Daniela Haigian

Daniela Haigian asked for specifics on how CarMax plans to redefine its digital platform to drive a more effective selling experience, its impact on the operating cost structure, and early indicators of progress. She also inquired about the strategy for reducing COGS and the progress of regional reconditioning centers.

Answer

David McCreight, Interim President and CEO, stated the focus is on streamlining the online shopping experience to make it easier and more conversion-focused, with iterative changes expected soon. Enrique Mayor-Mora, EVP and CFO, highlighted ongoing COGS initiatives like a new parts selection tool and confirmed progress with five regional reconditioning centers, expecting them to drive efficiency and logistics savings.

Daniela Haigian asked about competition from new entrants like Amazon and its impact on Carvana's ad spend return, the biggest gating factor in Carvana's near-term growth curve, and plans for expanding production capacity beyond the 3 million unit target, including associated capital requirements.

Answer

Ernie Garcia, Chief Executive Officer, stated Carvana focuses on delivering the best customer experience and improving every line item, rather than specific competitors, highlighting Carvana's structural advantage over traditional retailers. He identified the biggest gating factor as the 'sum of effort' across the complex business. He discussed ADESA integration sites for enhanced retail/wholesale capabilities. Regarding goals beyond 3 million units, he deemed it premature to discuss specific guidance, but acknowledged the large opportunity.

Daniela Haigian asked about Carvana's competitive strategy against new entrants like Amazon, the impact on return on ad spend, and the biggest gating factor for near-term growth. She also inquired about plans to expand production capacity beyond the 3 million unit target and the associated capital requirements.

Answer

Ernie Garcia, Chief Executive Officer, stated Carvana focuses on delivering the best customer experience and improving every business line, rather than specific competitors. He highlighted that the vast majority of the market is served by traditional retailers with different economics, making Carvana's scalable, capital-intensive model unique. He identified the sum of effort across the complex business as the primary growth constraint. Regarding capacity beyond 3 million units, he noted the large opportunity but deemed it premature to provide specific guidance beyond current goals.

Daniela Haigian from Morgan Stanley asked about the progress of conversations with credit rating agencies to improve Carvana's rating and questioned what the biggest near-term gating factors are for unit growth.

Answer

CFO Mark Jenkins responded that delivering strong financial metrics, such as their net debt to adjusted EBITDA of 2.8x and interest coverage above 2x, is the most important factor for improving their credit profile. CEO Ernie Garcia identified the entire operational chain as a factor for growth, with reconditioning being the most intensive part, but noted they have real estate capacity for 3 million units, mitigating a major historical bottleneck.

Daniela Haigian of Morgan Stanley inquired about the sustainability of Carvana's high incremental adjusted EBITDA margin and questioned if the company sees opportunities to expand its Total Addressable Market (TAM) beyond used cars, similar to autonomous fleet management partnerships in the industry.

Answer

CEO Ernie Garcia affirmed that the strong margin reflects business leverage and aligns with their long-term goal of selling 3 million units with a 13.5% EBITDA margin. Regarding TAM expansion, Garcia stated that while they see many opportunities, their primary focus remains on executing and improving the core used car retail business.

Daniela Haigian of Morgan Stanley inquired about the sustainability of the quarter's high incremental adjusted EBITDA margin and asked about the potential for Carvana's Total Addressable Market (TAM) to expand beyond used cars, citing the company's reconditioning and logistics infrastructure.

Answer

CEO Ernie Garcia explained that while the incremental margin was strong, the company's primary focus remains on its long-term goals of selling 3 million units annually with a 13.5% adjusted EBITDA margin. Regarding TAM expansion, Garcia acknowledged seeing many opportunities but stressed that the company is staying focused on its core mission of improving the customer experience and efficiency in the used car market.

Daniela Haigian asked for commentary on the drivers behind the strong sequential increase in gain on sale of loans, particularly across Carvana's various monetization channels.

Answer

CFO Mark Jenkins explained that the strength in finance GPU and gain on sale is driven by continuous fundamental gains. These gains come from two main areas: improving the credit platform's sophistication in scoring and pricing, and lowering the cost of funds, partly by bringing new buyers to the platform. While wider interest rate spreads were a factor year-over-year, he stressed that the primary driver is the team's ongoing work to optimize the lending and monetization systems.

Daniela Haigian from Morgan Stanley inquired about forward demand, specifically whether Group 1 Automotive is observing any decontenting or new vehicle pricing changes beyond normal hikes, especially given revised OEM guidances post-tariff fears. She also asked about any recent shifts in consumer behavior or auto credit trends, particularly concerning higher credit quality segments, amidst broader market headlines about consumer risk.

Answer

President and CEO Daryl Kenningham stated that Group 1 Automotive has not seen new vehicle pricing changes in excess of normal hikes, with OEMs generally absorbing most tariff impacts over a longer period. SVP Pete DeLongchamps added that strong captive lenders provide an advantage through leasing and subvened rates. Regarding auto credit, DeLongchamps reported no change in consumer behavior, noting increased penetration rates and that market headlines primarily concern the deep subprime segment, where Group 1 does not operate. Lenders continue to show strong appetite for car loans.

Daniela Haigian from Morgan Stanley inquired about forward demand, specifically whether Group 1 Automotive is observing any decontenting or new vehicle pricing changes beyond normal hikes, especially given revised OEM guidances post-tariff fears. She also asked about any recent shifts in consumer behavior or auto credit trends, particularly concerning higher credit quality segments, amidst broader market headlines about consumer risk.

Answer

President and CEO Daryl Kenningham stated that Group 1 Automotive has not seen new vehicle pricing changes in excess of normal hikes, with OEMs generally absorbing most tariff impacts over a longer period. SVP Pete DeLongchamps added that strong captive lenders provide an advantage through leasing and subvened rates. Regarding auto credit, DeLongchamps reported no change in consumer behavior, noting increased penetration rates and that market headlines primarily concern the deep subprime segment, where Group 1 does not operate. Lenders continue to show strong appetite for car loans.

Daniela Haigian from Morgan Stanley asked about the key drivers and risks for the parts and service business over the next one to three years, and how Group 1 views competition from online used car retailers.

Answer

CEO Daryl Kenningham stated that future aftersales growth depends on capturing a larger share of the market for vehicles older than four years through competitive pricing and targeted marketing using first-party data. CFO Daniel McHenry added that older vehicles generate higher repair order values. Regarding competition, Kenningham said Group 1 learns from online retailers and sees significant opportunity to grow its own used business digitally within its existing footprint.

Daniela Haigian asked about the efficiencies seen from the cluster marketing initiative and the key learnings from the U.K. branding effort. She also questioned if the current environment and policy uncertainty have shifted the company's capital allocation strategy or impacted the M&A pipeline.

Answer

CEO Daryl Kenningham explained that it's still early for the marketing initiative, but the goal is to leverage in-house data for proactive, local customer management. On capital allocation, he stated that some discretionary capital projects have been deferred by about six months and spending has been reviewed, but nothing has been canceled. He added that policy uncertainty has not yet materially impacted the M&A environment.

Daniela Haigian asked about forward demand, specifically how AutoNation is seeing pricing on new model year vehicles given OEMs revising up guidances and the impact of decontenting, and the outlook for 2026. She also inquired about the strategy around older used cars, competition from online pure-play retailers, and opportunities for growth and consolidation in the fragmented used car market.

Answer

CEO Mike Manley stated that new model year vehicle pricing appears broadly in line with normal changeovers, but noted ongoing option decontenting, value engineering, and impacts on dealer margins from reduced incentives. He acknowledged the higher bar for Q4 year-over-year comps and stated it's too early to call 2026 total inventory. Regarding used cars, Mike Manley confirmed continued competition and upward pressure on wholesale prices, but highlighted AutoNation's strong sourcing strategy (trade-ins, etc.). He discussed the potential to lean into lower-priced vehicles for growth and the strategy of holding elevated used inventory to improve turn rates, despite temporary depreciation pressure. He expressed bullishness on consolidation opportunities due to market fragmentation.

Daniela Haigian asked about forward demand, new model year vehicle pricing post-tariff fears, and the outlook for 2026. She also questioned the strategy for older used cars, competition from online pure-play retailers, and opportunities for consolidation in the used car market, given sourcing challenges.

Answer

CEO Mike Manley stated that OEMs have gained clarity on product plans and supply chains, with new model year pricing generally in line with expectations, though decontenting and value engineering are occurring. He noted impacts on dealer incentives and expressed satisfaction with the industry's navigation of recent turbulence, but deemed it too early to forecast 2026 total inventory. For used cars, Manley acknowledged continued competition and upward pressure on wholesale prices, but highlighted AutoNation's strong sourcing strategy, including trade-ins. He indicated a focus on growth in higher-priced vehicles, with potential to expand into lower-priced segments. The company is holding elevated used inventory in Q4 to improve turn rates, accepting a temporary depreciation impact, and sees significant consolidation opportunities due to market fragmentation.

Daniela Haigian from Morgan Stanley asked about the capacity and top-line growth outlook for the parts and service segment over the next few years, considering vehicle affordability. She also inquired about the competitive landscape in the used vehicle market.

Answer

CEO Michael Manley identified affordability as a key focus, noting that pent-up demand and a robust after-sales market provide significant future opportunities. CFO Thomas Szlosek confirmed that the company has ample physical capacity for service growth. Regarding used vehicles, Manley asserted that the market is large enough for all players to grow and highlighted AutoNation's unique advantage in leveraging its franchise brands to sell certified pre-owned vehicles, which builds customer confidence.

Daniela Haigian asked about the age mix of AutoNation's used vehicle inventory and whether there was an opportunity to focus more on older vehicles to meet affordability-driven demand. She also inquired about the current state of after-sales capacity and the potential for future growth.

Answer

CEO Mike Manley confirmed that demand for vehicles under $20,000 remains strong and is a focus area, noting they intentionally increased used inventory in Q1. On after-sales, he stated that while they have plenty of physical capacity (service bays), the key constraint is technician headcount, which they are actively growing. He sees significant growth opportunity by better penetrating the 7-year-plus vehicle park, which requires more technicians and tailored service offerings.

Daniela Haigian asked about forward demand, specifically how Lithia views pricing on new model year vehicles and consumer demand heading into 2026, given the passing of peak tariff fears and OEMs revising up their guidances. She also sought clarification on the 10% sales tracking in October.

Answer

Bryan DeBoer, President and CEO, clarified that the 10% October tracking was for used vehicle volume, not overall sales. He believes the impact of peak tariff fears is largely over, and manufacturers are assessing long-term product cycles. DeBoer emphasized that less than a quarter of Lithia's profitability comes from new cars, with 61% derived from after-sales. He noted that new car pricing is influenced by manufacturer incentives and geographic mix, and that Lithia's role as a new car retailer allows for some market share flexibility.

Daniela Marina Haigian asked for commentary on forward demand, specifically regarding new model year vehicle pricing and consumer demand expectations for 2026, in light of easing tariff fears and revised OEM guidances.

Answer

Bryan DeBoer, President and CEO, clarified that October's used vehicle volume was trending up 10%. He stated that the company is through most of the tariff impact, expecting market stabilization for manufacturers. DeBoer emphasized that less than a quarter of the company's profitability comes from new cars, with 61% derived from after-sales, and that new car sales are largely dictated by the marketplace, manufacturer incentives, and geographic base.

Daniela Haigian from Morgan Stanley asked about used car availability, the mix across CPO, core, and value segments, and competition from online retailers. She also inquired about the M&A environment and the impact of policy uncertainty on deal flow.

Answer

President & CEO Bryan DeBoer highlighted strong growth in the value auto segment (vehicles over 9 years old), up 50% YoY, and noted that sourcing over two-thirds of vehicles from consumers provides a GPU advantage. On M&A, he stated the company expects to achieve the low end of its $2-4 billion annual acquired revenue target as seller expectations normalize.

Daniela Haigian asked about the parts and service business, specifically focusing on capacity, technician availability, and how the company plans to continue growing the segment.

Answer

President and CEO Bryan DeBoer responded that significant capacity exists, with current service stall utilization below 50%, allowing for growth through extended hours or additional shifts. He noted that technician staffing is strong as the company 'grows its own.' The key growth driver is a mindset shift at the store level to actively pursue both warranty and customer-pay work simultaneously, thereby increasing technician productivity and overall throughput.

Daniela Haigian questioned the strategy for used vehicle sourcing, asking if there's an opportunity in older vehicles, and inquired about the capacity and growth potential within the parts and service business.

Answer

Chair and CEO Roger Penske firmly stated the company will maintain its focus on 1-4 year old used vehicles, citing better profitability and lower brand risk. EVP Rich Shearing confirmed they have existing capacity in the service business and are focused on hiring more technicians to increase utilization before adding facilities, noting they grew technician headcount by 94 in Q1.

Daniela Haigian of Morgan Stanley asked if EchoPark might pivot to selling older used vehicles to address affordability concerns, especially if tariffs tighten the supply of newer models.

Answer

President Jeff Dyke acknowledged that while they sold older vehicles during the COVID period and have the capability to do so again, they prefer to avoid it. He explained that selling older cars adds complexity to reconditioning and operations, which runs counter to the streamlined EchoPark model. He stated they can currently source enough 1-4 year old vehicles for their existing 17 stores.