I mean just even to throw some stats out there. Today, we’re moving cars inbound to our inspection centers, approximately 20% fewer miles than we were a year ago. Outbound we’re moving cars 30% fewer miles. That’s because we’ve got more of these facilities, and we’ve integrated intelligently into our scheduling systems to make better choices there. On in-market ops, we’re now pairing almost 50% of activities, which means when we deliver a car to a customer, on the way back, we are picking up another car to get more efficient. I think that’s up 75% year-over-year as we put time and effort into building those systems to make them smarter. And building the scheduling systems to make it more likely that we see overlap. That gets better as we get more density in the network and there’s still a lot of room to improve there across customer care.
Our advocates are roughly twice as efficient as they were in the past in terms of number of sales per advocate per period. The same is true in title and registration with better performance metrics in that group that are now extremely high quality. So I think we’re really well positioned to head into growth when it’s time. And I think what we’ve got to do now as a company is we’ve got to figure out just how effectively we can manage that transition, how good of a job we can do maintaining the accountability that we had over the last couple of years by keeping things simple as we do head into a more complex optimization equation of both growth and efficiency. But the opportunity is everywhere. The question is how well we execute. The question is not where we’re going.
We have every intention of selling millions of cars. We’ve never been better positioned for it, and that is absolutely what we intend to do. But now we’ve got to figure out how quickly we can do it and how efficient we can be along the way.
Nicholas Jones: And maybe just a follow-up on that. I think you listed off kind of the four buckets you highlighted in your vertically-integrated technology-driven platform from the shareholder letter of the customer sourcing, inbound transport, inspection, reconditioning with [indiscernible] and delivery or do one of those stand out as one of the biggest drivers? And are there any of those whether it’s kind of more wood to chop than others in terms of driving efficiency?
Mark Jenkins: I can take that one. So I actually think there’s opportunities in all of those areas. I don’t think we feel like we’re done with any of those. I think we’ve hit on these types of things at various points, but clear opportunities in inbound transport as we expand the number of sites where we’re doing reconditioning, which brings down inbound cost of inbound days on the inbound transport side. I think in the reconditioning centers, they’ve made tremendous gains, implementing new technology, new processes, standardizing processes across locations, rolling out our proprietary CARLI system across our nationwide infrastructure. That team is not done. That team still sees meaningful opportunity to further develop our technology, refine our processes and standardize and drive execution across our nationwide set of locations.
I think in outbound transport, just like the others. It’s the same story, pairing technology with process excellence. That’s the area where the teams have been focused up to this point, made tremendous gains, and I think they’re also looking at their business today, and saying, yes, we still see further opportunity to make gains. And then on the sourcing side, just like every other area. We’ve got teams that are working to every day pull in more data sources, every day, refine our algorithms – for putting the optimal valuation on every single car that we look at. And that’s, I think, millions of cars that we see and are collecting data on every single day. So I think the main takeaway there is we’ve made tremendous gains, but the teams that are working on each of those areas see opportunities for meaningful gains from here.
Nicholas Jones: Thanks, Ernie. Thanks, Mark.
Operator: And our next question will come from John Colantuoni with Jefferies. Please go ahead.
John Colantuoni: Great. Thanks for taking my questions. First one on retail GPU. Mark mentioned revenue from additional services as one of the drivers of strong GPU in the quarter. Can you just detail what those additional services are and how much they’re contributing to 4Q and 1Q GPU? And to the extent you could sort of comment on the sustainability of those additional services? And second, I’ve noticed sort of you’ve recently started incorporating EBITDA per unit into your public documents. I’m curious if that’s just a reflection of your greater operational focus on profitability or if that’s sort of nudging people externally to start assessing business on that KPI more? Thanks.
Mark Jenkins: Sure. Yes, I can take both of those. So let me start with retail GPU. So here I think the main idea is we have a unique business model that allows us to take cars that are reconditioned, acquired and stored around the country and make them available to customers in our 300 markets plus nationwide. And so for shorter distance shipments where customer finds a car that’s perfect for them that’s nearby to them. We have free shipping and in most of the markets we operate based on our data. We have the largest availability of free shipping inventory in those markets, the ones that we have looked at. However, for larger shipments, we’ve been – we do use the opportunity of making that selection available to also generate additional revenue, just from long distance, the shipping services provided to customers.
And so I think that’s where the additional revenue from additional services comes from. It’s really from our ability to move cars long distances efficiently around the country and make much wider selection available to customers as a result of that. Now in terms of how it flows through to retail GPU, that’s actually been fairly steady, I would say, over the last three or four quarters. It really hasn’t been moving around much sequentially, maybe up or down a little bit, but nothing that’s worth calling out. I think it’s more when you compare to sort of our pre-pandemic model, we weren’t generating as much revenue from having that nationwide logistics network as we are today. So that’s the answer to question one. On question two, so in my prepared remarks, I mentioned the idea of being significantly above adjusted EBITDA per unit in Q1.
And I think that my motivation for mentioning that was people for a long time they didn’t believe just to say it candidly, that a vertically integrated e-commerce online sales model could work. And now we’re sitting here in the first quarter of 2024. And I think we’re very confidently saying we expect to drive significantly more than $100 million of adjusted EBITDA or significantly more than $1,200 per unit of adjusted EBITDA in the first quarter. And we’re also doing that in an environment where rates are at multi-decade highs, which I think makes it even a bit more impressive. We’re doing it in an environment where the used vehicle industry as a whole is still notably down relative to pre-pandemic levels, which I think makes that adjusted EBITDA generation, even more impressive.
Moreover, we’re doing it while also carrying significant cost of excess capacity that we view as a huge benefit for us as we look forward because we’re generating a lot of adjusted EBITDA now at a volume that is far below what our capacity can support from an overhead cost and fixed infrastructure perspective. And so I just think when you start layering all of those things on top of each other, it gets us very excited about where the model can go. I think it resoundingly answers the questions about whether or not this is a long-term profitable business model, whether or not this is a long-term sustainable business model. I think that’s one of the things, as I mentioned, that I think we’re just – we’re feeling really good about and why I called out that one data point in my prepared remarks.
Ernie Garcia: Who doesn’t love when Professor Jenkins takes the mic. Everyone in Carvana is celebrating right now.
Operator: And our next question here will come from Seth Basham with Wedbush Securities. Please go ahead.
Seth Basham: Thanks. Just want to follow-up on an earlier question, just thinking about the framework for retail GPU moving forward. So obviously, as you start to grow, there will be some costs associated with that growth. Very limited growth you’re signaling for the first quarter in terms of retail units. But beyond that, as you really ramp, will the cost of growth outweigh all the efficiencies you continue to expect to get in 2024 within the retail GPU line?
Mark Jenkins: Yes. So let’s focus in on incremental costs associated with growth in retail cost of sales. So I do think there are some costs associated with higher growth rates and retail cost of sales. I think some of them take the form of just direct hiring and training expenses as you’re building up staffing, you’re spending money on hiring, training new employees. I think a little bit of it takes the form of newer employees typically take a little time to get up to speed and become as efficient as more tenured employees. And so I think that can have a small impact. I think another dynamic is you may outsource more services for a period of time as you’re ramping up. Now in our case, looking forward, I would not expect outsourcing more services to take the form of full car reconditioning by partners, which is something we did in 2021.
Don’t anticipate that. But on smaller services, on a select basis, I see [indiscernible] you could do that. So I give that detailed list just so you have a clear view of what we view as the some of the incremental costs associated with ramping and it’s really those three buckets. Now let’s talk a little bit about sizing. Putting all those together, we do not view those as being a particularly significant part of the overall retail GPU story. There are some offsets, for example, getting leverage on fixed facilities expenses in inspection and reconditioning centers, other fixed expenses in those centers. So that’s a partial offset to some of the things that I mentioned. And so I think the main takeaway is there are some frictions. However, we do not expect them to be of a particularly large size, just based on the progress that we’ve made in improving our technology, improving our processes, having a broad base of existing inspection and reconditioning centers from which to build.
And so that would be my full set of thoughts on that specific question.
Seth Basham: All right. That’s helpful. And as you work to acquire more inventory without wholesale purchases from the competitors, would you expect your pure metal margin to improve going forward?
Mark Jenkins: So I’m not sure I caught that question.
Seth Basham: Just thinking about the other component within retail GPU, just your spread between what you’re selling cars score and you’re buying them for probably getting a nice benefit from some of the inventory you’re acquiring [indiscernible] prices in the near term. Beyond the near term, would you expect continued expansion there?
Mark Jenkins: Got it. Yes. So I hit the point about the bulk part. We made a bulk purchase of vehicles from a competitor in January. We purchased about 2,800 units that we expect to sell the majority of over the next couple of quarters. We do not expect a material retail GPU impact from that. There could be some small impact. But just given the size of the portfolio, we do not expect a meaningful impact from that. On the question about metal margin more generally. I mean Ernie called this out early in the call, but with our outlook of being close to Q4 levels with upside or the potential for upside in Q1, that’s going to be four consecutive quarters at a pretty substantial retail GPU level. So obviously, with four full quarters at a very strong level, we’re feeling really good about the way that we’re executing from a retail GPU perspective.
We talked about a lot of the fundamentals that are driving that. We talked about – obviously, all the progress in the reconditioning centers. We’re doing a great job sourcing cars for customers. We really normalize inventory turn times. We’re generating revenue from additional services, taking advantage of our national logistics network. And so I think we obviously have established a very strong track record on retail GPU with our three final quarters of 2023 and our outlook for Q1.
Seth Basham: Absolutely. Thank you.
Mark Jenkins: Thank you.
Operator: And our next question will come from Rajat Gupta with JPMorgan. Please go ahead.
Rajat Gupta: Great. Thanks for taking the questions. I’ll take a couple as well. Just to follow-up on a couple of the previous questions around growth. It looks like you’ve obviously right-sized your cost structure to a large degree. You’ve comfortably exceeded your long-term model, at least on a gross profit per unit basis. And obviously, the margins look low because of where prices are. So why wouldn’t the company press the pedal on growth here a little more meaningfully? Even if GPUs did come back somewhat and you’re able to leverage fixed cost from your industry backdrop that’s a factoring the decision or any other consideration? Are you just willing to go a little slowly and keep testing how the business is responding? Just curious on the thought process there, and I have a quick follow-up on the finance business.
Ernie Garcia: Sure. Well, I think the first thing we want to do is we want to kind of complete the projects that we’ve got underway today. And I think we have a number of projects underway today that we expect to continue to drive efficiency. So I think we want to see that through. I think the reason we had to provide this frame earlier our goal is to sell millions of cars and to be the largest, most profitable automotive retailers because that’s the place where we’re heading. I think the question then is how fast are we going to get there. And I do think that there are reasons to believe that we should be able to grow at faster rates and be very efficient just given how much more efficient the business is today and the fact that infrastructure is sitting there to be filled in, but we have to go execute on that.
