Good afternoon and welcome to the Carvana First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mike Levin, Vice President of Investor Relations. Please go ahead.

Thank you, Andrea, and good afternoon, ladies and gentlemen. Thank you for joining us on Carvana's first quarter 2019 earnings conference call. Please note that this call will be simultaneously webcast on the Investor Relations section of the Company's corporate website at investors.carvana.com. The first quarter shareholder letter is also posted on the IR website. In addition, following the completion of our first auto loan securitization in Q1, we posted a detailed 101 on the transaction under resources investor materials on the IR website. Joining me on the call today are Ernie Garcia, Chief Executive Officer; and Mark Jenkins, Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including, but not limited to, Carvana's market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. A detailed discussion of the material factors that cause actual results to differ from forward-looking statements can be found in the risk factor section of Carvana's most recent Form 10-K and Form 10-Q. The forward-looking statements and risks in this conference call are based on current expectations as of today and Carvana assumes no obligation to update or revise them whether as a result of new developments or otherwise. Our commentary today will include non-GAAP financial measures, including but not limited to ex-Gift measures that exclude the impact of 100,000 milestone gets to our employees. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our shareholder letter issued today. A copy of which can be found on our Investor Relations website. Please note that all gross profit SG&A and EBITDA metrics mentioned by us on this call are on an ex-Gift basis. And now with that said, I'd like to turn over the call to Ernie Garcia, Ernie?

Thank you Mike, and thanks everyone for joining our call. The first quarter was a spectacular quarter for us and just about every respect and was full of milestones in our path to fulfilling our mission of changing the way people buy cars. In the quarter, we opened our hundredth market and sold our 200,000 car. It took us 22 quarters to sell our first 100,000 cars and open our first 50 markets and only three quarters to double those numbers. Those are fun digital milestones but they tell the story of many harder sea forces at work. We have incredible people who care about what we are building together and those incredible people are delivering incredible customer experiences. Every bit as exciting is that the speed of our improvement is accelerating. We are continuing to invest heavily across every facet of the business getting a little better every single day. To selection, fees, fun and fairness, we are able to deliver to our customers today is far better than the status quo, but it’s still a far cry from where we want it to be. That opportunity to improve is what motivates us. These quarterly calls have an opportunity to step back and pick our heads up from the daily grind of trying to improve and to look back at how all those improvements are adding up and translating into numbers. They are translating. We grew units and revenue at 99% and 110% respectively, reflecting continued demand growth across cohorts and exceptional execution. We also had a phenomenal quarter in GPU posting over $2,400. On our first public conference call in June, 2017, we're coming off a year of a $1,000 GPU and announce our midterm goal of getting to 3,000. At that time 3,000 looks pretty far away,…

Thank you, Ernie. And thank you all for joining us today. Unless otherwise noted all comparisons are on a year-over-year basis. We are pleased to report another quarter of exceptional growth in both retail units sold and revenue. Retail units sold totaled 36,766 in Q1, an increase of 99%. Total revenue was $755.2 million, an increase of 110% marking our 21st consecutive quarter of triple digit revenue growth. Our growth this quarter reflects a strong tax season and the many investments we made last year and continue to make to further improve scalability and satisfy increasing demand. Total gross profit per unit in Q1 was $2,429 an increase the $575. Our growth in GPU was broad based and reflected gains and retail, strong monetization of our finance platform, progress and buying cars from customers and higher attachment rates on ancillary products. EBITDA margin was negative 7.4% in Q1, an improvement of approximately 5% reflecting meaningful operating leverage across the entire business. SG&A levered by 2.8% and advertising levered by 1.7% benefiting from declining CACs in existing markets and lower initial CAC in new markets, both due to continued increases in awareness of our brand. While we have shown rapid EBITDA margin leverage over the past few years, we have now started to see margin improvements show up in smaller sequential dollar losses. The first quarter marked a significant milestone in this respect. Over the past six years, we have shown a sequential reduction in EBITDA dollar losses in two quarters. Both heading from Q1 to Q2 in 2017 and 2018. This year for the first time we showed a sequential reduction in EBITDA dollar losses heading from the fourth quarter to the first. This is a meaningful achievement and carries a lot of positive implications about where we are headed.…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Zack Fadem of Wells Fargo. Please go ahead.

Hey guys. First question here on new market openings 24 in Q1, your largest ever in terms of size, but as you start to enter markets of smaller average populations, curious if you could talk about strategy here first in terms of market entry costs, whether there's any leverage from closer existing markets and then second in terms of performance and how you think about these cohort curves will compare relative to the more densely populated areas that you've entered over the years?

Sure. So as we kind of said in our last quarter, I think our plan for this year is mostly driven by filling in markets that are nearby existing market and kind of filling out what already we can reach in logistics network. And so the expenses of opening these incremental markets is definitely less since we generally don't have to add long legs to the logistics network. The largest expense that open these markets is generally just turning on local marketing. And then given where GPU is today and how quickly these markets are ramping, the payback on these new markets is very, very fast. So the economics of them look great. I think, we're very happy with the pace which we're opening markets. We're currently on pace almost for a 100, but we're guiding it to 55 to 60 per year because we feel like that's a comfortable pace that makes sense for the business. And then as it relates to how these curves are performing, we continue to see the same trends that we've seen in the past across all of our cohorts, our oldest cohorts are still growing very quickly. Newer cohorts are generally growing faster than previous cohorts. And then smaller markets are also growing faster. So these are generally new markets. There are smaller markets as well. There's two reasons that we go faster and we're seeing them grow very quickly as a result.

Got it. And then it looks like you sold more than 5,000 vehicles that you've sourced from customers in the quarter. So as you can continue to get better there, curious how or when you think this translates to a more meaningful reduction in vehicle costs. And then second, curious if you could talk about how the attachment rates are for customers who are both buying and selling a car from you at the same time?

Yes. I think the way that we try to think about that the math of buying cars from customers and we tried to collapse that into the single number, how many cars are we buying from customers relative to the cars that we're selling to customers. And so that number is 40% this quarter, which was up from 36% of the previous quarter. So we continue to make, really nice progress there that we're very excited about. From there, those units then get for, some go to wholesale market where we sell them at auction and we earn a margin and we had a great margin this quarter, we're very happy with that. And then some go to retail and are sold to other customers and then contribute effectively incremental margin because we were able to buy them less expensively. I think the way that we think about that business in general is that the market leader in that business is buying roughly as many cars from customers that are selling and is able to achieve roughly $900 to $1,000 on the wholesale side, which is visible in their financials, for every car that they originate. And so we think that the total GPU opportunity is about that 100% times 900 to a 1000. And we're obviously achieving a fraction of that today where we're buying 40%, as many cars we're selling. And on the wholesale side of the quarter, we had about $450 wholesale margin. So I think there's a lot of opportunity left there. We think the most important thing is that we continue to grow it methodically. We continue to make sure we're delivering great experiences, and there's clear areas to improve the economics over time that we're aware of it. And so I think that's how we're thinking about that business. Mark do you want to jump in on the second question about attachment points or attachment for customers who buy and sell, any meaningful differences there?

Sure. So I think, are you asking about trade ins on that side?

Yes. Yes.

Yes. Sure. So a component of our business of buying cars from customers is trade ins and a portion is buying cars directly from customers without necessarily a retail sale. I think historically on the trade in attachment, we've bounced around in the 15 to 20 range. And so yes, hopefully that answers your question.

It does. Thanks so much guys. Really appreciate it.

Our next question comes from Chris Bottiglieri of Wolfe Research. Please go ahead.

Hey guys. Thanks for taking the question. So two part. I guess first in context of this very robust level of growth that you've seen, particularly relative to the kind of how you ended the year and how you were guiding, just wonder if you could maybe attribute or talk just through some of the levers that you think led to this like pretty enormous level of growth ?

Sure, I think there is maybe three things, we call it, two in the demand side and one in the supply side. So on the demand side of the, I think the first and foremost we continue see really robust growth across cohorts, demand feels very strong and we're excited about that, actually think it carries a lot of great long-term implications. I think on a more transitory note, we do believe that we had a great tax season. Total tax dollars returned to customers are best numbers that we've seen suggests that they were down about 2% to 3% year-over-year, but we believe it more of the dollars took the form of child tax credit dollars, which are more efficient in terms of driving customer car purchases. So we think that the tax season was also very strong, and we think we benefited from that a bit. And then I think, those two things led to higher levels of sales and then importantly the business held up very well, the operations teams executing incredibly well. And so I think we executed, we were able to handle the growth.

Got you. That's helpful. And then your average monthly website traffic really spiked this quarter, can you talk about the growth you're seeing there and where you are in terms of the search and optimization of customer acquisition. And then lastly, you highlighted new board member addition I could see some coming in the background of it, all my travel agency space would help, but maybe just kind of talk about this holistically and where you are and how this all fits together?

Sure, I think you – we've seen robust demand growth whether we define it as sales or website visits or kind of any stage of the funnel. We think there's probably a lot of drivers that we think we continue to have the best offering available to customers who want to buy a car and get a simple experience that's fair and have it delivered directly to their door and you have a seven-day return policy. So we think that's a very, very high quality offering. And then we think that we're also starting to see some of these network effects that we've talked about over time showing up. So we've always kind of talked about three network effects in the business. One is as we grow market and grow inventory that should increase conversion across markets. One is, as we put more inspections that are closer to customers that reduce delivery time and that should increase conversion in the markets near those inspection centers, one is as we continue to invest more in national marketing and then we open more markets and therefore have more ad dollars put to work and are able to put those national marketing channels, that also should feedback positively, and I think we're seeing a lot of evidence of that. An example is the NDRC which we opened in the first quarter. We just started ramping up inventory there in the first quarter and we saw our conversion rates for all of our Midwest markets bump up considerably and to a degree that we would have expected given all of our models that we kind of had before but it's nice to see that working then I think the national brand is starting to take hold, I think as I said in my prepared…

All right, great. Thanks for the time.

Our next question comes from Sharon Zackfia of William Blair. Please go ahead.

Hi. Good afternoon. A couple of questions. So I think in the text of the shareholder letter you talked about initial deployments of the AI tech that you purchased. So if you could give us any update on what you were seeing there and how we should expect that to influence the business going forward and at what pace. And then secondarily Ernie you talk a lot about time for delivery. Are there any metrics you can share for us on what the average time is for delivery today versus a year ago for consumers at this point?

Sure, So, first yes, we completed this acquisition of Propel about six months ago, give or take and then we're starting to implement that what we're calling our next generation customer communication platform that includes AI chat, it includes basically dynamic FAQs in our support menu that based on customer click stream activity put the right questions in front of the right customer at the right time. We also have short-form videos where we do the same that they are constantly updating and learning to make sure that we're answering customer questions in automated ways and then trying to kind of clear that work of our advocates plate. And I think you can think of AI chat as being effectively the same thing. It's a – way for a customer to come in – natural language, let us know what they are concerned about or trying to understand in that moment and then make sure that we can put the highest quality content right in front of them at that time. We've completed several of our initial rollouts in our next generation communication platform. And currently, those are being tested to different size of population, depending on which part we're talking about and I think we're seeing meaningful contributions that are generally taking the form today of basically fewer calls into advocates and customers being able to make it deeper into the funnel without having – have their answers – or their questions answered by a person, which we think is great. And so I think there's a lot of opportunity there, it's still very, very early. The foundation that we're building on top of we feel really, really good about and we feel that we're just scratching the surface. The quality results we're seeing right now is definitely material, but we think that there is a lot more room to improve, and so I think that's something that is a several year roadmap that we've got laid out in front of us that we will be continually working on. And then as it relates to delivery time, we definitely handled the tax season sales burst more gracefully this year than last, we've talked a lot in last couple of quarters about investments we've made and scalability, which includes things like we just discussed on website customer communication, but also include enhancements to our scheduler, the way that we're handling customer verifications just preparing to have more people and more trucks ready to see the growth that we expected through tax season. So, we're definitely better off than we were a year ago to the tune of probably a day to give or take.

Okay. Thank you.

Thank you.

Our next question comes from of Armintas Sinkevicius of Morgan Stanley. Please go ahead.

Great, thanks for taking the questions. If I look at that the outlook for the rest of the year here, it's about negative $100 million of EBITDA, negative $140 million but – or negative $45 million of cash interest and then, call it, minus $100 million of CapEx. So, that's minus $245 million and then meanwhile, you have $85 million of cash and $112 million of real estate. So call it about $200 million there. If the Floor Plan covers the inventory and the working capital there is a bit of a gap there between the cash burn and the liquidity available. Anything I'm missing there or if you could walk me through how you plan to fund the business into the end of the year.

Sure, Yes. So I think there, there's a major thing you're missing as a starting point, which is we have a significant amount of immediately available liquidity on our Floor Plan line, about $182 million. So to look at the complete picture, I think you had about $342 million in liquidity resources at end of the quarter. As we mentioned, we had a little over $100 million in real estate and another $20 million or so in securities on our balance sheet. All of that leading to significant flexibility for us as we continue to march down the path on our plan. I think the other kind of key components on cash usage over time, EBITDA and CapEx were two you pointed to. I think you can see from our guidance and also from our commentary about the trajectory of that EBITDA is headed that we expect, declining EBITDA losses in the back half of the year or back three quarters of the year, I should say. And then I would also just reiterate the point which you did allude to, we've had great success financing our CapEx historically. A great example of that is in Q1, we completed our first sale leaseback transaction for an IRC completing the sale leaseback of Indy IRC which came online around the end of 2018 and all of that point to significant flexibility.

Okay. I can appreciate the floor planning. I just thought the floor plan was tied to inventory. So is the floor plan being used to finance any?

Its inventory that we already have on balance sheet.

Okay. So you can effectively – okay. I got it. And then the other one is, with the securitization, first of all congratulations. And then the question I have there is, how close as we get you to that, 500 to 700 targets that you laid out at the Investor Day late last year?

Sure. So I think it’s a starting point and I also agree, I think, that securitization was a big success, I think, for the whole team and the whole company we are very excited about it to be able to bring our offering to a much, much broader market. I think some key numbers there to keep in mind, I think, before securitization deal fees and expenses which were significant on this inaugural deal, in particular. We did about $707 of total finance GPU that’s a meaningful step forward from where we were at Analyst Day, but only a partial step toward our long-term goals. We do see the inaugural securitization as opening up the new market to us, which we believe will be a key player in allowing us to accomplish those long-term goals over time.

Okay, great. Thank you for taking the questions.

Thank you.

Our next question comes from Nick Jones of Citi. Please go ahead.

Hi, just one question is you purchased two million units over time and that's kind of the long-term goal. I guess presumably you have to go for older cars. How does the reconditioning and that kind of pan out? Can you do more disclosures on the website or through your messaging app or you maybe can do less reconditioning but give more information to the consumer, or will it just cost more to recondition?

Sure, so I think let me break that into two pieces. First, I just want to make sure we're being clear about the size of the market and the size of the market in cars that are less than five-year-old. The best number that I can remember, and I could be offering a little bit is that around 50% of the market give or take is cars that are approximately five-year-older or less. And so we're talking about 20 million units per year there. So I think there's plenty of room to grow inside of less than five-year-old cars, for example. And I think also if you look at your Atlanta market share in Q4, which was nearing 2%, you extrapolate that nationwide, given the cars that we're selling today, and then just kind of add a little bit of growth underneath it, you can get to pretty big numbers pretty fast. So I don't think we necessarily feel like we would need to go to too much older cars to be able to sell two million cars per year. That said, we do believe that we are able to go to older cars and we see great evidence of that. We've sold cars up to nine-years-old so far and we don't see materially worse reviews, we don't see materially return rates. So we don't see a lot of evidence of there being customer experience friction and we do see evidence of our ability to execute on those cars. So we think that there is absolutely opportunity to continue to move to older cars with higher mileage and we think there's opportunity to move up market to more expensive cars as well. So over time we expect to continue to migrate in all those different directions in the way our system is built, it's largely kind of a pull system. So if we can find ways to attract those customers who want those cars, then our kind of inventory algorithms will automatically go out and look to those cars and we'll start to buy more of them. And so we would expect to be growing both within zero to five-year-old cars and across car types over time.

Got it, thank you.

Thank you.

Our next question comes from Ron Josey of JMP Securities. Please go ahead.

Great, thanks for taking the question. I just wanted to follow-up on, on two things. One is the new IRC plan for Cleveland. Can you just talk about the approach, just overall about IRC expansion as you get to that 5% share that we've been talking about longer term? And then Ernie when thinking about new markets, I mean the 24 in the quarter is pretty impressive and things are clearly going great, but it wasn't too long ago where there were growing pains in terms of, things that need to be fixed, make things more efficient, more electronic. Can you just talk about how like the process for growing these new markets is going? I'm assuming things are going really well, but any ways that you can improve this process and obviously hard to answer that question given 24 launch, but had to ask. Thank you.

And of course. So I mean, in terms of the IRC plan, our long-term plan is roughly to open 40 inspection centers that are able to produce about 50,000 cars per year around the country near 40 large population centers that enable us to deliver cars very quickly, right. That's kind of a long-term plan. Cleveland and Nashville fit into that plan very well. And then we'll continue to add cities over time. I think as a bit of an aside, but a nice data point, one of our inspection centers in the last week actually had its first week where it produced 1,000 cars in a week, which is a nice operational data point. It’s clear evidence that we're able to produce 50,000 cars per year out of these facilities. That's the first one that's got ramped all the way up and been able to hit that milestone. So that was a big one for us that we're excited about. I think on the market side, you're absolutely right, a year ago we had a great Q1 and we found ourselves a little bit constrained and struggling under the weight of the growth in many respects. And then, I think, when we're trying to size our market openings at any point in time, we need to be thoughtful about that. We think that opening markets is not operationally difficult for us at this point. As I said, we are on pace in the first quarter to open nearly a 100. And I think from a market opening ops perspective, that's the pace that we probably would be able to handle. It also economically makes a lot of sense, because we've got higher GPUs and the markets are ramping faster, and there's not a ton of expense to open them…

Makes a lot of sense. And real quick, just that thousand IRC goal, you hit, is that a newer IRC or existing ones? Thanks guys.

That was in our Phoenix IRC, which was the first one that we built from scratch.

Great, thanks.

Our next question comes from Steve Dyer of Craig-Hallum. Please go ahead.

Thanks. Good afternoon. Revenue for the quarter, I think, your guidance, I'm sorry for the balance of the year was up $100 million EBITDA, absolutely EBITDA when you flow through sort of the midpoint of the guided range. Yields EBITDA on an absolute basis of what, $5 million less sort of still implies negative, incremental margins. Is there a level whether it be units, or revenue per quarter where you see those incremental start to turn positive?

Sure. So, yes, I think, this quarter is a good example of positive, incremental margins obviously it saw declining sequential EBITDA dollar losses. Going from Q4 to Q1 this quarter represented the biggest improvement in EBITDA dollars that we've seen in our history as a company. It was also the only time we've ever shown a positive EBITDA going from Q4 to Q1, which has some seasonal elements in it. And so I think we're feeling really good to your question on showing positive contribution sequentially, which is what we just did. And I think you can see from our guidance how we think about that on a year-over-year basis as well. So I think to round that out a bit more, our guidance for the year is 3.5% to 5.5% EBITDA margin, that's a significant increase, or improvement from the prior year. That's significant improvement comes from all types of sources. So it's broad based gains in GPU, broad based gains in SG&A leverage we think places us on a very clear path to profitability.

And Steve, all I would add to that is in order to offset kind of the implied increase in EBITDA dollar losses there, we would have lowered our EBITDA margin guidance by 0.1%. That would have offset it. So it's just, I would say, we're in kind of rounding errors at that point and I think you are feeling really good about where the business has headed. I wouldn't read too much into it.

Got it, okay. And then just on the cars that you're buying back from consumers you're obviously starting to see a lot of traction there. Is there any way to sort of quantify or bucket sort of what is coming through your website versus the kinds of stuff that it's literally boots on the ground, gone through Craigslist, gone through ads, those types of things?

The vast majority of it is just on the website. People going through getting a trade in getting a value on their car, we kind of called that in our shareholder letter. This quarter was the first time that we did a TV advertising campaign specifically pointed at driving customers that are going to buy car from us. And we saw great results from that we're very excited about. I think hidden in that story is another actually exciting customer acquisition cost story. Mark talked about the leverage that we saw in customer acquisition costs that leveraged 21% year-over-year. I think something that makes that even a little bit better is that a lot of our advertising dollars or at least a meaningful portion of our advertising dollars this quarter were pointed at building the brand that we buy cars from customers as well. And that's definitely less efficient at driving retail sales. But despite that we still saw the growth that we saw on the retail side and we still saw the leverage that we see in customer acquisition cost, which is effectively taking all ad spend dollars and dividing by retail sales, and therefore kind of missing some of the benefits of the brand building that we're doing there. So we feel really good about all that.

Got it. And then actually that's it from me. I'll jump back in queue. Thank you, guys.

Thank you.

Thank you for adhering to the rules too.

Our next question comes from Seth Basham of Wedbush. Please go ahead.

Thanks a lot and good afternoon. My question is around retail GPU. Can you maybe just give us a little bit more color on the drivers of sequential improvement, that'd be really helpful.

Sure. Yes, so there's a number of drivers of sequential improvement in GPU. I think one is we do the Cyber Monday promotion every year in Q4 that’s $1,000 discount for customers to take advantage of the Cyber Monday promotion, which has a sizable impact on retail GPU. Seasonally Q4 has historically been a relatively weak quarter for depreciation rates and that's industry wide. And so that has an impact on Q4 GPU as well. Q1 is not a strong quarter for depreciation rates, but Q4 is particularly bad. I think that there's some other small sequential gains. I think we made some little gains in and recon, for example, getting a little bit of leverage through the reconditioning centers, but the seasonal ones would be the – sequentially would be some of the bigger ones that I point to.

Okay. And so thinking about the balance of the year, thinking about things like inventory days, can you expect a lot of improvement in that factor and do think that's going to be a point contributor retail GPU improvement?

Sure. So average day to sale in an area where we've made tremendous progress over the last couple of years for those of you that have been following us for awhile we were 91 days for the year in 2017. Now I've moved that down into the high 50s, low 60s range. I think that's obviously had a positive impact on retail GPU, other things equal. I think as we look forward, we expect that to stay in a stable and reasonable range. We feel pretty comfortable at the level we’re at. We may see that bounce around. We feel pretty good about where we are today.

Thank you.

In the long-term we think there's a big opportunity to march it down steadily, because of the nature of our model, which centralizes inventory and puts lots of eyeballs on a fixed set of cars, opportunities to increase efficiency in recon centers, et cetera. But in the near term we're pretty comfortable with our range.

Thank you.

Our next question comes from Sameet Sinha of B. Riley FBR. Please go ahead.

Yes, thank you very much. Couple of questions here. So in terms of the IRC, the Indy IRC, can you help us think about what sort of deleveraging impact that had in Q1? And the reason I'm asking for it is primarily because as you seem to have increased the level of rollout for IRCs Cleveland, Nashville and another 81 coming on this year. I just wanted to kind of get an assessment of how or what's the dampening effect. Secondly, Ernie, I think, you might have addressed it, but from your guidance into the new market opens, you just have 21 markets left from now to year end. So is the plan to hit that and kind of just slow down that for awhile while you ramp up your IRCs, or do you think there's a potential that you could increase your new market opens if you get to that number early on?

Yes, so on the deleveraging from the Indy IRC in Q1 I would not think of that as being a particularly larger fact, I think, Indy is now one out of six IRCs. And so any individual IRC coming online will have some effect because new IRCs are underutilized relative to the average utilization of other IRCs. They may also have some services outsourced initially that we bring in house over time. But I wouldn't view that as a particularly large contributor to our GPU in Q1.

And just to be real quick just to jump on your second question. I think as I tried to outline before, I think, we feel like we can open a lot of markets, we feel like that's a choice and the considerations of our kind of as discussed. So we do plan in the back half have slower market openings for all the reasons discussed. And again that's a choice, we feel like it's the right choice for the business.

Great. Thank you.

Thank you.

Okay, next question comes from Rick Nelson of Stephens. Please go ahead.

Thanks, good evening. So I want to follow-up on the cars that are here are sort of same from customers, how would that retail GPU compares to those that you would source from auction?

Sure. So I think first order, I think, a good way to think about that is that the cars that were, selling at retail should have similar incremental margin to the wholesale margin that we get when we sell cars at wholesale. The reason for that is basically if we're selling a car at wholesale and we're earning a profit, you could imagine us buying it from ourselves on the other side. And so that kind of wholesale margin is the same kind of incremental margin that we get for a car effectively when we sell it in retail. So first order it's very similar and that's why we like to think about the business of buying cars from customers holistically. And just how many cars we’re buying relative to the cars that we’re selling. And then how much are we able to earn incrementally on those cars, whether to wholesale or retail. Those numbers won't always be perfectly consistent, but they are conceptually at least somewhat tied to one another. And so that's how we think about the business.

Thanks for that. And if you could comment on brand awareness where it sits today and how it's grown.

Sure. Yes, in my prepared remarks I talked about our brand awareness, our unaided awareness. Just making sure we're using the precise language here. Being about 7% in Atlanta, we view that as really, really exciting. So and let me just try to give you our framework for how we think about the potential of the business over the long-term. Generally we like to separate what we think growth can or kind of the places growth can come from in terms of conversion which is basically changes that we make to the experienced customers that are already on our website get. So if we buy more cars, we have more cars on our website that leads to higher conversion years, converting more of the same customers you already had. If you deliver cars faster, you're converting more of the customers you already have. If you make product improvements that enable you to be more efficient communicate better to customers, you convert more of the customers you already have. Then you can always go out and acquire more customers. And so when you're thinking about getting more customers, I think, there's kind of three steps before a customer is psychologically ready to buy a car from Carvana. Step one, is obviously they have to know that we exist at all. And so that's this awareness measure. We can't sell a car to somebody doesn't know that we exist. Step two is they have to understand what buying a car online means. If they know what Carvana is in concept, we sell cars, they don't really even know what buying a car online truly means, they're not really a candidate for buying a car from us. And then three, they have to trust Carvana. Even if they know what buying a car…

Great. Thanks and good luck.

Thank you.

[Operator Instructions] And our next question will come from Gary Prestopino of Barrington Research. Please go ahead.

Hey guys how are you doing?

Great, how are you doing?

Good, good. Just want to ask a question in terms of have you seen any changes particularly in some of your older cohorts in competitive responses to what you guys are doing out there in the market? Is anybody – some of these rooftop dealers trying to replicate what you guys have or is it even possible to do that?

Sure. So let's start with B in that question. We still have not seen an impact that is measurable in any of our markets that we would assign to competition. That doesn't mean that maybe there's little things happening from a competitive perspective that we're not seeing or they're so small that we're not noticing the kind of visible impacts, but nothing that kind of hits our radar that we feel like is measurable, have we noticed in any of our markets at all. And I think that fits kind of our mental model, which is this is a very, very large, extremely fragmented market. As I said in my third marks, we have 0.35% market share nationwide, our most mature market in Atlanta, we have a little less than 2% market share. It's just a really, really big market. And it's hard to imagine that anything that any other competitor does is likely to have too big of an impact on us relative to us just making sure that we continue to execute into the huge demand that we see and the huge opportunity that we see. So we're really focused on execution and believe that that's the risk. And then I think even when we try to think longer term about what does competition really even mean for us? I don't even know which direction we're rooting there because we do think obviously there's negatives to having more competitors out there that are doing something similar to you. We think there's also positives in that kind of stream of awareness understanding trust. Part of understanding is if other companies are out there telling people buying a car online or telling people how buying a car online works, that's actually helpful to us. If other companies are out there…

You should also imaging the cars too because you do a good job of that. And then lastly, I couldn't find it, but what were your days sales this quarter? I don't have the queue.

They were 63 days, down from 70 in Q1 last year.

Okay, thank you.

Thanks.

Our last question will come from Derek Glynn of Consumer Edge Research. Please go ahead.

Thanks for taking my question. How much in funds or liquidity did you unlock from the sale leaseback of the Indy IRC? And as a follow-up to that, the $75 million in availability under the sale leaseback agreements mentioned in the letter, does that include the IRCs or is that just vending machines?

So we haven't disclosed the specific value of the Indy IRC. We've given some color, directional color on how much it costs us per line in the previous shareholder letter. And that was on the order of $10 million to $12 million per line. So I think that answers the first part of your question. And then to the second part of your question, the master sale leaseback agreement that we have in place applies to both vending machines and IRCs. And the real estate we have a balance sheet it’s mostly vending machines.

Got it, understood. And then just secondly, in terms of demographics, have you seen any wider adoption of your services from an older demographic as you've increased your brand awareness and expanded into newer markets?

We continue to see somewhat similar, I would say, demographic trends. I think the right first order mental model for that is that we're selling to the distribution of used car buyers across the country in just about every demographic break. I think there's been a couple interesting trends that we do view as positive. We continue to see a subtle migration in the direction of millennials. We continue to see a migration in the direction of mobile. We have more of our persons coming from mobile than ever before. We see a migration in the direction of women, which we think is also very interesting. In general, women make more purchase decisions for households in the U.S. and in automotive. That's not always the case. And so we think that migration is also positive. And so we do those subtle migrations as indications that we're tapping into the growing part of the population. So we think that's exciting, but in general we've seen similar trends we've seen in the past.

Understood, thanks for all the commentary.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you everyone for joining the call. And thanks to everyone on the Carvana team for all the efforts you've put in this last quarter. They're are definitely showing up on the results. Please keep working hard. We're on a great path and you should all be very proud of what you're doing. Thank you.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.