2017 ANNUAL REPORT - Carvana

2017 ANNUAL REPORT

OUR MISSION IS TO CHANGE THE WAY PEOPLE BUY CARS.

LETTER TO OUR VALUED SHAREHOLDERS

Dear Shareholders,

2017 was a big year for Carvana. It was our fifth year in operation and our fourth consecutive year of triple digit growth. We sold more cars than all previous years combined--a feat we plan to repeat in 2018. We more than doubled the markets where we operate. We crossed the 1,500 employee threshold and remain committed to hiring the best of the best. I continue to be blown away by the quality of people that have decided to make our mission their mission across all areas of the company. And for those of you keeping score at home, we also went public.

So how do we evaluate the financial performance of 2017, as well as our path to building the best customer experience available in automotive retail?

The numbers are a good place to start. On the following pages, we included a number of graphs that we believe are the most important financial measures of the business. They include revenue, units, total gross profit per unit ("GPU"), number of markets, number of vending machines, and EBITDA margin. Looking at these annually is helpful, because it forces a macro perspective that makes the larger Carvana story very clear. In addition to the core financial metric graphs, we've also included metrics on our market share by market cohort, as well as our customer acquisition costs by market cohort. These graphs provide additional context for a straightforward decomposition of our growth and our leverage.

We are very proud of these graphs. They capture the quality of customer experiences that we are delivering every day in numbers. They also point clearly toward an exciting future. We are just getting started.

Carvana is a five-year-old company. In that short time, we have established ourselves as the leaders in automotive e-commerce. Our customers can buy a car in minutes on our website, which includes getting approved for financing, pricing their trade in, and signing contracts without ever leaving their couch. Using our in-house logistics network, we can deliver their car to their door as soon as the next day. Last-mile delivery services are completed by a Carvana Customer Advocate who shares the customer's enthusiasm for the moment. This offering is powerful and difficult to replicate, as it requires expertise in many areas. The numbers reflect this power and uniqueness.

Our accomplishments in our short history have been accompanied by significant growth in GPU and significant operating leverage. Over the last three years, we have increased our GPU from -$200 per unit to over $1,500. We have taken our EBITDA margin from -32% to -17%1. We have achieved this while simultaneously exhibiting a Compound Annual Growth Rate of over 175% and 140% in units and markets respectively over that period. We view this as a significant accomplishment with few precedents.

1 A reconciliation of EBITDA margin to the nearest GAAP measure is provided at the end of this report.

CARVANA 2017 ANNUAL REPORT

The speed of our compounding growth is illustrated by several fun facts. 60% of our customers across our five-year history were served in the last twelve months alone. Our average market is currently only fifteen months old. Due to that growth, the average member of Team Carvana has only been with us for about ten months. Accomplishing all this in such a short period of time and with so many new people in the company is a testament to four things: the size of the opportunity we face, the quality of product we have put in front of our customers, the scalability of our model, and most importantly, the caliber of people that have made our mission their mission. Looking forward, we will remain focused on continued innovation and improvement. Everything that we do exceptionally is a risk, and everything we could do better is an opportunity. By the standards of our industry, we do many things exceptionally, but by our own standards we have much further to go. The more motivated, creative, and intelligent people you have pointed at a problem, the further you ever are from being done. We are a long way from the finish line. Most importantly, we must maintain a maniacal focus on delivering incredible customer experiences. That is the white space Carvana fills. It is the fuel for our growth, and we believe one of the only real limitations to how big we can get. We are heading into 2018 proud, but not satisfied. We believe in our mission to change the way people buy cars. We also believe the opportunity we have is one that is incredibly unique, and we feel privileged to be the team tackling it. We are up to the challenge.

Sincerely,

ERNIE C. GARCIA, III Chairman & Chief Executive Officer

CARVANA 2017 ANNUAL REPORT

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