicle from us. In addition, we occasionally sell certain used vehicles previously listed for sale to customers through our website to wholesalers. Factors affecting wholesale vehicle 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 through our wholesale marketplace platform, including auction fees and related services revenue.



Other Sales and Revenues


We generate other sales and revenues primarily through the sales of automotive finance receivablesloans we originate and sell in securitization transactions or to third parties andfinancing partners, reported net of a reserve for expected repurchases, commissions we receive on VSCs. Prior to December 9, 2016, the VSCs, were soldsales of GAP waiver coverage, and administered by third parties. On December 9, 2016, we entered into a master dealer agreement with DriveTime, pursuant to which we sell VSCs that DriveTime administers. The commission revenues we recognize on VSCs depends on the number of retail units we sell, the conversion rate of VSCs on these sales, commission ratescommissions and warrants we receive VSC early cancellation frequency, and product features.on sales of auto insurance.


We generally seek to sell the automotiveloans we originate to securitization trusts we sponsor and establish or to financing partners. The securitization trusts issue asset-backed securities, some of which are collateralized by the finance receivables that we generatesell to the securitization trusts. We also sell the loans we originate under committed forward flowforward-flow arrangements, including a master purchase and sale agreement, and through fixed pool loan sales, with third partiesfinancing partners who generally acquire these receivablesthem at premium prices without recourse to us for their post-sale performance. Factors affecting revenue from these sales include the number of automotive finance receivablesloans we originate, the average principal balance of these receivables,the loans, the credit quality of the portfolio, and the price at which we are able to sell them in securitization transactions or to third parties.financing partners.


The number of receivablesloans we originate is driven by the number of usedretail vehicles sold and the percentage of our sales for which we provide financing, which is influenced by the financing terms we offer our customers relative to alternatives available to the customer. The average principal balance is driven primarily by the mix of vehicles we sell, since higher average selling prices typically mean higher average receivable balances. The price at which we resell these automotive finance receivablessell the loan is driven by the terms of our forward flow arrangementssecuritization transactions and forward-flow arrangement, applicable interest rates.rates, and whether or not the loan includes GAP waiver coverage.


In 2016, we entered into a master dealer agreement with DriveTime, pursuant to which we receive a commission for selling VSCs that DriveTime administers. The commission revenue we recognize on VSCs depends on the number of retail units we sell, the conversion rate of VSCs on these sales, commission rates we receive, VSC early cancellation frequency and product features. The GAP waiver coverage revenue we recognize depends on the number of retail units we sell, the number of customers that choose to finance their purchases with us, the frequency of GAP waiver coverage early cancellation, and the conversion rate of GAP waiver coverage on those sales.

In September 2022, we partnered with Root to offer an integrated auto insurance solution, through which customers may conveniently access auto insurance directly from the Carvana e-commerce platform. We receive commissions and Warrants to purchase shares of Root's Class A common stock based on the Root insurance policies sold through the Integrated Platform.
41

The commission revenue we recognize depends on the number of retail units we sell, the conversion rate of auto policies on those sales, commission rates we receive, and forecasted attrition. The revenue we recognize from warrants as non-cash consideration depends on the probability of achieving certain auto policy sales thresholds within a specific timeline as well as our performance under the agreement.

Cost of Sales


Cost of sales includes the cost to acquire, vehiclesrecondition, and the reconditioning and transportation coststransport vehicles associated with preparing the vehiclesthem for resale.resale, and beginning in 2022, wholesale marketplace cost of sales. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles, and supply and demandsupply-and-demand dynamics in the wholesale vehicle market. Reconditioning costs consist of direct costs, including parts, labor, and third partythird-party repair expenses directly attributable to specific vehicles, as well as indirect costs, such as IRC overhead. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition to the IRC.IRC or other site. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value. Wholesale marketplace cost of sales include costs related to the sale of wholesale marketplace units by third-party sellers through our wholesale marketplace platform, including labor, rent, depreciation and amortization.


UsedRetail Vehicle Gross Profit


UsedRetail vehicle gross profit equalsis the vehicle sales price minus our costs of sales associated with vehicles that we list and sell on our website. UsedRetail vehicle gross profit per unit equalsis our aggregate usedretail vehicle gross profit in any measurement period divided by the number of retail units sold in suchthat period.


Wholesale Vehicle Gross Profit


Wholesale vehicle gross profit equalsis the vehicle sales price minus our cost of sales associated with vehicles we sell to wholesalers.wholesalers, and beginning in 2022, wholesale marketplace revenues less wholesale marketplace cost of sales. Factors affecting wholesale gross profit include the number of wholesale units sold, the average wholesale selling price of these vehicles, the average acquisition price we offer to the customer and, in the case of vehicles formerly listed on our website, the total costs described above associated with that vehicle.these vehicles, and the number of wholesale marketplace units sold.


Other Gross Profit


Other sales and revenues consist of 100% gross margin products for which gross profit equals revenue. Therefore, changes in gross profit and the associated drivers are identical to changes in revenues from these products and the associated drivers.


Selling, General and Administrative Expenses


Selling, general and administrative (“SG&A”)&A expenses include expenses associated with advertising and providing customer service to customers, operating our logistics hubs, fulfillment centers and vending machines, operating ourhubs, physical auctions, logistics and fulfillment network and other corporate overhead expenses, including expenses associated with IT,information technology, product development, engineering, legal, accounting, finance, and business development. We anticipate that these expenses will increase as we grow. SG&A expenses exclude the costs of inspecting and reconditioning vehicles and transporting vehicles from the point of acquisition to the IRC, which are included in cost of sales.sales, and payroll costs for our employees related to the development of software products for internal use, which are capitalized to software and depreciated over the estimated useful lives of the related assets.



Interest Expense


Interest expense includes interest incurred on our Senior Notes, our Floor Plan Facility,Facilities, and our Finance Receivable Facilities (each as defined in Note 10 — Debt Instruments of our financial statements included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q), as well as our notes payable, finance leases, and other long-term debt, which are used to fund general working capital, our inventory, our transportation fleet, and certain of our property and equipment, respectively. During 2017, interestequipment. Interest expense also includesexcludes the interest incurred during various construction projects to build, upgrade or remodel certain facilities, which is capitalized to property and equipment and depreciated over the commitment feeestimated useful lives of the related assets.

Other (Income) Expense, net

Other (income) expense, net includes changes in fair value on our beneficial interests in securitizations, purchase price adjustment receivables, and fair value adjustments related to our Warrants to acquire Root's Class A common stock as discussed in Note 18 — Fair Value of Financial Instruments of our financial statements included in Part I, Item 1, Financial Statements of
42

this Quarterly Report on Form 10-Q, along with other general expenses such as gains or losses from disposals of long-lived assets.

Income Tax (Benefit) Provision

Income taxes are recognized based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the Verde Credit Facility, which was usedperiod. As the sole managing member of Carvana Group, LLC (“Carvana Group”), Carvana Co. consolidates the financial results of Carvana Group. Carvana Group is treated as neededa partnership and therefore not subject to fund working capital priorU.S. federal and most applicable state and local income tax purposes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its economic interest held in Carvana Group. Carvana Co. is taxed as a corporation and is subject to U.S. federal, state and local income taxes with respect to its termination in connection with our IPO.allocable share of any taxable income or loss of Carvana Group, as well as any stand-alone income or loss generated by Carvana Co. During the three months ended March 31, 2023 and 2022, the Company generated an income tax benefit of $2 million and an expense of less than $1 million, respectively.


Results of Operations


Three Months Ended March 31,
20232022Change
(in millions, except unit and per unit amounts)
Net sales and operating revenues:
Retail vehicle sales, net$1,827 $2,732 (33.1)%
Wholesale sales and revenues (1)
618 575 7.5 %
Other sales and revenues (2)
161 190 (15.3)%
Total net sales and operating revenues$2,606 $3,497 (25.5)%
Gross profit:
Retail vehicle gross profit (3)
$110 $85 29.4 %
Wholesale gross profit (1)
70 23 204.3 %
Other gross profit (2)
161 190 (15.3)%
Total gross profit$341 $298 14.4 %
Unit sales information:
Retail vehicle unit sales79,240 105,185 (24.7)%
Wholesale vehicle unit sales35,110 50,280 (30.2)%
Per unit selling prices:
Retail vehicles$23,056 $25,973 (11.2)%
Wholesale vehicles (4)
$11,592 $11,436 1.4 %
Per retail unit gross profit:
Retail vehicle gross profit (5)
$1,388 $808 71.8 %
Wholesale gross profit883 219 303.2 %
Other gross profit2,032 1,806 12.5 %
Total gross profit$4,303 $2,833 51.9 %
Per wholesale unit gross profit:
Wholesale vehicle gross profit (6)
$1,253 $457 174.2 %
Wholesale marketplace: (7)
Wholesale marketplace units sold213,764 $— NM
Wholesale marketplace revenues$211 $— NM
Wholesale marketplace gross profit (8)
$26 $— NM
(1) Includes $5 and $14, respectively, of wholesale sales and revenues from related parties.
(2) Includes $36 and $48, respectively, of other sales and revenues from related parties.
43

  Three Months Ended September 30,   Nine Months Ended September 30,  
  2017 2016 Change 2017 2016 Change
             
  (dollars in thousands, except per unit amounts)   (dollars in thousands, except per unit amounts)  
Net sales and operating revenues:            
Used vehicle sales, net $208,113

$92,115
 125.9 % $550,442

$241,098
 128.3 %
Wholesale vehicle sales 7,459

2,870
 159.9 % 21,003

6,904
 204.2 %
Other sales and revenues (1)
 9,807

3,859
 154.1 % 22,372

10,319
 116.8 %
Total net sales and operating revenues $225,379

$98,844
 128.0 % $593,817

$258,321
 129.9 %
Gross profit: 


   


  
Used vehicle gross profit $9,859

$2,849
 246.1 % $22,657

$6,290
 260.2 %
Wholesale vehicle gross profit 751

58
 1,194.8 % 1,173

151
 676.8 %
Other gross profit (1)
 9,806

3,859
 154.1 % 22,371

10,319
 116.8 %
Total gross profit $20,416

$6,766
 201.7 % $46,201

$16,760
 175.7 %
Market information: 


   


  
Markets, beginning of period 30

14
 114.3 % 21

9
 133.3 %
Market launches 9

2
 350.0 % 18

7
 157.1 %
Markets, end of period 39

16
 143.8 % 39

16
 143.8 %
Unit sales information: 


   


  
Used vehicle unit sales 11,719

5,023
 133.3 % 30,735

13,161
 133.5 %
Wholesale vehicle unit sales 1,797

787
 128.3 % 4,665

1,920
 143.0 %
Per unit selling prices: 


   


  
Used vehicles $17,759

$18,339
 (3.2)% $17,909

$18,319
 (2.2)%
Wholesale vehicles $4,151

$3,647
 13.8 % $4,502

$3,596
 25.2 %
Per unit gross profit: (2)
 


   


  
Used vehicle gross profit $841

$567
 48.3 % $737

$478
 54.2 %
Wholesale vehicle gross profit $418

$74
 464.9 % $251

$79
 217.7 %
Other gross profit $837

$768
 9.0 % $728

$784
 (7.1)%
Total gross profit $1,742

$1,347
 29.3 % $1,503

$1,273
 18.1 %
             
(1) Includes $2,414 and $6,070 of other sales and revenues from related parties for the three and nine months ended September 30, 2017, respectively.
(2) All gross profit per unit amounts are per used vehicle sold, except wholesale vehicle gross profit, which is per wholesale vehicle sold.
(3) Includes $0 and $8, respectively, of share-based compensation expense related to the CEO Milestone Gift.

(4) Excludes wholesale marketplace revenues and wholesale marketplace units sold.

(5) Includes $0 and $76, respectively, of share-based compensation expense related to the CEO Milestone Gift.
Used(6) Excludes wholesale marketplace gross profit and wholesale marketplace units sold.
(7) Represents results of ADESA and its subsidiaries, which the Company has designated as unrestricted subsidiaries. These amounts do not include units sold, revenues, or gross profit received from Company purchases and sales through the wholesale marketplace, which are eliminated in consolidation.
(8) Includes $26 and $0, respectively, of depreciation and amortization expense.
NM = Not Meaningful

Retail Vehicle Sales


Three Months Ended September 30, 2017 Versus 2016. UsedRetail vehicle sales increaseddecreased by $116.0$905 million to $208.1 million$1.8 billion during the three months ended September 30, 2017March 31, 2023, compared to $92.1 million$2.7 billion during the three months ended September 30, 2016.March 31, 2022. The increasedecrease in revenue was primarily due to an increasea decrease in the number of usedretail vehicles sold to 11,71979,240 from 5,023105,185 during the three months ended September 30, 2016March 31, 2023 and 2017,2022, respectively. The increasedecrease in unit sales was driven in part by growth to 39 markets as of September 30, 2017 from 16 markets as of September 30, 2016. The increase inretail units sold was also driven by growth in existing markets duevarious macroeconomic factors including increased interest rates and inflation, leading to expandeddecreased vehicle affordability, as well as our increased focus on profitability initiatives, which have led to lower advertising levels and inventory selection, enhanced marketing efforts, increased brand awareness, and customer referrals. We anticipate that unit sales will continue to grow as we launch new markets and increase penetration in existing markets. Thesize. In addition, the average selling price of our retail units sold decreased to $17,759$23,056 in the three months ended September 30, 2017March 31, 2023 from $18,339 in the same quarter$25,973 in the prior year, due primarily due to a shiftoverall depreciation in inventory mix.the used vehicle market compared to the three months ended March 31, 2022.


Nine Months Ended September 30, 2017 Versus 2016. Used vehicleWholesale Sales and Revenues

Wholesale sales and revenues increased by $309.3$43 million to $550.4 million during the nine months ended September 30, 2017 compared to $241.1 million during the nine months ended September 30, 2016. The increase in revenue was primarily due to an increase in the number of used vehicles sold to 30,735 from 13,161 during the nine months ended September 30, 2016 and 2017, respectively. The increase in unit sales was driven in part by growth to 39 markets as of September 30, 2017 from 16 markets as of September 30, 2016. The increase in units sold was also driven by growth in existing markets due to expanded inventory selection, enhanced marketing efforts, increased brand awareness, and customer referrals. We anticipate that unit sales will continue to grow as we launch new markets and increase penetration in existing markets. The average selling price of our retail units sold decreased to $17,909 in the nine months ended September 30, 2017 from $18,319 in the same year-to-date period in the prior year. We believe average selling prices declined primarily due to our shift in inventory mix and partially due to an increase in average days to sale to 99 days in the nine months ended September 30, 2017 from 90 days in the comparable prior year period, leading to additional sticker price reductions and therefore lower average selling prices.

Wholesale Vehicle Sales

Three Months Ended September 30, 2017 Versus 2016. Wholesale vehicle sales increased by $4.6 million to $7.5$618 million during the three months ended September 30, 2017,March 31, 2023, compared to $2.9$575 million during the three months ended September 30, 2016. We primarily obtainMarch 31, 2022. Subsequent to the ADESA Acquisition in May 2022, wholesale sales and revenues includes wholesale marketplace revenues, resulting in an increase of $211 million in wholesale sales and revenues in the three months ended March 31, 2023. This was partially offset by a decrease in wholesale units sold that were acquired from customers on our wholesale inventorywebsite to 35,110 from customer trade-ins. As our retail unit sales have increased, so have the trade-ins we receive. Therefore, we have had more units available for sale to wholesalers over time and our revenues attributed to wholesale vehicle sales have increased.

Nine Months Ended September 30, 2017 Versus 2016. Wholesale vehicle sales increased by $14.1 million to $21.0 million50,280 during the ninethree months ended September 30, 2017, compared to $6.9 million during the nine months ended September 30, 2016. We primarily obtain our wholesale inventory from customer trade-ins. As our retail unit sales have increased, so have the trade-ins we receive. Therefore, we have had more units available for sale to wholesalers over timeMarch 31, 2023 and our revenues attributed to wholesale vehicle sales have increased.2022, respectively.


Other Sales and Revenues


Three Months Ended September 30, 2017 Versus 2016. Other sales and revenues primarily consist of gains on the sales of loans we originate, commissions we receive on sales of VSCs and sales of GAP waiver coverage. Other sales and revenues increaseddecreased by $5.9$29 million to $9.8$161 million during the three months ended September 30, 2017,March 31, 2023, compared to $3.9$190 million during the three months ended September 30, 2016. This increase wasMarch 31, 2022. The decrease is primarily driven by the increasedue to a decrease in retail units sold which led to an increase in loans originated and sold,gain on loan sales as well as an increase in VSCa result of fewer loan sales and GAP waiver coverage sales. During the three months ended September 30, 2016, VSC revenues were generated from third party sales whereas during the three months ended September 30, 2017, all VSC sales were administered through DriveTime.

Nine Months Ended September 30, 2017 Versus 2016. OtherMarch 31, 2023. In addition, other sales and revenues increased by $12.1 million to $22.4 million during the nine months ended September 30, 2017, compared to $10.3 million during the nine months ended September 30, 2016. This increase was primarily drivenwere negatively impacted by the increasedecrease in retail units sold which led to an increase in loans originated and sold, as well as an increase in VSC sales and GAP waiver coverage sales. Duringduring the ninethree months ended September 30, 2016, VSC revenues were generated from third party sales whereas during the nine months ended September 30, 2017, all VSC sales were administered through DriveTime.March 31, 2023.



UsedRetail Vehicle Gross Profit


Three Months Ended September 30, 2017 Versus 2016. UsedRetail vehicle gross profit increased by $7.0$25 million to $9.9$110 million during the three months ended September 30, 2017,March 31, 2023, compared to $2.8$85 million during the three months ended September 30, 2016.March 31, 2022. This increase was driven primarily by an increase in retail units sold, as well as an increase in used vehicle gross profit per unit to $841$1,388 for the three months ended September 30, 2017March 31, 2023, compared to $567$808 for the three months ended September 30, 2016. Despite higher average days to sale, as described above, vehicle gross profitMarch 31, 2022. The per unit increased. The increase was primarily driven by enhancements in our proprietary vehicle purchasinglower acquisition, reconditioning and pricing technology, as well as by cost efficiencies ininbound transport costs on retail vehicles sold during the reconditioning of our vehicles.three months ended March 31, 2023.


Nine Months Ended September 30, 2017 Versus 2016. Used vehicleWholesale Gross Profit

Wholesale gross profit increased by $16.4$47 million to $22.7 million during the nine months ended September 30, 2017, compared to $6.3 million during the nine months ended September 30, 2016. This increase was driven primarily by an increase in retail units sold, as well as an increase in used vehicle gross profit per unit to $737 for the nine months ended September 30, 2017 compared to $478 for the nine months ended September 30, 2016. The increase was driven by enhancements in our proprietary vehicle purchasing and pricing technology, as well as by cost efficiencies in the transportation and reconditioning of our vehicles.

Wholesale Vehicle Gross Profit

Three Months Ended September 30, 2017 Versus 2016. Wholesale vehicle gross profit increased by $0.7 million to $0.8$70 million during the three months ended September 30, 2017,March 31, 2023, compared to $0.1$23 million during the three months ended September 30, 2016.March 31, 2022. This increase was primarily driven primarily by an increase in wholesale units sold to 1,797 from 787 and an increase invehicle gross profit per wholesale unit to $418$1,253 from $74.

Nine Months Ended September 30, 2017 Versus 2016. Wholesale vehicle gross profit increased by $1.0 million to $1.2 million during$457 for the ninethree months ended September 30, 2017, compared to $0.2 million during the nine months ended September 30, 2016. This increase was driven primarilyMarch 31, 2023 and 2022, respectively, partially offset by an increasea decrease in wholesale units sold to 4,66535,110 from 1,920 and an50,280, respectively. The increase in wholesale vehicle gross profit per wholesale unit is primarily a result of lower acquisition costs of wholesale vehicles sold during the three months ended March 31, 2023. Wholesale gross profit includes $26 million of wholesale marketplace gross profit for the three months ended March 31, 2023 due to $251 from $79.the ADESA Acquisition.


44

Other Gross Profit


Other sales and revenues consist of 100% gross margin products for which gross profit equals revenue. Therefore, changes in other gross profit and the associated drivers are identical to changes in other sales and revenues and the associated drivers.



Components of SG&A

Three Months Ended March 31,
20232022
(in millions)
Compensation and benefits (1)
$177 $236 
CEO Milestone Gift (2)
(1)20 
Advertising56 155 
Market occupancy (3)
21 23 
Logistics (4)
35 56 
Other (5)
184 237 
Total$472 $727 
_________________________
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
         
  (in thousands) (in thousands)
Compensation and benefits (1)
 $19,404
 $9,868
 $54,496
 $24,390
Advertising expense 15,475
 6,677
 39,299
 17,928
Market occupancy costs (2)
 1,734
 346
 4,141
 1,199
Logistics (3)
 3,905
 2,252
 9,829
 5,515
Other overhead costs (4)
 18,158
 8,852
 48,830
 22,939
Total $58,676
 $27,995
 $156,595
 $71,971
         
(1) Compensation and benefits includes all payroll and related costs, including benefits, payroll taxes, and unit-based compensation, except those related to reconditioning vehicles, which are included in cost of sales.
(2) Market occupancy costs includes rent, utilities, security, repairs and maintenance, and depreciation of buildings and improvements, including vending machines and fulfillment centers, excluding the portion related to reconditioning vehicles which is included in cost of sales, and excluding the portion related to our corporate office which is included in other overhead costs.
(3) Logistics includes fuel, maintenance, and depreciation related to owning and operating our own transportation fleet, and third party transportation fees, except the portion related to inbound transportation, which are included in cost of sales.
(4) Other overhead costs include all other overhead and depreciation expenses such as IT expenses, limited warranty, travel, insurance, bad debt, title and registration, and other administrative expenses.
(1) Compensation and benefits includes all payroll and related costs, including benefits, payroll taxes, and equity-based compensation, except those related to preparing vehicles for sale, which are included in cost of sales, and those related to the development of software products for internal use, which are capitalized to software and depreciated over the estimated useful lives of the related assets.

(2) CEO Milestone Gift includes all equity-based compensation and payroll tax costs associated with the Gift, except those Gift costs related to preparing vehicles for sale, which are included in cost of sales.
(3) Market occupancy costs includes occupancy costs of our vending machine and hubs. It excludes occupancy costs related to reconditioning vehicles which are included in cost of sales and the portion related to corporate occupancy which are included in other costs.
(4) Logistics includes fuel, maintenance and depreciation related to operating our own transportation fleet, and third-party transportation fees, except the portion related to inbound transportation, which is included in cost of sales.
(5) Other costs include all other selling, general and administrative expenses such as IT expenses, corporate occupancy, professional services and insurance, limited warranty, and title and registration.

Selling, general and administrative expenses increaseddecreased by $30.7 million and $84.6$255 million to $58.7 million and $156.6$472 million during the three and nine months ended September 30, 2017, respectively,March 31, 2023, compared to $28.0 million and $72.0$727 million during the three and nine months ended September 30, 2016, respectively. The increaseMarch 31, 2022. During 2022, we implemented a number of profitability initiatives to reduce selling, general and administrative expenses including reducing our employee headcount, integrating real estate acquired as part of the ADESA Acquisition and reducing our corporate office footprint, improving the targeting of our advertising spend and reducing other selling, general and administrative expenses. In addition, the reduction in retail units sold contributed to reductions in several categories of selling, general and administrative expenses.

During the three months ended March 31, 2023, we realized a benefit of $1 million of compensation expense related to the CEO Milestone Gift within selling, general and administrative expense, which is partially duepresented separately above, as a result of more forfeitures than employees continuing to vest, compared to an increaseexpense of $20 million in compensation and benefits of $9.5 million and $30.1 million during the three and nine months ended September 30, 2017, respectively, which was driven by expansion into new markets and growth in headcount at our Phoenix headquarters, including in our product and engineering, accounting, finance, legal, real estate, information technology, and human resources departments. These expenses will increase in absolute terms as we expand to additional markets and continue to grow as a public company. Advertising, market occupancy, logistics and other overhead expenses increased during the three and nine months ended September 30, 2017 compared to the prior comparable periods primarily due to an increase in number of markets.March 31, 2022.


Interest Expense


Interest expense increased by $0.1 million and $3.2$95 million to $0.8 million and $5.4$159 million during the three and nine months ended September 30, 2017, respectively,March 31, 2023, compared to $0.7 million and $2.2$64 million during the three and nine months ended September 30, 2016, respectively. In order to expand the inventory we make available to customers and accommodate operations in additional markets, we increased our borrowings under our Floor Plan Facility year over year.March 31, 2022. The increase in interest expense is partiallyprimarily due to increased interest incurred on additional senior unsecured notes issued by the increasesCompany in the outstanding balance. In addition, we incurred $1.4 million during the nine months ended September 30, 2017 related to the Verde Credit Facility, includingMay 2022, along with increased interest expense incurred on working capital financing compared to March 31, 2022, partially due to rising interest rates.

Other (Income) Expense, Net

Other (income) expense, net increased by $15 million to income of $2 million compared to expense of $13 million during the outstanding balancethree months ended March 31, 2023 and financing costs. Total borrowings of $35.0 million under the Verde Credit Facility were repaid2022, respectively. The change is primarily due to fair value adjustments on our retained beneficial interests in full with the proceeds of our IPOsecuritizations and the facility was terminated.warrants to acquire Root's Class A common stock.
45




Non-GAAP Financial Measures


To supplement the unaudited condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we also present the following non-GAAP measures: Adjusted EBITDA; Adjusted EBITDA margin; Gross profit, non-GAAP; Total gross profit per retail unit, non-GAAP; SG&A, non-GAAP; and Total SG&A per retail unit, non-GAAP.

Adjusted EBITDA; Adjusted EBITDA margin, adjusted net lossmargin; Gross profit, non-GAAP; Total gross profit per retail unit, non-GAAP; SG&A, non-GAAP; and adjusted net lossTotal SG&A per share.retail unit, non-GAAP


Adjusted EBITDA; Adjusted EBITDA margin; Gross profit, non-GAAP; Total gross profit per retail unit, non-GAAP; SG&A, non-GAAP; and EBITDA Margin

EBITDA and EBITDA MarginTotal SG&A per retail unit, non-GAAP are non-GAAP supplemental measures of operating performance that do not represent and should not be considered an alternative to net loss, gross profit, or cash flow from operations,SG&A, as determined by U.S. GAAP.

Adjusted EBITDA is defined as net loss before interest expense,plus income tax expense, andinterest expense, other (income) expense, net, depreciation and amortization expense.in cost of sales and SG&A, share-based compensation including the CEO Milestone Gift in cost of sales and SG&A, and restructuring costs, minus revenue related to our Root warrants. Following the ADESA Acquisition, we are also excluding depreciation and amortization in cost of sales, which was historically only a small component of cost of sales. Adjusted EBITDA Marginmargin is Adjusted EBITDA as a percentage of total revenues.

Gross profit, non-GAAP is defined as GAAP gross profit plus depreciation and amortization in cost of sales and share-based compensation including the CEO Milestone Gift in cost of sales, minus revenue related to our Root warrants. Total gross profit per retail unit, non-GAAP is Gross profit, non-GAAP divided by retail vehicle unit sales.

SG&A, non-GAAP is defined as GAAP SG&A minus depreciation and amortization in SG&A, share-based compensation including the CEO Milestone Gift in SG&A, and restructuring costs. Total SG&A per retail unit, non-GAAP is SG&A, non-GAAP divided by retail vehicle unit sales.

We use EBITDAthese non-GAAP measures to measure the operating performance of our business excluding specifically identifiedas a whole and relative to our total revenues and retail vehicle unit sales. We believe that these metrics are useful measures to us and to our investors because they exclude certain financial, capital structure, and non-cash items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. We use EBITDA Marginbelieve that excluding these items enables us to measuremore effectively evaluate our operating performance period-over-period and relative to our total revenues.competitors. Adjusted EBITDA; Adjusted EBITDA margin; Gross profit, non-GAAP; Total gross profit per retail unit, non-GAAP; SG&A, non-GAAP; and EBITDA MarginTotal SG&A per retail unit,
46

non-GAAP may not be comparable to similarly titled measures provided by other companies due to potential differences in methods of calculations.

A reconciliation of Adjusted EBITDA to net loss, Gross profit, non-GAAP to gross profit, and SG&A, non-GAAP to SG&A, which are the most directly comparable GAAP measure, and calculation of EBITDA Margin is as follows (in thousands):

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Net loss $(39,769) $(21,985) $(117,078) $(57,418)
Depreciation and amortization expense 3,101
 1,196
 7,746
 3,020
Interest expense 838
 725
 5,404
 2,231
EBITDA $(35,830) $(20,064) $(103,928) $(52,167)
         
Total revenues $225,379
 $98,844
 $593,817
 $258,321
EBITDA Margin (15.9)% (20.3)% (17.5)% (20.2)%

Adjusted Net Loss and Adjusted Net Loss per Share

Adjusted net loss represents net loss attributable to Carvana Co. assuming the full exchange of all outstanding LLC Units for shares of Class A common stock. Adjusted net loss per share is calculated by dividing adjusted net loss by the weighted-average shares of Class A common stock outstanding assuming (i) the full exchange of all outstanding LLC Units and (ii) shares issued in our public offering were outstanding for the entire period presented.


Adjusted net loss and adjusted net loss per share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net loss and net loss per share, as determined under GAAP. We believe that adjusted net loss and adjusted net loss per share supplementU.S. GAAP measures, and enable us to more effectively evaluate our performance period-over-periodcalculations of Adjusted EBITDA margin, Total gross profit per retail unit, non-GAAP, and relative to our competitors. A reconciliation of adjusted net loss to net loss attributable to Carvana Co., the most directly comparable GAAP measure, and the computation of adjusted net lossTotal SG&A per share areretail unit, non-GAAP is as follows (in thousands, except per share amounts):follows:

Three Months Ended March 31,
20232022
(dollars in millions)
Net loss$(286)$(506)
Income tax (benefit) provision(2)— 
Interest expense159 64 
Other (income) expense, net(2)13 
Depreciation and amortization expense in cost of sales44 8 
Depreciation and amortization expense in SG&A49 37 
Share-based compensation expense in cost of sales— 8 
Share-based compensation expense in SG&A15 28 
Root warrant revenue(5)— 
Restructuring4 — 
Adjusted EBITDA$(24)$(348)
Total revenues$2,606 $3,497 
Net loss margin(11.0)%(14.5)%
Adjusted EBITDA margin(0.9)%(10.0)%
Gross profit$341 $298 
Depreciation and amortization expense in cost of sales44 8 
Share-based compensation expense in cost of sales— 8 
Root warrant revenue(5)— 
Gross profit, non-GAAP$380 $314 
Retail vehicle unit sales79,240 105,185 
Total gross profit per retail unit$4,303 $2,833 
Total gross profit per retail unit, non-GAAP$4,796 $2,985 
SG&A$472 $727 
Depreciation and amortization expense in SG&A49 37 
Share-based compensation expense in SG&A15 28 
Restructuring4 — 
SG&A, non-GAAP$404 $662 
Retail vehicle unit sales79,240 105,185 
Total SG&A per retail unit$5,957 $6,912 
Total SG&A per retail unit, non-GAAP$5,098 $6,294 
47
    Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Numerator:        
 Net loss attributable to Carvana Co. $(4,380) $(21,985) $(57,361) $(57,418)
 Add: Net loss attributable to non-controlling interests (35,389) —
 (59,717) —
 Adjusted net loss attributable to Carvana Co. $(39,769) $(21,985) $(117,078) $(57,418)
           
Denominator:        
 
Weighted-average shares of Class A common stock outstanding(1)(3)
 15,045
 15,000
 15,024
 15,000
 Adjustments:        
  
Assumed exchange of LLC Units for shares of Class A common stock (2)
 121,989
 121,760
 121,805
 121,760
 Adjusted shares of Class A common stock outstanding 137,034
 136,760
 136,829
 136,760
Adjusted net loss per share $(0.29) $(0.16) $(0.86) $(0.42)

(1) Amounts for periods prior to the initial public offering have been retrospectively adjusted to give effect to 15.0 million shares of Class A common stock issued in the initial public offering.
(2) Assumes exchange of all outstanding LLC Units for shares of Class A common stock during each period presented, including retrospectively applying exchanges of LLC units outstanding at the initial public offering to all periods prior to the initial public offering.
(3) Excludes approximately 0.5 million unvested restricted stock awards and 0.6 million vested and unvested stock options outstanding at September 30, 2017, because they were determined to be anti-dilutive.


Liquidity and Capital Resources


General


Our principal sources of liquidity areWe generate cash generated from our operations and from financing activities. Cash generated from operating activities primarily includes cash derived from the sale of used retail vehicles, the sale of wholesale vehicles, and proceeds from the sale of automotive finance receivables originated in connection with the sale of usedretail vehicles. Cash generated fromWe generate additional cash flows through our financing activities primarily includes proceedsincluding our short-term revolving inventory and finance receivable facilities, real estate and equipment financing, the issuance of long-term notes, and new issuances of equity. Historically, cash generated from the sale of Class A common stock in our IPO, sales of Class C Preferred Units throughout 2015financing activities has funded growth and 2016expansion into new markets and net proceeds from our floor plan facility.
We have incurred losses each year from inception through September 30, 2017,strategic initiatives and we expect this to incur additional lossescontinue in the future. In response to the current macroeconomic environment, we have increased focus on driving profitability through initiatives to better conform our expense structure to unit volume levels. 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.

Our ability to service our debt and fund working capital, capital expenditures, and business development efforts in the long-term will depend on our ability to generate cash from operating and financing activities, which is subject to our future operating performance, as well as to general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. We believe that our existing sources of liquidity including future debt and equity financing will be sufficient to fund our operations, including lease obligations, debt service requirements, capital expenditures and working capital obligations for at least the next 12 months. However, ourOur future capital requirements will depend on many factors, including our ability to refinance indebtedness, our ability to obtain supplemental liquidity through debt, equity, strategic relationships or other arrangements on terms available or acceptable to us, our rate of revenue growth, our expansion into new markets, construction of IRCs and vending machines, and the timing and extent of our spending to support our technology and software development efforts. Toefforts, and increased population coverage. If we need to obtain supplemental liquidity, there can be no assurance that financing alternatives will be available in sufficient amounts or on terms acceptable to us in the extent that existingfuture. In the first quarter of 2023, the U.S. and global
banking sector experienced increased volatility as a result of several distressed or closed banks and financial institutions. While we have not suffered any material effects as a result of the increased financial market volatility, we continue to monitor the
situation and will take appropriate measures, as necessary, to minimize our potential risk exposure.

We had the following liquidity resources available as of March 31, 2023 and December 31, 2022:

March 31,
2023		December 31,
2022
(in millions)
Cash and cash equivalents$488 $434 
Availability under short-term revolving facilities (1)
1,001 1,314 
Committed liquidity resources available$1,489 $1,748 
Unpledged real estate not included above (2)
1,973 1,971 
Unpledged beneficial interests in securitizations65 69 
Total liquidity resources$3,527 $3,788 
_________________________
(1) Based on pledging all eligible vehicles and finance receivables under the available capacity in our floor plan and finance receivable facilities, excluding the impact to restricted cash requirements. We updated the calculation of availability under short-term revolving facilities at December 31, 2022 to reflect the available inventory borrowing base at the end of the day on Friday, December 30, 2022, inclusive of a draw made on the floor plan facility on the last business day of the year.
(2) Total unpledged gross real estate assets minus committed sale leasebacks. Includes $1.1 billion of ADESA unpledged real estate assets.

Our total liquidity resources are composed of cash and cash equivalents, availability under existing credit facilities, and additional unpledged assets, including vehicle inventory, finance receivables, real estate, and securities, on our balance sheet that can be financed using traditional asset-based financing sources.

Cash and cash equivalents includes cash deposits and highly liquid investment instruments with original maturities of three months or less, such as money market funds.

Availability under short-term revolving facilities is the available amount we can borrow under our existing vehicle inventory floor plan and finance receivable facilities based on the pledgeable value of vehicle inventory and finance receivables
48

on our balance sheet on the period end date. Availability under short-term revolving facilities is distinct from operations are insufficientthe total commitment amount of these facilities because it represents the currently borrowable amount, rather than committed future amounts that could be borrowed to fundfinance future additional assets.

As of March 31, 2023 and December 31, 2022, the short-term revolving facilities had a total commitment of $4.6 billion and $4.8 billion, an outstanding balance of $1.7 billion and $1.5 billion, and unused capacity of $2.8 billion and $3.2 billion, respectively.

Unpledged vehicle inventory and finance receivables is the value of vehicle inventory and finance receivables on our future activities,balance sheet on the period end date beyond that covered by committed financing agreements. Effective September 22, 2022, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all.


Floor Plan Facility

We have aamended and restated our vehicle inventory floor plan facility (the "12-Month Floor Plan Facility") to extend the maturity date to September 22, 2023 with a third party to finance our usedline of credit of $2.2 billion. On September 22, 2022, we also entered into a separate vehicle inventory which is secured by substantially all of our assets, other than our interests in real propertyfloor plan facility (the "18-Month Floor Plan Facility", and together with the 12-Month Floor Plan Facility, the "Floor Plan Facility"Facilities"). with a lender. The line of credit available to us under this agreement is $275.0 million. Starting January 1, 2018, the line of credit will increase to $350.0 million. We are required to make monthly interest payments on borrowings under the 18-Month Floor Plan Facility at a rate per annum equal to one-month LIBOR plus a fixed base. Repayment in an amount equal tois $2.0 billion, which becomes available following the amountmaturity and repayment of the advance or loan must be made within five business days of selling or otherwise disposing12-Month Floor Plan Facility.

Unpledged real estate assetsinclude real estate acquired as part of the underlying vehicle inventory. For sales involvingADESA Acquisition, and IRC, vending machine, and hub real estate assets that have not been sold and are not pledged on the period end date. Since our first sale-leaseback transaction in 2017, we have historically had flexible access to real estate financing originated by us and sold under eitherexpect to continue to use various forms of real estate financing in the future.

Unpledged beneficial interests in securitizations includes retained beneficial interests in securitizations that have not been previously pledged or sold. We historically have financed the majority of our retained beneficial interests in securitizations and expect to continue to do so in the future.

Additionally, we amended our Master Purchase and Sale Agreement for the purchaser to purchase up to a maximum of $4.0 billion of our finance receivables through January 2024, and such facility had approximately $3.3 billion of unused capacity as of March 31, 2023.

To optimize our cost of capital, in any given period we may choose not to maximize borrowings on our short-term revolving facilities, maximize revolving commitment size, or immediately sale-leaseback or pledge real estate and retained beneficial interests in securitizations. This has the Master Transfer Agreement,benefit of reducing interest expense and debt issuance costs and providing flexibility to minimize financing costs over time.

We consider our total liquidity resources as an input into our planning. In general, changes in total liquidity resources fall into two broad categories: changes due to current business operations and changes due to investments in automotive retail assets.

Changes in liquidity due to current business operations include Adjusted EBITDA, non-real estate capital expenditures, including technology, furniture, fixtures, and equipment, and changes in traditional working capital, including accounts receivable, accounts payable, accrued expenses, and other miscellaneous assets and liabilities.

In the lender has extended repaymentordinary course of business, we sponsor and engage in securitization transactions to the earliersell our finance receivables to a diverse pool of fifteen business days after the saleinvestors. These securitizations involve unconsolidated variable interest entities in which we retain at least 5% of the used vehicle or one day following the salecredit risk of the relatedunderlying finance receivable.receivable by holding at least 5% of the notes and certificates issued by these entities. We are exposed to market risk in the securitization market. See Note 9 — Securitizations and Variable Interest Entities, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, for further discussion regarding our transactions with unconsolidated variable interest entities.

In addition we also requiredinvest in and generate several types of assets, including vehicle inventory, finance receivables, retained beneficial interests in securitizations, and real estate. To maximize capital efficiency, we generally seek to make principal reduction payments equalfinance these assets with matched sources of asset-based financing, including short-term revolving facilities for vehicle inventory and finance receivables, beneficial interests financing for retained beneficial interests in securitizations, and sale-leaseback or other real estate financing for IRCs and vending machines. We have historically used these sources of financing to 10% offinance our investment in these assets and expect to continue to do so in the original principal amount for each vehicle subject to the floor plan for more than 180 days until the outstanding principal amount for such vehicle is reduced to the lesser of 50% of the original principal amount of such vehicle or 50% of such vehicle��s wholesale value. Additionally, we are permitted to make prepayments to the lender to be held as principal payments under the Floor Plan Facility and subsequently re-borrow such amounts. As of September 30, 2017, $195.1 million borrowings were outstanding under the Floor Plan Facility, the interest rate was 4.88% and $79.9 million remained available for borrowing.future.

Verde Credit Facility

On February 27, 2017, we entered into a credit facility with Verde for an amount up to $50.0 million (the "Verde Credit Facility"). As of March 31, 2017, $20.0 million had been drawn under2023 and December 31, 2022, our outstanding principal amount of indebtedness, including finance leases, was $8.5 billion and $8.4 billion, respectively, summarized in the Verde Credit Facility. From March 31, 2017 through the completiontable below. See Note 10 — Debt Instruments and Note 16 —
49

Leases included in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q for further information on our debt and finance leases.
March 31,
2023		December 31,
2022
(in millions)
Asset-Based Financing:
Inventory$543 $569 
Finance receivables and beneficial interests1,421 1,233 
Transportation fleet(1)
358 375 
Real estate(2)
488 489 
Total asset-based financing2,810 2,666 
Senior Notes5,725 5,725 
Total debt8,535 8,391 
Less: unamortized debt issuance costs(3)
(78)(82)
Total debt, net$8,457 $8,309 
_________________________
(1) Amount includes notes payable and finance leases.
(2) Amount includes real estate financing and notes payable.
(3) The unamortized debt issuance costs related to long-term debt are presented as a reduction of the IPO, we drew an additional $15.0 million under the Verde Credit Facility, bringing the total outstanding balance to $35.0 million immediately prior to the IPO. Amounts outstanding accrued interest at a rate of 12.0% per annum, compounding semi-annually and payable in kind and matured in August 2018. Upon executioncarrying amount of the agreement, we paid a $1.0 million commitment fee. Upon completion of the IPOcorresponding liabilities on May 3, 2017, we repaid the entire outstanding principal and accrued interest using a portion of the proceeds we received from the IPO and recognized the unamortized commitment fee as interest expense. Subsequent to the IPO and this repayment, the agreement was terminated.

Other Long-Term Debt

Since 2016, we have periodically issued notes payable to finance haulers and equipment for use in our logistics operations. The assets purchased with the proceeds from these notes serve as the collateral for each note and certain security agreementsunaudited condensed consolidated balance sheets. Unamortized debt issuance costs related to theserevolving debt agreements are presented within other assets have cross collateralization and cross default provisions with respect to one another. Each note has a five-year term, fixed interest rate and requires monthly principal and interest payments. As of September 30, 2017, the outstanding principal of these notes totaled $16.7 million and had a weighted-average interest rate of 5.8%.

Finance Receivables

Our customers can obtain vehicle financing directly on our website. Historically, we have entered into various arrangements to sell the finance receivables we originate to third partiesunaudited condensed consolidated balance sheets and to a lesser extent related parties. Sales of receivables are a source of cash from operations and remove these loans from our balance sheet without recourse for their post-sale performance. In January 2016, we entered into transfer agreements pursuant to which we indirectly sell automotive finance receivables meeting certain underwriting criteria to third party purchasers. Under these transfer agreements and note purchase and security agreements, we could sell up to $230.0 million in principal balances of the finance receivables in this manner, which we reached in the fourth quarter of 2016 and as a result have no capacity under the note purchase and security agreements.not included here.

In December 2016, we entered into a master purchase and sale agreement with an unrelated third party pursuant to which we sell automotive finance receivables meeting certain underwriting criteria. Under such sale agreement, the third party has committed to purchase up to an aggregate of $375.0 million in principal balances of automotive finance receivables that we originate, subject to adjustment as described in the agreement. During the nine months ended September 30, 2017, we sold $241.3 million in principal balances of automotive finance receivables under this agreement and there was $112.4 million of unused capacity under this agreement as of September 30, 2017. On November 3, 2017, we amended our Purchase and Sale Agreement to increase the aggregate amount of principal balances of finance receivables we can sell from $375.0 million to $1.5 billion.


In December 2016, we entered into a master transfer agreement with an unrelated third party pursuant to which we sell automotive finance receivables meeting certain underwriting criteria to such party. Under such sale agreement, the third party has committed to purchase up to an aggregate of $292.2 million in principal balances of automotive finance receivables that we originate. The third party purchaser finances a majority of these purchases with borrowings from our purchaser in the master purchase and sale agreement. During the nine months ended September 30, 2017, we sold $106.6 million in principal balances of automotive finance receivables under this agreement and there was $177.1 million of unused capacity under this agreement as of September 30, 2017. Also on November 3, 2017, we terminated the remaining capacity under the Master Transfer Agreement and entered into a new master transfer agreement with an unrelated third party under which the third party has committed to purchase up to an aggregate of $357.1 million in principal balances of finance receivables.

Liquidity Upon Initial Public Offering


On May 3, 2017,April 26, 2022, we completed an initial publicequity offering and received $205.9of 15.6 million shares of Class A common stock for net proceeds of $1.2 billion. Also, on May 6, 2022, we issued $3.275 billion in senior unsecured notes due 2030. We are using the net proceeds net of underwriting discounts and commissions andfrom the Class A common stock offering costs. We used a portion of the proceeds to repay $35.0 million of outstanding borrowings plus accrued interest under the Verde Credit Facilityfor general corporate purposes and to pay any costs, fees and expenses incurred by us in connection with the IPO and Organizational Transactions.offering. We will useused the remaining net proceeds from the issuance and sale of the 2030 Notes to finance the $2.2 billion ADESA Acquisition and other ancillary transactions in connection therewith, and to pay related fees and expenses in connection therewith and for future working capital, capital expenditures and other general corporate purposes. In addition, we or our affiliates may, at any time, and from time to time, repurchase portions of our Class A common stock or our senior unsecured notes 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.

50


Cash Flows


The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the ninethree months ended September 30, 2017March 31, 2023 and 2016 (in thousands):2022:
Three Months Ended March 31,
20232022
(in millions)
Net cash used in operating activities$(66)$(593)
Net cash used in investing activities(19)(208)
Net cash provided by financing activities151 707 
Net increase (decrease) in cash, cash equivalents and restricted cash66 (94)
Cash, cash equivalents and restricted cash at beginning of period628 636 
Cash, cash equivalents and restricted cash at end of period$694 $542 

  Nine Months Ended September 30,
  2017 2016
Net cash used in operating activities $(116,014) $(144,778)
Net cash used in investing activities (60,897) (23,320)
Net cash provided by financing activities 241,181
 205,318
Net increase in cash and cash equivalents 64,270
 37,220
Cash and cash equivalents at beginning of period 39,184
 43,134
Cash and cash equivalents at end of period $103,454
 $80,354


Operating Activities


ForOur primary sources of operating cash flows result from the nine months ended September 30, 2017, netsales 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 used in operating activities was $116.0$66 million and $593 million during the three months ended March 31, 2023 and 2022, respectively, a decrease of $28.8$527 million, compared to net cash used in operating activities of $144.8 million for the nine months ended September 30, 2016. Significant changes impacting net cash used in operating activities comparing the nine months ended September 30, 2017 and 2016 are as follows:

At December 31, 2015, our accounts payable to related party was $21.4 million, primarily related to vehicle inventory purchases. During the nine months ended September 30, 2016 we made net repayments of $22.8 million to related parties resulting in an ending prepayment to related parties of $1.4 million. Comparatively, as of September 30, 2017, our balance of accounts payable to related parties increased by $0.3 million since December 31, 2016. Thus, cash flows associated with the change in our accounts payable to related parties increased $23.1 million year over year due to the timing of payments.

Net increase in vehicle inventory was $6.0 million during the nine months ended September 30, 2017 compared to a net increase in vehicle inventory of $62.3 million during the nine months ended September 30, 2016, resulting in a $56.4 million reduction in use of cash related to our efforts to optimize our inventory levels.

Net cash generated by originations and proceeds of finance receivables was $0.4 million during the nine months ended September 30, 2017, a decrease of $5.7 million from the net use of $5.3 million during the nine months ended September 30, 2016. This is primarily due to the timing of originations and subsequent sales.


Our net loss was $117.1 million during the nine months ended September 30, 2017, an increase of $59.7 million from a net loss of $57.4 million during the nine months ended September 30, 2016 primarily duedecreases in cash used to an increase inacquire vehicle inventory, along with decreased selling, general and administrative expenses associated with expansion to additional markets and expanding our corporate infrastructure.reconditioning costs.


Investing Activities


Our primary use of cash for investing activities is purchases of property and equipment to expand our operations. Cash used in investing activities was $60.9$19 million and $23.3$208 million during the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively, an increasea decrease of $37.6 million. The increase$189 million, primarily relates to the increase indriven by decreased purchases of property and equipment of $38.4 million, reflecting the expansionas part of our business operations into new markets and construction of new vending machines.effort to reduce our capital expenditures.


Financing Activities


Cash flows from financing activities primarily relate to our short and long-term debt activity, including paying down our short-term revolving facilities. Cash provided by financing activities was $241.2$151 million and $205.3$707 million during the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively, an increasea decrease of $35.9$556 million. The net increasechange primarily relates to the following financing activities:

Net proceeds from sales of equity increased $46.6 million due to receipt ofdecreased net proceeds from our IPO of $206.3 million during the nine months ended September 30, 2017 compared to net proceeds of $159.7 million from sales of Class C Preferred Units during the nine months ended September 30, 2016.short-term revolving facilities.

Proceeds from and payments on the Floor Plan Facility increased by $427.5 million and $443.8 million, respectively, resulting in a net decrease to sources of cash of $16.2 million related to this facility during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.


Contractual Obligations and Commitments


During the nine months ended September 30, 2017, we entered into new leases with DriveTime and Verde, someAs of which replaced previous leases we had with DriveTime. Pursuant to these new leases, we are contractually obligated to make lease payments to DriveTime and Verde of $15.4 million over the remaining lease terms, which range from seven to eight years. We also entered into new leases with various third parties, pursuant to which we are contractually obligated to make lease payments of $15.2 million over the remaining lease terms which range from less than one to ten years. Further, in April 2017, we financed certain property and equipment through a sale and leaseback transaction. We are now contractually obligated to make rent payments of $5.1 million over the remaining lease term.

Outside of the recent obligations outlined above and routine transactions made in the ordinary course of business,March 31, 2023, there have been no material changes to the contractual obligations as of the most recently ended fiscal year asor commitments previously disclosed in our prospectusmost recent Annual Report on Form 10-K, filed withFebruary 23, 2023. In the SEC on April 28, 2017.first quarter of 2023, the Company launched offers to eligible holders of Senior Notes to exchange any and all of their Senior Notes for up to an aggregate principal amount of $1.0 billion of new 9.0%/12.0% Cash/PIK Toggle Senior Secured Second Lien Notes due 2028. Subsequent to March 31, 2023, the Company increased the exchange offer consideration for certain Senior Notes and extended the scheduled expiration of the offers to May 17, 2023.


Fair Value Measurements


We report money market securities, and certain receivables, Warrants to acquire Root's Class A common stock and beneficial interests in securitizations at fair value. See Note 1418 — Fair Value of Financial Instruments, included in Part I, Item 1, Unaudited Condensed and Consolidated Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

51
Off-Balance Sheet Arrangements


We did not have any off-balance sheet arrangements as of September 30, 2017.

JOBS Act

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure

obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period is irrevocable.


Critical Accounting PoliciesEstimates


There have been no material changes to our critical accounting policies and use of estimates from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our prospectusmost recent Annual Report on Form 10-K, filed with the SEC on April 28, 2017.February 23, 2023.


FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements”"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “ongoing,” “contemplate”"anticipate," "believe," "envision," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "contemplate," and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:


•expectations relating to the automotive market and our industry;

•macroeconomic conditions, economic slowdowns or recessions;

•future financial position;


•business strategy;


•budgets, projected costs, and plans;


•future industry growth;


•financing sources;


•short-term and long-term liquidity;

•the impact of litigation, government inquiries, and investigations; and


•all other statements regarding our intent, plans, beliefs, or expectations or those of our directors or officers.


We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, the following:


•the impact on our business from the larger automotive ecosystem and macroeconomic conditions, including consumer demand, global supply chain challenges, heightened inflation and rising interest rates;

•our ability to raise additional capital, the quality of the financial markets, and our substantial indebtedness;

•our history of losses and ability to achieve or maintain profitability in the future;


•our ability to effectively manage our historical rapid growth;


•our limited operating history;ability to maintain customer service quality and reputational integrity and enhance our brand;


•the seasonal and other fluctuations in our quarterly operating results;


52

•our relationship with DriveTime;DriveTime and its affiliates;


•our management’s accounting judgments and estimates, as well as changes to accounting policies;


•our ability to compete in the highly competitive industry in which we participate;


•the changes in prices of new and used vehicles;


•our ability to acquire desirable inventory;


•our ability to sell our inventory expeditiously;


•our abilityaccess to sellstructured finance, securitization, or derivative markets at competitive rates and generate gains on the sale of automotive finance receivables;in sufficient amounts;


•our dependence on the sale of automotive finance receivables for a substantial portion of our gross profits;


•our exposure to credit losses and prepayments on our interests in automotive finance receivables;

•our reliance on potentially fraudulent credit data for the automotive finance receivables we sell;


•our ability to successfully market and brand our business;


•our reliance on Internetinternet searches to drive traffic to our website;website and mobile application;


•the volatility of the trading price of our Class A common stock and risks related to the actions of short sellers;

•our ability to comply with the laws and regulations to which we are subject;


•the changes in the laws and regulations to which we are subject;


•our ability to comply with the Telephone Consumer Protection Act of 1991;


•the evolution of regulation of the Internetinternet and eCommerce;e-commerce;


our ability to maintain reputational integrity and enhance our brand;

•our ability to grow complementary product and service offerings;


our ability to address the shift to mobile device technology by our customers;

risks related to the larger automotive ecosystem;

•the geographic concentration where we provide services;services and recondition and store vehicle inventory;


•our ability to raise additional capital;obtain affordable inventory insurance;


•our ability to maintain adequate relationships with the third partieslenders that finance our vehicle inventory purchases;


•the representations we make inwith regard to our finance receivables we sell;


•our reliance on our proprietary credit scoring model in the forecasting of loss rates;


•our reliance on internal and external logistics to transport our vehicle inventory;


the •risks associated with the construction and operation of our inspection and reconditioning centers, fulfillment centersIRCs, hubs and vending machines, including our dependence on one supplier for construction and maintenance for our vending machines;


•our ability to finance IRCs and vending machines;

•our ability to protect the personal information and other data that we collect, process, and store;


•disruptions in availability and functionality of our website;website and mobile application;


•our ability to protect our intellectual property, technology, and confidential information;

53


•our ability to defend against claims that our employees, consultants or advisors have wrongfully used or disclosed trade secrets or intellectual property;


•our ability to defend against intellectual property disputes;


•our ability to comply with the terms of open source licenses;


•conditions affecting automotive manufacturers, including manufacturer recalls;


•our reliance on third party technology to complete critical business functions;


•our dependence on key personnel to operate our business;


•our ability to successfully integrate the costs associated with becoming a public company;operations of ADESA;


•our minority equity investment in Root, Inc.;

•the diversion of management’s attention and other disruptions associated with potential future acquisitions;


•the restrictions that could limit the flexibility in operating our business imposed by the covenants contained in the indentures governing our Senior Notes;

•the legal proceedings to which we may be subject in the ordinary course of business;


potential errors in our retail installment contracts with our customers that could render them unenforceable;

•risks relating to our corporate structure and tax receivable agreements;

•risks relating to our Section 382 Tax Asset Preservation Plan; and


the •other factors identified underdisclosed in the heading “Risk Factors”section titled "Risk Factors" in our prospectusmost recent Annual Report on Form 424(b) filed with the SEC on April 28, 2017 (File No. 333-217085)10-K and other filings we make with the Securities and Exchange Commission.


The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Market risk represents the risk of loss that may impactThere have been no material changes to our financial position due to adverse changes in financial market pricesquantitative and rates. Ourqualitative disclosures about market risk exposure is primarily a resultfrom those described under "Management's Discussion and Analysis of exposure due to potential changesFinancial Condition and Results of Operations" included in inflation or interest rates. We do not hold financial instruments for trading purposes.our most recent Annual Report on Form 10-K, filed on February 23, 2023.


Interest Rate Risk


Our primary market risk exposure is changing LIBOR-based interest rates. We had total outstanding debt of $195.1 million under our variable Floor Plan Facility at September 30, 2017. Amounts outstanding under our Floor Plan Facility are generally due within one year and bear a variable interest rate of a fixed spread to the one-month LIBOR rate. At September 30, 2017, the applicable one-month LIBOR rate was 1.23%. Based on the amounts outstanding, a 100-basis point increase or decrease in market interest rates would result in a change to annual interest expense of $2.0 million at September 30, 2017.

Our outstanding notes payable each have fixed interest rates, require monthly payments and mature five years after commencement. The outstanding balance totaled $16.7 million as of September 30, 2017.

Inflation Risk

Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including the Chief Executive Officerthe chief executive officer and Chief Financial Officer, wechief financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation,evaluation, our Chief Executive Officerchief executive officer and Chief Financial Officerchief financial officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to
54

management, including the Chief Executive Officerchief executive officer and Chief Financial Officer,chief financial officer, to allow timely decisions regarding required disclosure.


Changes in Internal ControlsControl Over Financial Reporting


There waswere no change inchanges to our internal controlcontrols over financial reporting that occurred during the quarterthree months ended September 30, 2017March 31, 2023 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

55

PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


From time to time, we are involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity and capital resources.


Future litigation may be necessary to defend ourselves and our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. For more information, see “Legal Matters” in Note 17 — Commitments and Contingencies, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.


ITEM 1A. RISK FACTORS


There have been no material changes to the risk factors disclosed under the heading “Risk Factors”"Risk Factors" in our prospectusmost recent Annual Report on Form 10-K, filed with the SEC on April 28, 2017. February 23, 2023.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


None.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5. OTHER INFORMATION


On November 2, 2017, we entered into a letter agreement with Ally Bank and Ally Financial (the "Ally Parties") to extend repayment of amounts due under the Floor Plan Facility for sales involving financing originated by us that are not sold to or financed by the Ally Parties.  With respect to such vehicles, the Ally Parties agree to extend repayment of the advance or the loan for such vehicle to the earlier of fifteen business days after the sale of the vehicle or two business days following the sale or funding of the retail installment contract.  The letter agreement is filed herewith as Exhibit 10.2.None.

56
On November 3, 2017, we amended our Purchase and Sale Agreement to increase the aggregate amount of principal balances of finance receivables we can sell from $375.0 million to $1.5 billion. Also on November 3, 2017, we terminated the remaining capacity under the Master Transfer Agreement and replaced this facility by entering into a new master transfer agreement with an unrelated third party under which the third party has committed to purchase up to an aggregate of $357.1 million in principal balances of finance receivables. The amendment to the Purchase and Sale Agreement and new master transfer agreement are filed herewith as Exhibits 10.3 and 10.4, respectively.



On November 3, 2017, we entered into a Master Sale-Leaseback Agreement pursuant to which we may sell and lease back up to $75 million of our real property interests, including costs for construction improvements. At any time we may elect to, and beginning November 2, 2019, the purchaser has the right to demand that, we repurchase one or more sold real property interests for an amount equal to the repurchase price provided in the applicable lease and any amounts due and owing under such lease. We expect to sell and lease back many of our vending machines pursuant to this agreement. The Master Sale-Leaseback Agreement is filed herewith as Exhibit 10.5.

ITEM 6. EXHIBITS

Exhibit No.Description
10.3
Second Amendment to the Amended and Restated Master Purchase and Sale Agreement, filed herewith.
10.4 *
Master Transfer Agreement, filed herewith.
10.5 *
Master Sale-Leaseback Agreement, filed herewith.
31.1
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), filed herewith.
101.INSXBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.


* Confidential treatment requested as to certainCertain portions which portionsof this exhibit have been provided separatelyomitted in accordance with Item 601(b)(10)(iv) of Regulation S-K. The registrant agrees to furnish supplementally an unredacted copy of this exhibit to the Securities and Exchange Commission.Commission upon its request.

57


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




Date:May 4, 2023Carvana Co.
Date:November 7, 2017Carvana Co.(Registrant)
(Registrant)
By:
By:/s/ Mark Jenkins
Mark Jenkins
Chief Financial Officer
(On behalf of the Registrant and as Principal Financial Officer)



48
58