Ernest C. Garcia III
CARVANAAbout Ernest C. Garcia III
Ernest C. Garcia III, age 42, is Carvana’s co-founder, President, CEO, and Chairman, serving since inception in 2012; he holds a B.S. in management science and engineering from Stanford University and previously held analytics and finance roles at DriveTime and RBS Greenwich Capital . Under his tenure, Carvana delivered record 2024 results with net income of $404M and Adjusted EBITDA of $1.378B, selling 416,348 retail units; five-year TSR was 120.9% per the proxy’s pay-versus-performance disclosure . Carvana’s revenues rose to $13.673B in 2024 from $10.771B in 2023, with Adjusted EBITDA up from $339M to $1,378M; management emphasizes profitable growth with unit expansion and GPU improvements .
| Performance context | 2022 | 2023 | 2024 |
|---|---|---|---|
| Total revenues ($USD Millions) | $13,604 | $10,771 | $13,673 |
| Net income ($USD Millions) | $(2,894) | $150 | $404 |
| Adjusted EBITDA ($USD Millions) | $(1,041) | $339 | $1,378 |
| Retail vehicle unit sales | 412,296 | 312,847 | 416,348 |
| 5-year TSR | 120.9% |
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| DriveTime | Financial Strategist; Managing Director of Corporate Finance; VP & Treasurer; Director of Quantitative Analytics | 2007–2013 | Built consumer credit scoring and deal structuring models underpinning retail pricing and risk analytics |
| RBS Greenwich Capital | Associate, Principal Transactions Group (consumer-credit investments) | 2005–2006 | Credit investing expertise and structured finance exposure |
External Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Not disclosed in proxy biography | — | — | No external public-company directorships mentioned in the proxy biography |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base salary | $930,000 | $930,000 (voluntary temporary reduction affected early 2023 pay) | $930,000 |
| All other compensation (cell phone, etc.) | $557 | $712 | $2,164 |
| CEO total compensation (SCT total) | $5,594,436 | $6,454,661 | $10,595,400 |
Notable practices and policies:
- CEO pay set below market median at Garcia’s request due to significant ownership .
- No excise tax gross-ups; no option repricing without shareholder consent; executives prohibited from hedging .
- Stock ownership guidelines: CEO must hold ≥6x base salary (currently $5.58M); CEO in compliance as of proxy date .
Performance Compensation
2024 equity mix significantly increased at-risk pay and tied PSUs to operational/financial milestones. 2023 introduced PSUs tied to Adjusted EBITDA and Core Free Cash Flow that fully vested by Q1 2024 .
| 2024 Incentives (granted Jan 24, 2024 unless noted) | Grant size (shares) | Target value | Vesting schedule | Metric / trigger | Payout status |
|---|---|---|---|---|---|
| Stock Options | 97,735 at $42.03 + 37,099 at $51.97 | $3,420,739 target; $5,117,706 grant-date FV | 25% on Apr 1, 2025; then monthly over 36 months | Time-based | Unvested at year-end 2024 |
| Time-based RSUs | 32,578 | $1,140,246 target; $1,483,602 grant-date FV | 25% on Apr 1, 2025; then monthly over 36 months | Time-based | Unvested at year-end 2024 |
| PSUs – Adjusted EBITDA (33.3%) | 22,412 | $784,427 target; $1,020,642 grant-date FV | Vests upon rolling-4Q Adjusted EBITDA >$1B | Achieved; vested on Q3’24 10-Q filing (Oct 30, 2024) | Vested |
| PSUs – 600k retail units + ≥$1B Adjusted EBITDA (33.3%) | 22,412 | $784,427 target; $1,020,642 grant-date FV | Vests upon rolling-4Q retail units sold reaching 600k concurrently with or after EBITDA trigger | Not yet vested as of proxy | Unvested |
| PSUs – 1.0M retail units + ≥$1B Adjusted EBITDA (33.3%) | 22,412 | $784,427 target; $1,020,642 grant-date FV | Vests upon rolling-4Q retail units sold reaching 1.0M concurrently with or after EBITDA trigger | Not yet vested as of proxy | Unvested |
Additional 2023 PSU outcomes:
- 2023 Adjusted EBITDA PSUs (50%) vested on Q2’23 10-Q filing (Jul 19, 2023) .
- 2023 Core Free Cash Flow PSUs (50%) vested on Q1’24 10-Q filing (May 1, 2024) .
Pay-for-performance governance:
- Clawback policy adopted July 25, 2023, aligned with SEC/NYSE rules; mandates recovery for certain restatements .
- Compensation program design: ~88.1% of NEO target comp at-risk via stock price-linked options/RSUs and PSUs on financial metrics .
Equity Ownership & Alignment
| Component | Detail |
|---|---|
| Beneficial ownership – Class A | 3,088,984 shares (direct + trusts + vested options/RSUs), ~2% of Class A |
| Beneficial ownership – Class B | 27,666,483 shares (direct + trusts), ~35% of Class B; ~32% voting power due to 10 votes/share for Garcia Parties |
| Voting structure | Garcia Parties entitled to 10 votes per Class B share, subject to maintaining ≥25% as-exchanged Class A ownership; all other Class B holders get 1 vote/share |
| Options (selected outstanding at 12/31/24) | Unexercisable: 97,735 @ $42.03 exp 1/24/2034; 37,099 @ $51.97 exp 2/13/2034; plus prior series with varying strikes/expiries; Exercisable totals across series listed in proxy |
| RSUs outstanding (12/31/24) | 32,578 (2024 grant; cliff 25% 4/1/2025 then monthly); 58,070 (2023 grant); 3,476 (2022 grant); 302 (2021 grant) |
| PSUs outstanding (12/31/24) | 22,412 (600k units tranche); 22,412 (1.0M units tranche), each valued at market in table |
| Ownership guidelines | CEO must hold ≥6x base salary; compliance confirmed in proxy |
| Hedging/pledging | Hedging prohibited; pledging prohibited absent adequate assurance of other assets to satisfy loans; insider trading policy detailed |
Insider selling/vesting signals:
- 2024 stock vested: Garcia III had 121,008 shares vest across RSUs/PSUs, value realized $14.56M; no option exercises reported for Garcia III in 2024 .
- Upcoming supply: 2024 option and RSU grants begin vesting 25% on Apr 1, 2025 and monthly thereafter; PSUs could vest upon reaching rolling 600k/1.0M retail units with ≥$1B Adjusted EBITDA .
Employment Terms
| Term | Details |
|---|---|
| Employment agreement | None; no severance agreements; benefits governed by award agreements under 2017 Omnibus Incentive Plan |
| Change-in-control (CIC) | Double-trigger: if involuntary termination without cause within 24 months post-CIC, all unvested options/RSUs/PSUs fully vest; illustrative accelerated vesting value for CEO at 12/31/24: $107.33M at $203.36 stock price |
| Restrictive covenants | Confidentiality; non-compete 18 months; non-solicit/non-interference 12 months post-termination (Garcia III and certain NEOs) |
| Perquisites | Minimal; company inventory vehicle program, company phone; 401(k) match applies broadly; Garcia III “All other comp” $2,164 in 2024 (cell phone) |
| Clawback | Effective July 25, 2023, compliant with SEC/NYSE; recovery required for certain restatements |
Board Governance
- Role: President, CEO, and Chairman; board comprises six directors with five independent and Garcia III as management director .
- Committees: Audit and Compensation & Nominating; independent composition; Garcia III not listed as a member; Audit chaired by Ira Platt; Compensation & Nominating chaired by Gregory Sullivan .
- Lead Independent Director: Michael Maroone; presides executive sessions; leads agenda and oversight .
- Controlled company: Garcia Parties hold >50% voting power; eligible for NYSE governance exemptions, though company states it does not currently rely on them .
- Attendance/executive sessions: 2024 board met 11 times; directors attended ≥90% of meetings; independent directors meet in executive sessions at least annually .
Committee oversight and comp governance:
- Independent consultant Korn Ferry engaged; committee affirmed consultant independence; peer group established across auto retail, marketplaces, ecommerce, travel, etc. .
- 2024 say-on-pay passed with ~99.8% support; board recommends annual say-on-pay frequency .
Compensation Structure Analysis
- Year-over-year mix: CEO equity grants increased materially in 2024 versus 2023 (options $5.12M vs. $3.47M; RSUs/PSUs $4.55M vs. $2.07M), while base salary held flat at $930k, reflecting stronger at-risk alignment to stock performance and milestones .
- Formalized PSUs: Introduced in 2023 (Adjusted EBITDA, Core FCF) and expanded in 2024 (Adjusted EBITDA, volume milestones), sharpening pay-for-performance links and reducing discretionary bonuses (explicitly none) .
- Governance protections: Clawback adopted; no gross-ups; prohibition on option repricing; compensation committee independence and use of external consultant; peer benchmarking disclosed .
Related-Party Transactions (DriveTime & Garcia Parties) — 2024 scale indicators
| Agreement/Service | 2024 Amounts | Notes |
|---|---|---|
| Lease agreements (Blue Mound, TX; Delanco, NJ; Winder, GA; Tempe office arrangements) | ~$1.9M (Blue Mound/Delanco) ; ~$1.5M (Winder) ; ~$0.8M (Tempe office purchased by DriveTime) | Carvana pays rent, insurance, taxes; extensions/terms specified |
| Loan servicing (own receivables pre-sale) | ~$6.4M revenues to DriveTime | DriveTime performs servicing/admin for Carvana-held receivables |
| Loan servicing (sold to third parties) | ~$10.4M revenues to DriveTime | DriveTime services loans sold by Carvana |
| Master Purchase & Sale Agreement (Ally $4.0B commitment Jan 2024–Jan 2025) | ~$3.0B sold; ~$87.1M servicing revenues to DriveTime | DriveTime as servicer; Carvana as seller |
| Securitization transfer agreements (7 transactions) | ~$3.8B principal; ~$84.5M servicing revenues to DriveTime | DriveTime as servicer; Carvana as trust administrator |
| Finance receivable facilities (revolvers) | $2.7B committed; ~$3.7M servicing revenues to DriveTime | Multiple short-term facilities |
| VSC commissions (administered by DriveTime) | ~$193M commission revenue to Carvana; ~$19M warranty admin fees to DriveTime | VSCs and limited warranty administration |
| Profit sharing (Transferred Contracts) | ~$7M recognized by Carvana | RH & PPM profit-sharing with DriveTime |
| Wholesale vehicle transactions | ~$12.2M revenue; ~$11.3M marketplace platform revenue (DriveTime activity) | Competitive auctions/platform |
| Retail reconditioning services | $4.2M revenue; $2.7M expense | Services to DriveTime via platform |
| Aircraft time-sharing reimbursements | ~$0.7M reimbursed to DriveTime | Carvana reimburses actual flight expense |
| Tax Receivable Agreement (TRA) liability | $82M total; ~$61M to related parties; ~$56M to Garcia Parties/entities expected in 2025–2026 | TRA pays 85% of realized tax benefits to pre-IPO holders |
Governance note: The board reviews/approves related-party transactions with disinterested directors under a formal policy assessing comparability to third-party terms .
Say-on-Pay & Shareholder Feedback
- 2024 say-on-pay: ~99.8% “For”; board interprets as strong support and continues to evolve program to balance growth/profitability .
- 2025 advisory frequency: Board recommends annual say-on-pay .
- Stockholder proposal (simple majority vote): Board recommends “AGAINST,” citing stability of governing documents and need for broad support for fundamental changes .
Equity Ownership & Compensation Tables (multi-year, Garcia III)
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Stock awards (grant-date FV) | $1,318,099 | $2,071,711 | $4,545,530 |
| Option awards (grant-date FV) | $3,953,009 | $3,470,000 | $5,117,706 |
| Shares vested (count) | — | — | 121,008 |
| Value realized on vesting | — | — | $14,556,493 |
| Option exercises (count; value) | —; — | —; — | —; — |
Vesting schedule details:
- 2024 options/RSUs: 25% on Apr 1, 2025 then monthly over 36 months .
- 2024 PSUs: 1/3 vested on achieving rolling-4Q Adjusted EBITDA >$1B; remaining 2/3 contingent on 600k and 1.0M rolling-4Q retail units with EBITDA condition .
Employment & Contracts Matrix (alignment and retention)
| Provision | Alignment impact |
|---|---|
| No employment/severance agreements | Limits guaranteed cash commitments; equity-centric retention tied to performance and time |
| Double-trigger CIC acceleration | Retain focus in change scenarios; creates potential near-term equity supply if triggered |
| Non-compete/non-solicit durations | Protects IP/talent; moderates immediate founder exit risk |
| Clawback | Enforces accountability for restatements; reduces incentive for aggressive accounting |
Investment Implications
- Alignment: Garcia III’s large beneficial stake (including high-vote Class B) and strict ownership guidelines align incentives with long-term equity value; 2024’s heightened at-risk equity and milestone PSUs strengthen pay-for-performance ties .
- Supply/flow: Near-term vesting (Apr 1, 2025 cliff for 2024 grants) and potential PSU vesting on volume milestones could create incremental share supply/insider settlement activity; however, Garcia III reported no option exercises in 2024 and vesting does not equal selling .
- Governance risk: Controlled-company structure and combined Chair/CEO amplify governance concentration; material related-party flows with DriveTime and TRA payments to Garcia Parties present conflict-of-interest optics, though overseen via policies and disinterested board review –.
- Execution track record: 2024 profitability and unit rebound support vesting of EBITDA-tied PSUs; sustained unit growth toward 600k/1.0M rolling targets would further unlock performance awards, signaling confidence but also tying pay to tangible volume outcomes .
- Shareholder sentiment: Strong say-on-pay support (~99.8%) suggests investors currently view the compensation design as aligned; continuing annual say-on-pay keeps feedback loop active .