filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and par values)
| March 31, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,410 | $ | 2,327 | |||||||
| Restricted cash | 102 | 102 | |||||||||
| Accounts receivable, net | 339 | 245 | |||||||||
| Finance receivables held for sale, net | 982 | 813 | |||||||||
| Vehicle inventory | 2,664 | 2,408 | |||||||||
| Beneficial interests in securitizations | 492 | 486 | |||||||||
| Other current assets, including $7 and $5, respectively, due from related parties | 208 | 168 | |||||||||
| Total current assets | 7,197 | 6,549 | |||||||||
| Property and equipment, net | 2,821 | 2,814 | |||||||||
| Operating lease right-of-use assets, including $6 and $6, respectively, from leases with related parties | 431 | 443 | |||||||||
| Intangible assets, net | 49 | 47 | |||||||||
| Goodwill | 10 | 10 | |||||||||
| Deferred tax assets | 3,031 | 3,064 | |||||||||
| Other assets | 232 | 274 | |||||||||
| Total assets | $ | 13,771 | $ | 13,201 | |||||||
| LIABILITIES & STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities, including $35 and $21, respectively, due to related parties | $ | 1,259 | $ | 1,100 | |||||||
| Short-term revolving facilities | 79 | 58 | |||||||||
| Current portion of long-term debt | 229 | 227 | |||||||||
| Other current liabilities, including $77 and $31, respectively, due to related parties | 194 | 134 | |||||||||
| Total current liabilities | 1,761 | 1,519 | |||||||||
| Long-term debt, excluding current portion | 4,846 | 4,830 | |||||||||
| Operating lease liabilities, excluding current portion, including $4 and $5, respectively, from leases with related parties | 392 | 406 | |||||||||
| Tax receivable agreement liability, including $1,645 and $1,721, respectively, due to related parties | 2,130 | 2,228 | |||||||||
| Other liabilities | 10 | 15 | |||||||||
| Total liabilities | 9,139 | 8,998 | |||||||||
| Commitments and contingencies (Note 16) | |||||||||||
| Stockholders' equity: | |||||||||||
| Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of each of March 31, 2026 and December 31, 2025 | — | — | |||||||||
| Class A common stock, $0.001 par value - 500,000 shares authorized; 143,004 and 142,230 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | — | — | |||||||||
| Class B common stock, $0.001 par value - 125,000 shares authorized; 76,109 shares issued and outstanding as of each of March 31, 2026 and December 31, 2025 | — | — | |||||||||
| Additional paid-in capital | 3,479 | 3,450 | |||||||||
| Retained earnings (accumulated deficit) | 241 | (9) | |||||||||
| Total stockholders' equity attributable to Carvana Co. | 3,720 | 3,441 | |||||||||
| Non-controlling interests | 912 | 762 | |||||||||
| Total stockholders' equity | 4,632 | 4,203 | |||||||||
| Total liabilities & stockholders' equity | $ | 13,771 | $ | 13,201 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per share amounts)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Sales and operating revenues: | |||||||||||||||||||||||
| Retail vehicle sales, net | $ | 4,828 | $ | 2,980 | |||||||||||||||||||
| Wholesale sales and revenues, including $13 and $8, respectively, from related parties | 1,078 | 863 | |||||||||||||||||||||
| Other sales and revenues, including $114 and $72, respectively, from related parties | 526 | 389 | |||||||||||||||||||||
| Net sales and operating revenues | 6,432 | 4,232 | |||||||||||||||||||||
| Cost of sales, including $5 and $3, respectively, to related parties | 5,161 | 3,303 | |||||||||||||||||||||
| Gross profit | 1,271 | 929 | |||||||||||||||||||||
| Selling, general and administrative expenses, including $10 and $7, respectively, to related parties | 690 | 535 | |||||||||||||||||||||
| Other operating expense, net | — | — | |||||||||||||||||||||
| Operating income | 581 | 394 | |||||||||||||||||||||
| Interest expense, net | 99 | 139 | |||||||||||||||||||||
| Loss on debt extinguishment | — | 2 | |||||||||||||||||||||
| Other expense (income), net | 41 | (122) | |||||||||||||||||||||
| Net income before income taxes | 441 | 375 | |||||||||||||||||||||
| Income tax provision | 36 | 2 | |||||||||||||||||||||
| Net income | 405 | 373 | |||||||||||||||||||||
| Net income attributable to non-controlling interests | 155 | 157 | |||||||||||||||||||||
| Net income attributable to Carvana Co. | $ | 250 | $ | 216 | |||||||||||||||||||
| Net earnings per share of Class A common stock - basic | $ | 1.75 | $ | 1.61 | |||||||||||||||||||
| Net earnings per share of Class A common stock - diluted | $ | 1.69 | $ | 1.51 | |||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding - basic | 142,749 | 134,058 | |||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding - diluted | 148,085 | 142,587 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In millions, except number of shares, which are reflected in thousands)
| Class A Common Stock | Class B Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Non-controlling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | 133,271 | $ | — | 79,119 | $ | — | $ | 2,676 | $ | (1,416) | $ | 115 | $ | 1,375 | |||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 216 | 157 | 373 | |||||||||||||||||||||||||||||||||||||||
| Exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises | 55 | — | — | — | 1 | — | (1) | — | |||||||||||||||||||||||||||||||||||||||
| Tax payments made on behalf of non-controlling members | — | — | — | — | — | — | (2) | (2) | |||||||||||||||||||||||||||||||||||||||
| Establishment of deferred tax assets related to increases in tax basis in Carvana Group | — | — | — | — | 3 | — | — | 3 | |||||||||||||||||||||||||||||||||||||||
| Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group | — | — | — | — | (3) | — | — | (3) | |||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock to settle vested RSUs | 926 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| RSUs surrendered in lieu of withholding taxes | — | — | — | — | (4) | — | — | (4) | |||||||||||||||||||||||||||||||||||||||
| Options exercised | 147 | — | — | — | 5 | — | — | 5 | |||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | 26 | — | — | 26 | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | 134,399 | $ | — | 79,119 | $ | — | $ | 2,704 | $ | (1,200) | $ | 269 | $ | 1,773 | |||||||||||||||||||||||||||||||||
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Continued)
(Unaudited)
(In millions, except number of shares, which are reflected in thousands)
| Class A Common Stock | Class B Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Non-controlling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | 142,230 | $ | — | 76,109 | $ | — | $ | 3,450 | $ | (9) | $ | 762 | $ | 4,203 | |||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 250 | 155 | 405 | |||||||||||||||||||||||||||||||||||||||
| Exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises | 26 | — | — | — | 3 | — | (3) | — | |||||||||||||||||||||||||||||||||||||||
| Tax payments made on behalf of non-controlling members | — | — | — | — | — | — | (2) | (2) | |||||||||||||||||||||||||||||||||||||||
| Establishment of deferred tax assets related to increases in tax basis in Carvana Group | — | — | — | — | 2 | — | — | 2 | |||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock to settle vested RSUs | 663 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| RSUs surrendered in lieu of withholding taxes | — | — | — | — | (8) | — | — | (8) | |||||||||||||||||||||||||||||||||||||||
| Options exercised | 85 | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | 31 | — | — | 31 | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | 143,004 | $ | — | 76,109 | $ | — | $ | 3,479 | $ | 241 | $ | 912 | $ | 4,632 | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income | $ | 405 | $ | 373 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization expense | 69 | 73 | |||||||||
| Equity-based compensation expense | 26 | 23 | |||||||||
| Deferred income taxes | 35 | (1) | |||||||||
| Tax receivable agreement expense | — | 40 | |||||||||
| Loss on disposal of property and equipment | — | 1 | |||||||||
| Loss on debt extinguishment | — | 2 | |||||||||
| Payment-in-kind interest expense | — | 72 | |||||||||
| Provision for bad debt and valuation allowance | 3 | 5 | |||||||||
| Amortization of debt issuance costs | 3 | 2 | |||||||||
| Unrealized loss (gain) on warrants to acquire common stock | 42 | (158) | |||||||||
| Unrealized gain on beneficial interests in securitizations | (2) | (3) | |||||||||
| Changes in finance receivable related assets: | |||||||||||
| Originations of finance receivables | (4,254) | (2,660) | |||||||||
| Proceeds from sale of finance receivables, net | 4,302 | 2,699 | |||||||||
| Gain on loan sales | (354) | (273) | |||||||||
| Principal payments received on finance receivables held for sale | 62 | 48 | |||||||||
| Other changes in assets and liabilities: | |||||||||||
| Vehicle inventory | (247) | 114 | |||||||||
| Accounts receivable | (96) | (68) | |||||||||
| Other assets | (42) | (31) | |||||||||
| Accounts payable and accrued liabilities | 163 | (20) | |||||||||
| Operating lease right-of-use assets | 12 | 10 | |||||||||
| Operating lease liabilities | (13) | (10) | |||||||||
| Other liabilities | (7) | (6) | |||||||||
| Net cash provided by operating activities | 107 | 232 | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Purchases of property and equipment | (51) | (27) | |||||||||
| Proceeds from disposal of property and equipment | — | 1 | |||||||||
| Payments for acquisitions, net of cash acquired | (11) | (24) | |||||||||
| Principal payments received on and proceeds from sale of beneficial interests | 31 | 15 | |||||||||
| Net cash used in investing activities | (31) | (35) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Proceeds from short-term revolving facilities | 1,125 | 567 | |||||||||
| Payments on short-term revolving facilities | (1,104) | (570) | |||||||||
| Proceeds from issuance of long-term debt | 53 | 46 | |||||||||
| Payments on long-term debt | (20) | (77) | |||||||||
| Payments of debt issuance costs | (1) | (1) | |||||||||
| Payments of tax made on behalf of non-controlling members | (2) | (2) | |||||||||
| Tax receivable agreement payments | (37) | (17) | |||||||||
| Proceeds from equity-based compensation plans | 1 | 5 | |||||||||
| Tax withholdings related to RSUs | (8) | (4) | |||||||||
| Net cash provided by (used in) financing activities | 7 | (53) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | 83 | 144 | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 2,429 | 1,760 | |||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 2,512 | $ | 1,904 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — BUSINESS ORGANIZATION
Description of Business
Carvana Co. and its wholly-owned subsidiary Carvana Co. Sub LLC (collectively, "Carvana Co.", and together with its consolidated subsidiaries, the "Company"), is the leading e-commerce platform for buying and selling used cars. The Company is transforming the used car sales experience by giving consumers what they want - a wide selection, great value and quality, transparent pricing, and a simple, no pressure transaction. Primarily using the Company's website or mobile application, customers can complete all phases of a used vehicle transaction, including financing their purchase, trading in their current vehicle, and purchasing complementary products such as vehicle service contracts ("VSC"), GAP waiver coverage, and auto insurance. Each element of the Company's business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.
Organization
Carvana Co. is a holding company that was formed as a Delaware corporation on November 29, 2016, for the purpose of completing its initial public offering ("IPO") and related transactions in order to operate the business of Carvana Group, LLC and its subsidiaries (collectively, "Carvana Group"). Substantially all of the Company's assets and liabilities represent the assets and liabilities of Carvana Group, except the Company's Senior Secured Notes and Senior Unsecured Notes (each as defined in Note 9 — Debt Instruments) which were issued by Carvana Co. and are guaranteed by its and Carvana Group's existing domestic restricted subsidiaries, excluding, in the case of the Senior Unsecured Notes, ADESA US Auction, LLC ("ADESA"), and its subsidiaries.
In accordance with Carvana Group, LLC's amended and restated limited liability company agreement (the "LLC Agreement"), Carvana Co. is the sole manager of Carvana Group and conducts, directs, and exercises full control over the activities of Carvana Group. There are two classes of common ownership interests in Carvana Group, Class A common units (the "Class A Units") and Class B common units (the "Class B Units"). As further discussed in Note 10 — Stockholders' Equity, the Class A Units and Class B Units (collectively, the "LLC Units") do not hold voting rights, which results in Carvana Group being considered a variable interest entity ("VIE"). Due to Carvana Co.'s power to control and its significant economic interest in Carvana Group, it is considered the primary beneficiary of the VIE and the Company consolidates the financial results of Carvana Group. As of March 31, 2026, Carvana Co. owned approximately 64.9% of Carvana Group and the LLC Unitholders (as defined in Note 10 — Stockholders' Equity) owned the remaining 35.1%.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K filed on February 18, 2026.
The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of March 31, 2026, results of operations, changes in stockholders' equity, and cash flows for the three months ended March 31, 2026 and 2025. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.
As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary. All intercompany balances and transactions have been eliminated.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Liquidity
Historically, the Company's capital and liquidity needs have been primarily satisfied through its debt and equity financings, operating cash flows, and short-term revolving facilities. During the three months ended March 31, 2026, the Company extended and upsized one of its short-term revolving credit facilities through June 2027. Management believes that current working capital, cash flows from operations, and expected continued or new financing arrangements will be sufficient to fund operations for at least one year from the financial statement issuance date.
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company's assets and liabilities and the results of operations.
Segments
Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing operating performance. The Company operates and manages an integrated business with the overall objective of increasing the number of retail units sold and total gross profit per retail unit. Because of this, the Company has determined that it currently operates with one operating segment and therefore one reportable segment. The CODM is the chief executive officer and focuses on consolidated results, specifically consolidated net income, in assessing operating performance and allocating resources. Furthermore, the Company offers similar products and services and uses similar processes to sell those products and services to similar classes of customers throughout the United States ("U.S."). The amounts presented in each revenue line item in the accompanying unaudited condensed consolidated statements of operations represent categories of revenue disaggregated by product and customer type. The measure of segment assets is reported on the accompanying unaudited condensed consolidated balance sheets as total assets. Substantially all revenue is generated and all assets are held in the U.S. for all periods presented.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Segment information for the three months ended March 31, 2026 and 2025 are as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Net sales and operating revenues | $ | 6,432 | $ | 4,232 | |||||||||||||||||||
| Cost of sales | 5,161 | 3,303 | |||||||||||||||||||||
| Gross profit | 1,271 | 929 | |||||||||||||||||||||
| Compensation and benefits | 245 | 199 | |||||||||||||||||||||
| Advertising | 118 | 72 | |||||||||||||||||||||
| Market occupancy | 19 | 16 | |||||||||||||||||||||
| Logistics | 48 | 37 | |||||||||||||||||||||
| Other (1) | 260 | 211 | |||||||||||||||||||||
| Other operating expense, net | — | — | |||||||||||||||||||||
| Operating income | 581 | 394 | |||||||||||||||||||||
| Interest expense, net | 99 | 139 | |||||||||||||||||||||
| Loss on debt extinguishment | — | 2 | |||||||||||||||||||||
| Other expense (income), net | 41 | (122) | |||||||||||||||||||||
| Net income before income taxes | 441 | 375 | |||||||||||||||||||||
| Income tax provision | 36 | 2 | |||||||||||||||||||||
| Net income | $ | 405 | $ | 373 |
(1) Other costs include all other selling, general and administrative expenses such as IT expenses, corporate occupancy, professional services and insurance, limited warranty, and title and registration.
Accounting Standards Issued But Not Yet Adopted
The Company is currently evaluating the impact of ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, and ASU 2025-06, Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software on the presentation of its consolidated financial statements and accompanying notes.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 3 — PROPERTY AND EQUIPMENT, NET
The following table summarizes property and equipment, net as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (in millions) | |||||||||||
| Land and site improvements | $ | 1,369 | $ | 1,365 | |||||||
| Buildings and improvements | 1,490 | 1,467 | |||||||||
| Transportation fleet | 656 | 636 | |||||||||
| Software | 368 | 356 | |||||||||
| Furniture, fixtures, and equipment | 182 | 178 | |||||||||
| Total property and equipment excluding construction in progress | 4,065 | 4,002 | |||||||||
| Less: accumulated depreciation and amortization on property and equipment | (1,315) | (1,250) | |||||||||
| Property and equipment excluding construction in progress, net | 2,750 | 2,752 | |||||||||
| Construction in progress | 71 | 62 | |||||||||
| Property and equipment, net | $ | 2,821 | $ | 2,814 |
Depreciation and amortization expense on property and equipment in cost of sales was $28 million and $31 million during the three months ended March 31, 2026 and 2025, respectively. Depreciation and amortization expense on property and equipment in selling, general and administrative expense was $39 million and $37 million during the three months ended March 31, 2026 and 2025, respectively.
NOTE 4 — GOODWILL AND INTANGIBLE ASSETS, NET
During the three months ended March 31, 2026, the Company acquired one franchise dealership for total purchase consideration of $11 million, comprised of $3 million in cash and $8 million in trade vehicle floor plan payables. The purchase price was allocated to tangible assets of $8 million and indefinite-lived franchise rights of $3 million. The acquisition was not material to the Company's financial condition or results of operations.
The following table summarizes goodwill and intangible assets, net as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | |||||||||||||
| (in millions) | ||||||||||||||
| Customer relationships | $ | 50 | $ | 50 | ||||||||||
| Developed technology | 31 | 31 | ||||||||||||
| Franchise rights | 30 | 27 | ||||||||||||
| Intangible assets, acquired cost | 111 | 108 | ||||||||||||
| Less: accumulated amortization | (62) | (61) | ||||||||||||
| Intangible assets, net | $ | 49 | $ | 47 | ||||||||||
| Goodwill | $ | 10 | $ | 10 | ||||||||||
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Amortization expense was $1 million and $5 million during the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the remaining weighted-average amortization period for definite-lived intangible assets was 2.4 years. The anticipated annual amortization expense to be recognized in future years as of March 31, 2026 is as follows:
| Expected Future Amortization | |||||
| (in millions) | |||||
| Remainder of 2026 | $ | 6 | |||
| 2027 | 5 | ||||
| 2028 | 3 | ||||
| 2029 | 2 | ||||
| 2030 | 2 | ||||
| Thereafter | 1 | ||||
| Total | $ | 19 |
NOTE 5 — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table summarizes accounts payable and accrued liabilities as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (in millions) | |||||||||||
| Accounts payable, including $35 and $21, respectively, due to related parties | $ | 320 | $ | 236 | |||||||
| Reserve for returns and cancellations | 144 | 121 | |||||||||
| Trade floor plan payables | 141 | 64 | |||||||||
| Accrued compensation and benefits | 132 | 103 | |||||||||
| Sales taxes and vehicle licenses and fees | 123 | 102 | |||||||||
| Accrued insurance | 95 | 85 | |||||||||
| Accrued interest expense | 51 | 138 | |||||||||
| Customer deposits | 47 | 51 | |||||||||
| Accrued advertising costs | 31 | 31 | |||||||||
| Other accrued liabilities | 175 | 169 | |||||||||
| Total accounts payable and accrued liabilities | $ | 1,259 | $ | 1,100 | |||||||
In connection with the franchise dealership acquisitions in 2025, the Company entered into a Master Loan and Security Agreement (the "Trade Floor Plan Facility") with Stellantis Financial Services, Inc. ("SFS") to finance certain of its purchases of new vehicle inventory, and such financed inventory secures the Trade Floor Plan Facility. The line of credit under the Trade Floor Plan Facility is $257 million, allocated among sub-advance limits for each dealership location and type of vehicle inventory, and the interest rate is based on one-month term SOFR plus an applicable margin, which ranges from 2.25% to 3.25% depending on the relative amount of retail sales funded by SFS. Under the Trade Floor Plan Facility, repayment of amounts drawn for the purchase of a vehicle should generally be made within several days after selling or otherwise disposing of the vehicle. Outstanding principal balances related to vehicles held in inventory for more than 11 months are due in full on the first day of the 12th month after a vehicle was initially financed. Prepayments may be made without incurring a premium or penalty. The Trade Floor Plan Facility also requires monthly interest payments and a minimum $39 million restricted cash balance.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 6 — RELATED PARTY TRANSACTIONS
Lease Agreements
In November 2014, the Company and DriveTime Automotive Group, Inc. (together with its subsidiaries and affiliates other than the Company, collectively, "DriveTime"), a related party of the Company due to Ernest Garcia II, Ernest Garcia III, and entities controlled by one or both of them (collectively the "Garcia Parties") controlling and owning substantially all of the interests in DriveTime, entered into a lease agreement that previously governed the occupation of two inspection and reconditioning centers in Blue Mound, Texas and Delanco, New Jersey. Pursuant to that lease agreement, the Company made monthly lease payments based on DriveTime's actual rent expense, and the Company was responsible for the actual insurance costs, tenant improvements required to conduct operations, and real estate taxes. In March 2025, the Company assumed DriveTime's lease at the Blue Mound, Texas location, which lease expires in 2029, with two five-year renewal options. The Company continues to lease the Delanco, New Jersey location from DriveTime, which lease expires in 2032 with no further renewal options.
In February 2017, the Company entered into a lease agreement with DriveTime for sole occupancy of a fully operational inspection and reconditioning center in Winder, Georgia. In May 2024, the lease expiration for the Winder, Georgia location was extended to 2030, subject to two remaining renewal options of five years each.
Expenses related to these operating lease agreements are allocated based on usage to inventory and selling, general and administrative expenses in the accompanying unaudited condensed consolidated balance sheets and statements of operations. Costs allocated to inventory are recognized as cost of sales when the inventory is sold. Total costs related to these operating lease agreements, including those noted above, were less than $1 million and $1 million during the three months ended March 31, 2026 and 2025, respectively, allocated between inventory and selling, general and administrative expenses.
Office Leases
In December 2019, DriveTime purchased an office building in Tempe, Arizona that the Company leased from an unrelated landlord prior to DriveTime's purchase. In connection with the purchase, DriveTime assumed that lease. The lease has an initial term of ten years expiring in 2029, subject to the right to exercise two five-year extension options. The rent expense incurred under the lease with DriveTime was less than $1 million during each of the three months ended March 31, 2026 and 2025.
Wholesale Vehicle Sales and Purchases
DriveTime purchases wholesale vehicles from the Company through competitive auctions that are open to other dealers. As a result, the Company recognized $11 million and $4 million of wholesale sales and revenues from DriveTime during the three months ended March 31, 2026 and 2025, respectively. The Company purchased $4 million and $3 million of vehicles from DriveTime through competitive auctions that are open to other dealers during the three months ended March 31, 2026 and 2025, respectively.
Wholesale Marketplace Revenues
DriveTime sells vehicles to, and purchases vehicles from, third parties and the Company through the Company's wholesale marketplace platform. These transactions occur through competitive auctions in which all registered buyers and sellers are able to bid on and purchase, or list and sell, wholesale vehicles. In addition, beginning in September 2023, certain auction locations generally provide customers, including DriveTime, with reconditioning services. As a result, the Company recognized $2 million and $4 million of wholesale sales and revenues from DriveTime during the three months ended March 31, 2026 and 2025, respectively. The Company recognized zero and less than $1 million of cost of sales to DriveTime related to reconditioning services during the three months ended March 31, 2026 and 2025, respectively.
Master Dealer Agreement
In December 2016, the Company entered into a master dealer agreement with DriveTime (the "Master Dealer Agreement"), most recently amended in April 2021, pursuant to which the Company may sell VSCs to customers purchasing a vehicle from the Company. The Company earns a commission on each VSC sold to its customers and DriveTime is obligated by and
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
subsequently administers the VSCs. The Company collects the retail purchase price of the VSCs from its customers and remits the purchase price net of commission to DriveTime. The Master Dealer Agreement further allows the Company to receive payments for excess reserves based on the performance of the VSCs versus the reserves held by the VSC administrator, once a required claims period for such VSCs has passed. During the three months ended March 31, 2026 and 2025, the Company recognized $111 million and $70 million, respectively, of commissions earned on VSCs sold to its customers and administered by DriveTime, net of a reserve for estimated contract cancellations, and payments for excess reserves to which it expects to be entitled, which are included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.
Beginning in 2017, DriveTime also administers the Company's limited warranty provided to all customers. The Company pays a per-vehicle fee to DriveTime to administer the limited warranty included with every purchase. The Company incurred $7 million and $5 million during the three months ended March 31, 2026 and 2025, respectively, related to the administration of limited warranty.
Profit Sharing Agreement
In June 2018, the Company entered into an agreement with an unaffiliated third party, pursuant to which the Company would sell certain Road Hazard ("RH") and Pre-Paid Maintenance ("PPM") contracts. Under this agreement, third parties would administer the RH and PPM contracts, including providing customer and administrative services, and pay a profit sharing component to the Company. In 2022, the Company began selling equivalent offerings from DriveTime pursuant to the Master Dealer Agreement discussed above, and all rights and obligations in connection with existing RH and PPM contracts were transferred to DriveTime (the "Transferred Contracts"). In December 2022, the Company entered into a profit sharing agreement with DriveTime with regard to the Transferred Contracts (the "Profit Sharing Agreement"). In March 2026, the Profit Sharing Agreement was amended to include additional vehicle service contracts. The Company recognized $3 million and $2 million in revenue during the three months ended March 31, 2026 and 2025, respectively, under the Profit Sharing Agreement.
Servicing and Administrative Fees
DriveTime provides servicing and administrative functions associated with the Company's finance receivables. Servicing and administrative functions are outsourced services in which DriveTime has developed significant expertise. The Company incurred expenses of $2 million during each of the three months ended March 31, 2026 and 2025 related to these services. The Company sold no finance receivables to DriveTime or any of its affiliates in each of the three months ended March 31, 2026 and 2025.
During the three months ended March 31, 2026 and 2025, DriveTime, as servicer, exercised its optional clean-up call on certain 2019, 2020, and 2021 securitization trusts. Optional clean-up calls are customary features of automobile securitization transactions and typically exercised when a loan pool has amortized down to a pre-determined percentage of its original balance. These clean-up calls resulted in the Company receiving less than $1 million during each of the three months ended March 31, 2026 and 2025, attributable to its retained interests in such trusts at the time of exercise.
Aircraft Time Sharing Agreement
The Company entered into an agreement to share usage of two aircraft owned by Verde and operated by DriveTime on October 22, 2015, and the agreement was subsequently amended in 2017. Pursuant to the agreement, the Company agreed to reimburse DriveTime for actual expenses for each of its flights. The original agreement was for 12 months, with perpetual 12-month automatic renewals. Either the Company or DriveTime can terminate the agreement with 30 days’ prior written notice. The Company reimbursed DriveTime less than $1 million under this agreement during each of the three months ended March 31, 2026 and 2025.
Accounts Payable Due to Related Party
As of March 31, 2026 and December 31, 2025, $35 million and $21 million, respectively, was due to related parties primarily related to the agreements mentioned above, and is included in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Tax Receivable Agreement Liability
As further discussed in Note 14 — Income Taxes, as of March 31, 2026 and December 31, 2025, the Company recorded a tax receivable agreement ("TRA") liability of $2.2 billion and $2.3 billion, respectively, of which $1.7 billion in both periods is due to related parties. Refer to Note 14 — Income Taxes for further discussion of the TRA. During the three months ended March 31, 2026 and 2025, the Company made TRA payments of $37 million and $17 million, respectively, of which $29 million and $13 million, respectively, was paid to related parties.
Tax Payments on Behalf of Non-Controlling Members
As further discussed in Note 14 — Income Taxes, as a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members, including Carvana Co., based on its allocable share held in Carvana Group. Nonetheless, many states require that partnerships make mandatory tax payments on behalf of members who are non-residents of the respective states. Accordingly, if Carvana Group generates taxable income and is required to remit income tax on behalf of its members, it will make payments to the states through composite tax returns and non-resident withholding. These payments are treated as distributions to the affected members because the amounts remitted are a payment of income tax on behalf of the affected members. During the three months ended March 31, 2026 and 2025, the Company made mandatory composite and non-resident withholding tax payments on behalf of non-controlling members of $2 million in each period, of which $1 million and $2 million, respectively, was paid on behalf of related parties.
NOTE 7 — FINANCE RECEIVABLE SALE AGREEMENTS
The Company originates loans for its customers and sells them to partners and investors pursuant to finance receivable sale agreements. Historically, the Company has sold loans through two types of arrangements: forward flow agreements and fixed pool loan sales, including securitization transactions. The Company completes loan sales without recourse for their post-sale performance and makes customary representations and warranties as part of these transactions.
Ally Master Purchase and Sale Agreement
In December 2016, the Company entered into a master purchase and sale agreement (the "Ally MPSA") with Ally Bank and Ally Financial Inc. (together, "Ally"). Pursuant to the Ally MPSA, the Company sells finance receivables meeting certain underwriting criteria under a committed forward flow arrangement without recourse to the Company for their post-sale performance. On January 3, 2025, the Company and Ally amended the Ally MPSA to reestablish the commitment by Ally to purchase up to $4.0 billion of principal balances of finance receivables between January 3, 2025 and January 2, 2026, and further amended the Ally MPSA on April 29, 2025 to reestablish the commitment by Ally to purchase up to $4.0 billion of principal balance of finance receivables between April 30, 2025 and April 29, 2026. On October 28, 2025, the Ally MPSA was further amended to increase the commitment by Ally to purchase up to $6.0 billion of principal balance of finance receivables between October 28, 2025 and October 27, 2026, with all other terms and conditions remaining unchanged from the preceding Ally MPSA.
During the three months ended March 31, 2026 and 2025, the Company sold $1.6 billion and $0.8 billion, respectively, in principal balances of finance receivables under the Ally MPSA, and had $3.3 billion of unused capacity as of March 31, 2026.
Securitization Transactions
The Company sponsors and establishes securitization trusts to purchase finance receivables from the Company. The securitization trusts issue asset-backed securities, some of which are collateralized by the finance receivables that the Company sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables. The net proceeds from the sales are the fair value of the assets obtained as part of the transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply with the Risk Retention Rules as defined and further discussed in Note 8 — Securitizations and Variable Interest Entities.
During the three months ended March 31, 2026 and 2025, the Company sold $1.0 billion and $0.9 billion, respectively, in principal balances of finance receivables through securitization transactions.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Fixed Pool Loan Sales
During the year ended December 31, 2025, the Company entered into three separate definitive loan purchase agreements with three separate independent, third-party purchasers for the sale of up to a total of $12 billion of principal balance of finance receivables through the fourth quarter of 2027. These agreements formalize existing relationships with loan purchasers and establish defined expectations for loan sale volume and sale procedures throughout the respective agreement periods.
During the three months ended March 31, 2026 and 2025, the Company completed fixed pool loan sales of $1.4 billion and $0.8 billion, respectively, in principal balances of finance receivables to unrelated third parties and had $9.9 billion of unused capacity as of March 31, 2026.
Gain on Loan Sales
The total gain related to finance receivables sold to financing partners and pursuant to securitization transactions was $354 million and $273 million during the three months ended March 31, 2026 and 2025, respectively, which is included in other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.
NOTE 8 — SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
As noted in Note 7 — Finance Receivable Sale Agreements, the Company sponsors and establishes securitization trusts to purchase finance receivables from the Company. The securitization trusts issue asset-backed securities, some of which are collateralized by the finance receivables that the Company sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables. The net proceeds from the sales are the fair value of the assets obtained as part of the transactions and typically include cash and at least 5% of the beneficial interests issued by the securitization trusts to comply with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules"). The beneficial interests retained by the Company include, but are not limited to, rated notes and certificates of the securitization trusts. The holders of the certificates issued by the securitization trusts have rights to cash flows only after the holders of the notes issued by the securitization trusts have received their contractual cash flows. The securitization trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the securitization trusts can look only to the assets of the securitization trusts that issued their securities for payment. The beneficial interests held by the Company are subject principally to the credit and prepayment risk stemming from the underlying finance receivables.
The securitization trusts established in connection with asset-backed securitization transactions are VIEs. For each VIE that the Company establishes in its role as sponsor of securitization transactions, it performs an analysis to determine whether or not it is the primary beneficiary of the VIE. The Company’s continuing involvement with the VIEs consists of retaining a portion of the securities issued by the VIEs, providing industry standard representations and warranties regarding the underlying finance receivables, and performing ministerial duties as the trust administrator. As of March 31, 2026, the Company was not the primary beneficiary of these securitization trusts because its retained interests in the VIEs do not have exposures to losses or benefits that could potentially be significant to the VIEs. As such, the Company does not consolidate the securitization trusts.
The assets the Company retains in the unconsolidated VIEs are presented as beneficial interests in securitizations on the accompanying unaudited condensed consolidated balance sheets, which as of March 31, 2026 and December 31, 2025 were $492 million and $486 million, respectively. The Company held no other assets or liabilities related to its involvement with unconsolidated VIEs as of March 31, 2026 and December 31, 2025.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the carrying value and total exposure to losses of its assets related to unconsolidated VIEs with which the Company has continuing involvement, but is not the primary beneficiary at March 31, 2026 and December 31, 2025. Total exposure represents the estimated loss the Company would incur under severe, hypothetical circumstances, such as if the value of the interests in the securitization trusts and any associated collateral declined to zero. The Company believes the possibility of this is remote. As such, the total exposure presented below is not an indication of the Company's expected losses.
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Carrying Value | Total Exposure | Carrying Value | Total Exposure | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Rated notes | $ | 389 | $ | 389 | $ | 378 | $ | 378 | |||||||||||||||
| Certificates and other assets | 103 | 103 | 108 | 108 | |||||||||||||||||||
| Total unconsolidated VIEs | $ | 492 | $ | 492 | $ | 486 | $ | 486 |
The beneficial interests in securitizations are considered securities available for sale subject to restrictions on transfer pursuant to the Company’s obligations as a sponsor under the Risk Retention Rules. As described in Note 9 — Debt Instruments, the Company has entered into secured borrowing facilities through which it finances certain of these retained beneficial interests in securitizations. These securities are interests in securitization trusts, thus there are no contractual maturities. The amortized cost and fair value of securities available for sale as of March 31, 2026 and December 31, 2025 were as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Rated notes | $ | 389 | $ | 389 | $ | 376 | $ | 378 | |||||||||||||||
| Certificates and other assets | 112 | 103 | 116 | 108 | |||||||||||||||||||
| Total securities available for sale | $ | 501 | $ | 492 | $ | 492 | $ | 486 |
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 9 — DEBT INSTRUMENTS
Debt instruments, excluding finance leases, which are discussed in Note 15 — Leases, as of March 31, 2026 and December 31, 2025 consisted of the following:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (in millions) | |||||||||||
| Asset-based financing: | |||||||||||
| Floor plan facility | $ | 79 | $ | 58 | |||||||
| Financing of beneficial interests in securitizations | 386 | 374 | |||||||||
| Real estate financing | 485 | 485 | |||||||||
| Transportation fleet financing | 47 | 23 | |||||||||
| Total asset-based financing | 997 | 940 | |||||||||
| Senior Secured Notes | 3,929 | 3,929 | |||||||||
| Senior Unsecured Notes | 107 | 107 | |||||||||
| Total debt | 5,033 | 4,976 | |||||||||
| Less: current portion | (238) | (211) | |||||||||
| Less: unamortized debt issuance costs (1) | (34) | (36) | |||||||||
| Plus: unamortized premium (2) | 17 | 18 | |||||||||
| Total included in long-term debt, net | $ | 4,778 | $ | 4,747 |
(1) The unamortized debt issuance costs related to long-term debt are presented as a reduction of the carrying amount of the corresponding liabilities on the accompanying unaudited condensed consolidated balance sheets. Unamortized debt issuance costs related to revolving debt arrangements are presented within other assets on the accompanying unaudited condensed consolidated balance sheets and not included here.
(2) The unamortized premium relates to a portion of the notes exchange offers completed in September 2023 which were accounted for as a debt modification.
Short-Term Revolving Facilities
Floor Plan Facility
The Company previously entered into a floor plan facility with Ally to finance its vehicle inventory, which was secured by Carvana, LLC's vehicle inventory, general intangibles, accounts receivable, and finance receivables (as amended, the "Floor Plan Facility"). On September 1, 2023, the Company amended the Floor Plan Facility in connection with the issuance of the Senior Secured Notes (as defined below) to provide for an additional exclusive grant of collateral over certain deposit accounts and the cash on deposit in those accounts in favor of the lender and to amend certain other affirmative and negative covenants.
The Company further amended the Floor Plan Facility on April 29, 2025 to renew the line of credit at $1.5 billion until April 30, 2027. Under the amendment, the interest rate on the Floor Plan Facility was reduced to (i) a prime rate minus 0.70% when amounts drawn under the Floor Plan Facility are less than 25% of the then current inventory balance, (ii) a prime rate minus 0.50% when amounts drawn under the Floor Plan Facility are 25% or more but less than 50% of the then current inventory balance, or (iii) a prime rate plus 0.10% when amounts drawn under the Floor Plan Facility are 50% or more of the then current inventory balance. The Floor Plan Facility also requires monthly interest payments and restricted cash requirements on a sliding scale whereby at least 5% of the total principal amount owed to the lender is required to be held as restricted cash if amounts drawn are under 25% of the then current inventory balance, increasing to 12.5% to be held as restricted cash if amounts drawn are between 25% and 49.99% of the then current inventory balance, and further increasing to 25% to be held as restricted cash if amounts drawn are equal to or greater than 50% of the then current inventory balance. The Company is also required to pay the lender an availability fee based on the average unused capacity during the prior calendar quarter under the amended Floor Plan Facility.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of March 31, 2026, the Company had $79 million outstanding under the Floor Plan Facility, unused capacity of $1.4 billion, and held $4 million in restricted cash related to the Floor Plan Facility. During the three months ended March 31, 2026, the Company's effective interest rate on the Floor Plan Facility was 4.35%.
As of December 31, 2025, the Company had $58 million outstanding under the Floor Plan Facility, unused capacity of $1.4 billion, and held $3 million in restricted cash related to the Floor Plan Facility. During the year ended December 31, 2025, the Company's effective interest rate on the Floor Plan Facility was 5.77%.
Finance Receivable Facilities
The Company has various short-term revolving credit facilities to fund certain finance receivables originated by the Company prior to selling them, which are typically secured by the finance receivables pledged to them (the "Finance Receivable Facilities").
In January 2020, the Company entered into an agreement pursuant to which a lender agreed to provide a revolving credit facility to fund certain finance receivables originated by the Company. In March 2026, the Company amended its agreement to, among other things, increase the line of credit to $600 million and extend the maturity date to June 30, 2027.
In February 2020, the Company entered into an agreement pursuant to which a second lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. In December 2021, the Company amended its agreement to, among other things, increase the line of credit to $600 million, and in November 2025, the maturity date was extended to November 24, 2027.
In April 2021, the Company entered into an agreement pursuant to which a third lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. In December 2021, the Company amended its agreement to, among other things, increase this line of credit to $600 million, and in October 2025 the maturity date was extended to October 9, 2026.
In March 2022, the Company entered into an agreement pursuant to which a fourth lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. In August 2025, the Company amended its agreement to, among other things, increase the line of credit to $600 million and extend the maturity date to August 6, 2026.
In May 2023, the Company entered into an agreement pursuant to which a fifth lender agreed to provide a $500 million revolving credit facility to fund certain finance receivables originated by the Company. In August 2025, the Company amended its agreement to, among other things, increase the line of credit to $600 million and extend the maturity date to February 14, 2027.
In September 2025, the Company entered into an agreement pursuant to which a sixth lender agreed to provide a $600 million revolving credit facility to fund certain finance receivables originated by the Company until March 29, 2027.
The Finance Receivable Facilities require that any undistributed amounts collected on the pledged finance receivables be held as restricted cash. The Finance Receivable Facilities require monthly payments of interest and fees based on usage and unused facility amounts. The Finance Receivable Facilities self-amortize from the end of the draw period until maturity, offer full prepayment rights, and have no credit sublimits or aging restrictions, subject to negotiated concentration limits. The subsidiaries that entered into these Finance Receivable Facilities are each wholly-owned, special purpose entities whose assets are not available to the general creditors of the Company. As of March 31, 2026 and December 31, 2025, the Company had zero outstanding under these Finance Receivable Facilities each period, unused capacity of $3.6 billion and $3.5 billion, respectively, and held less than $1 million and $2 million, respectively, in restricted cash related to these Finance Receivable Facilities. During the three months ended March 31, 2026, the Company's effective interest rate on these Finance Receivable Facilities was 5.06%. During the year ended December 31, 2025, the Company's effective interest rate on these Finance Receivable Facilities was 5.64%.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Long-Term Debt
Senior Secured Notes
The Company has issued various tranches of Senior Secured Notes (collectively, the "Senior Secured Notes") as further described below:
| Senior Secured Notes | March 31, 2026 | December 31, 2025 | Cash Interest Rate | ||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||
| Notes due June 1, 2030 (the "2030 Senior Secured Notes") | $ | 1,660 | $ | 1,660 | 9% | ||||||||||||||||||||||||
| Notes due June 1, 2031 (the "2031 Senior Secured Notes") | 2,269 | 2,269 | 9% | ||||||||||||||||||||||||||
| Total principal amount | $ | 3,929 | $ | 3,929 | |||||||||||||||||||||||||
| Less: unamortized debt issuance costs | (27) | (29) | |||||||||||||||||||||||||||
| Plus: unamortized premium | 17 | 18 | |||||||||||||||||||||||||||
| Total Senior Secured debt | $ | 3,919 | $ | 3,918 |
Interest on each of the Senior Secured Notes is payable semi-annually on February 15 and August 15.
The Company may redeem some or all of its 2031 Senior Secured Notes at any time prior to August 15, 2028 at a redemption price of 100% of the principal amount outstanding plus applicable make-whole premiums set forth in the indenture, plus any accrued and unpaid interest to the redemption date. The 2031 Senior Secured Notes are not otherwise redeemable at the Company's option prior to August 15, 2028. At any time on or after August 15, 2028, the Company may redeem the 2031 Senior Secured Notes, in whole or in part, at redemption prices set forth in the indenture plus accrued and unpaid interest up to but excluding the redemption date. The Company may also redeem its 2030 Senior Secured Notes in whole or in part at redemption prices set forth in the indenture, plus accrued and unpaid interest up to but excluding the redemption date. If the Company experiences certain change of control events, it must make an offer to purchase all of the Senior Secured Notes at 101% of the principal amount thereof, plus any accrued and unpaid interest, to the repurchase date.
The Senior Secured Notes mature as specified in the table above unless earlier repurchased or redeemed and are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by all of the domestic restricted subsidiaries of the Company (other than, subject to certain exceptions, any subsidiary that constitutes an "immaterial subsidiary," "captive insurance subsidiary," "securitization subsidiary" or "permitted joint venture"). The Senior Secured Notes and the guarantees are secured by (i) second-priority liens on certain assets and property of the Company, pledged in favor of the Ally Parties under the Floor Plan Facility and (ii) first-priority liens on certain assets and property of the Company and the guarantors, as identified in the indentures to the Senior Secured Notes.
The indentures governing the Senior Secured Notes contain restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things and subject to certain exceptions, incur additional debt or issue preferred stock, create new liens, create restrictions on intercompany payments, pay dividends and make other distributions in respect of the Company's capital stock, redeem or repurchase the Company’s capital stock or prepay subordinated indebtedness, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers or consolidations.
During the three months ended March 31, 2025, the Company repurchased $52 million of principal amount of the then outstanding 2028 Senior Secured Notes in the open market for $55 million, which included less than $1 million of accrued interest. The repurchased notes were canceled upon receipt. The repurchases are treated as an extinguishment of debt, with any realized discount (premium) recognized as a gain (loss) on debt extinguishment in the accompanying unaudited condensed consolidated statements of operations, net of transaction fees and write-offs of related unamortized debt issuance costs and unamortized premium. As a result of the repurchases, during the three months ended March 31, 2025, the Company recognized a net loss on debt extinguishment of $2 million which included less than $1 million of transaction fees and write-offs of related unamortized debt issuance costs and unamortized premium.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Senior Unsecured Notes
The Company has issued various tranches of Senior Unsecured Notes (the "Senior Unsecured Notes") each under a separate indenture, as further described below:
| Senior Unsecured Notes | March 31, 2026 | December 31, 2025 | Interest Rate | ||||||||||||||
| (in millions, except percentages) | |||||||||||||||||
| Notes due April 15, 2027 ("2027 Senior Unsecured Notes") | $ | 32 | $ | 32 | 5.500% | ||||||||||||
| Notes due October 1, 2028 ("2028 Senior Unsecured Notes") | 22 | 22 | 5.875% | ||||||||||||||
| Notes due September 1, 2029 ("2029 Senior Unsecured Notes") | 26 | 26 | 4.875% | ||||||||||||||
| Notes due May 1, 2030 ("2030 Senior Unsecured Notes") | 27 | 27 | 10.250% | ||||||||||||||
| Total principal amount | 107 | 107 | |||||||||||||||
| Less: unamortized debt issuance costs | (1) | (1) | |||||||||||||||
| Total included in long-term debt, net | $ | 106 | $ | 106 |
Interest on each of the Senior Unsecured Notes is payable semi-annually. The Senior Unsecured Notes mature as specified in the table above unless earlier repurchased or redeemed and are guaranteed by certain of the Company's subsidiaries. In March 2023, the Company designated ADESA and its subsidiaries as unrestricted subsidiaries under the indentures governing the Senior Unsecured Notes.
The Company may redeem some or all of each series of Senior Unsecured Notes at any time prior to certain specified redemption dates (the "Unsecured Early Redemption Dates") at the redemption prices and applicable make-whole premiums set forth in each respective indenture, plus any accrued and unpaid interest to the redemption date. Prior to the Unsecured Early Redemption Dates, the Company may also redeem up to 35% of the aggregate principal amount at a redemption price equal to 100% plus the respective interest rate specified in the table above, together with accrued and unpaid interest to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings. With respect to the 2030 Senior Unsecured Notes, the Company may, at its option, redeem in the aggregate up to 10% of the original aggregate principal amount of the 2030 Senior Unsecured Notes during the period from, and including, May 1, 2025 to, but excluding May 1, 2027, at a redemption price equal to 105.125% of the 2030 Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest thereon to the relevant redemption date. On or after the Unsecured Early Redemption Dates, the Company may redeem some or all of the Senior Unsecured Notes in whole or in part at redemption prices set forth in each respective indenture, plus accrued and unpaid interest up to but excluding the redemption date.
Real Estate Financing
The Company finances certain purchases and construction of its property and equipment through various sale and leaseback transactions. As of March 31, 2026, none of these transactions have qualified for sale accounting due to meeting the criteria for finance leases, or forms of continuing involvement, such as repurchase options or renewal periods that extend the lease for substantially all of the asset's remaining useful life, and are therefore accounted for as financing transactions. These arrangements require monthly payments and have initial terms of 20 to 25 years. Some of the agreements are subject to renewal options of up to 25 years and some are subject to base rent increases throughout the term. As of both March 31, 2026 and December 31, 2025, the outstanding liability associated with these sale and leaseback arrangements, net of unamortized debt issuance costs, was $482 million and was included in long-term debt in the accompanying unaudited condensed consolidated balance sheets.
Financing of Beneficial Interests in Securitizations
As discussed in Note 8 — Securitizations and Variable Interest Entities, the Company has retained certain beneficial interests in securitizations pursuant to the Company’s obligations as a sponsor under the Risk Retention Rules. Beginning in June 2019, the Company entered into secured borrowing facilities through which it finances certain retained beneficial interests in securitizations whereby the Company sells such interests and agrees to repurchase them for their fair value at a stated time of repurchase.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of March 31, 2026 and December 31, 2025, the Company had pledged $386 million and $374 million, respectively, of its beneficial interests in securitizations as collateral under the repurchase agreements with expected repurchases ranging from May 2026 to June 2033. The securitization trusts distribute payments related to the Company's pledged beneficial interests in securitizations directly to the lenders, which reduces the beneficial interests in securitizations and the related debt balance. Pledged collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral, the repurchase price of the pledged collateral will be increased by the amount of the decline.
The outstanding balance of these facilities, net of unamortized debt issuance costs, was $383 million and $371 million as of March 31, 2026 and December 31, 2025, respectively, of which $151 million and $148 million, respectively, was included in current portion of long-term debt in the accompanying unaudited condensed consolidated balance sheets.
Transportation Fleet Financing
On October 20, 2025, the Company entered into a loan and security agreement (the "Loan Agreement") with Citizens Bank, N.A. ("Citizens Bank"), which provides for up to $250 million in aggregate principal amount of loans to finance certain equipment for its transportation fleet. All loans extended under the Loan Agreement are secured by a first priority lien on the transportation fleet and will mature within four to seven years depending on the attributes of the financed equipment. At maturity, a final payment of unamortized principal will be due to Citizens Bank. These outstanding loans will bear interest at a rate based on the applicable SOFR swap rate, with tenors ranging from two and a half to four years, plus an applicable margin ranging from 2.80% to 2.95% depending on the maturity of the loan. The Company has the option to prepay the outstanding balances of the loans prior to the maturity date.
As of March 31, 2026 and December 31, 2025, the outstanding liability under the Loan Agreement was $47 million and $23 million, respectively, of which $8 million and $4 million, respectively, was included in current portion of long-term debt in the accompanying unaudited condensed consolidated balance sheets.
As of March 31, 2026, the Company was in compliance with all debt covenants.
NOTE 10 — STOCKHOLDERS' EQUITY
Classes of Common Stock and LLC Units
Carvana Co.'s amended and restated certificate of incorporation, among other things, authorizes (i) 50 million shares of Preferred Stock, par value $0.01 per share, (ii) 500 million shares of Class A common stock, par value $0.001 per share, and (iii) 125 million shares of Class B common stock, par value $0.001 per share. Each share of Class A common stock generally entitles its holder to one vote on all matters to be voted on by stockholders. Each share of Class B common stock held by the Garcia Parties generally entitles its holder to ten votes on all matters to be voted on by stockholders, for so long as the Garcia Parties maintain direct or indirect beneficial ownership of at least 25% of the outstanding shares of Carvana Co.'s Class A common stock determined on an as-exchanged basis assuming that all of the Class A Units were exchanged for Class A common stock. All other shares of Class B common stock generally entitle their holders to one vote per share on all matters to be voted on by stockholders. Holders of Class B common stock are not entitled to receive dividends and would not be entitled to receive any distributions upon the liquidation, dissolution or winding down of the Company. Holders of Class A and Class B common stock vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by applicable law.
Carvana Group's amended and restated LLC Agreement provides for two classes of common ownership interests in Carvana Group: (i) Class A Units and (ii) Class B Units (together, the "LLC Units"). Carvana Co. is required to, at all times, maintain (i) a four-to-five ratio between the number of shares of Class A common stock issued and outstanding by Carvana Co. and the number of Class A Units owned by Carvana Co. (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities and subject to adjustment as set forth in the exchange agreement (the "Exchange Agreement") further discussed below, and taking into account Carvana Co. Sub LLC's 0.1% ownership interest in Carvana, LLC) and (ii) a four-to-five ratio between the number of shares of Class B common stock owned by the original holders of LLC Units prior to the IPO (the "Original LLC Unitholders") and the number of Class A Units owned by the Original LLC Unitholders. The Company may issue shares of Class B common stock only to the extent necessary to maintain these ratios.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Shares of Class B common stock are transferable only if an Original LLC Unitholder elects to exchange them, together with 1.25 times as many LLC Units, for consideration from the Company. Such consideration from the Company can be, at the Company's election, either shares of Class A common stock or cash.
As of March 31, 2026 and December 31, 2025, there were 274 million and 273 million Class A Units, respectively, and 2 million of Class B Units at each period (as adjusted for the participation thresholds and closing price of Class A common stock on March 31, 2026 and December 31, 2025), issued and outstanding. As discussed in Note 12 — Equity-Based Compensation, Class B Units were issued under the Company’s LLC Equity Incentive Plan (the "LLC Equity Incentive Plan") and are subject to a participation threshold, and are earned over the requisite service period.
At-the-Market Offering
On July 19, 2023, the Company entered into a distribution agreement with Citigroup Global Markets Inc. and Moelis & Company LLC to establish an ATM Program, and on July 31, 2024, the Company refreshed the ATM Program by entering into an Amended and Restated Distribution Agreement with Barclays Capital Inc., Citigroup Global Markets Inc., Moelis & Company LLC, and Virtu Americas LLC. On February 19, 2025, the Company further refreshed the ATM Program by entering into a Second Amended and Restated Distribution Agreement with Barclays Capital Inc., Citigroup Global Markets Inc., and Virtu Americas LLC. Under the ATM Program, the Company could sell up to the greater of (i) shares of Class A common stock representing an aggregate offering price of $1.0 billion, or (ii) an aggregate of 21 million shares of Class A common stock, from time to time. As of March 31, 2026, $461 million of aggregate offering price remained available to be sold under the ATM Program. The Company has used the net proceeds from the ATM Program to purchase Class A Units. There can be no assurance that the Company will sell further shares of Class A common stock through the ATM Program.
There was no activity pursuant to the ATM Program during the three months ended March 31, 2026 and 2025.
Exchange Agreement
Carvana Co. and the Original LLC Unitholders together with any holders of LLC Units issued subsequent to the IPO (together, the "LLC Unitholders") entered into an Exchange Agreement under which each LLC Unitholder (and certain permitted transferees thereof) may receive shares of the Company's Class A common stock in exchange for their LLC Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to (i) conversion ratio adjustments for stock splits, stock dividends, reclassifications and similar transactions, (ii) vesting for certain LLC Units, and (iii) the respective participation threshold for Class B Units. To the extent such owners also hold Class B common stock, they are required to deliver to Carvana Co. a number of shares of Class B common stock equal to the number of shares of Class A common stock being exchanged for. Any shares of Class B common stock so delivered are canceled. The number of exchangeable Class B Units is determined based on the value of Carvana Co.'s Class A common stock and the applicable participation threshold. Finally, in connection with each exchange, in order to preserve the required four-to-five ratio between the number of shares of Class A common stock issued and outstanding by Carvana Co. and the number of Class A Units owned by Carvana Co., an equivalent number of LLC units to the LLC units exchanged are issued to Carvana Co.
The exchanges affected pursuant to the Exchange Agreement during the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| LLC Units exchanged by certain LLC Unitholders | 33 | 69 | |||||||||||||||||||||
| Newly issued Class A common stock | 26 | 55 | |||||||||||||||||||||
| LLC Units received by Carvana Co. | 33 | 68 |
Class A Non-Convertible Preferred Units
In accordance with the Carvana Group, LLC amended and restated LLC Agreement, and in connection with the issuance of Senior Secured Notes or Senior Unsecured Notes by Carvana Co., Carvana Group, LLC is authorized to issue Class A Non-Convertible Preferred Units to Carvana Co. In each case, the consideration for the capital contribution made or deemed to have
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
been made by Carvana Co. is equal to the net proceeds of notes issuances. As of March 31, 2026 and December 31, 2025, Carvana Co. held 4.0 million of Class A Non-Convertible Preferred Units in both periods.
When Carvana Co. makes payments on the Senior Unsecured Notes and Senior Secured Notes (collectively the "Senior Notes"), Carvana Group makes an equal cash distribution, as necessary, to the Class A Non-Convertible Preferred Units. For each $1,000 principal amount of Senior Notes that Carvana Co. repays or otherwise retires, one Class A Non-Convertible Preferred Unit is canceled and retired.
During the three months ended March 31, 2026, the Company did not cancel and retire or issue any Class A Non-Convertible Preferred Units. During the three months ended March 31, 2025, the Company canceled and retired 0.1 million of Class A Non-Convertible Preferred Units in conjunction with the repurchases of 2028 Senior Secured Notes and issued 0.1 million of Class A Non-Convertible Preferred Units in conjunction with the PIK interest payments the Company was required to make on February 15, 2025.
NOTE 11 — NON-CONTROLLING INTERESTS
As discussed in Note 1 — Business Organization, Carvana Co. consolidates the financial results of Carvana Group and reports a non-controlling interest related to the portion of Carvana Group owned by the LLC Unitholders. Changes in the ownership interest in Carvana Group while Carvana Co. retains its controlling interest will be accounted for as equity transactions. Exchanges of LLC Units result in a change in ownership and reduce the amount recorded as non-controlling interests and increase additional paid-in capital.
Upon the issuance of shares of Class A common stock by Carvana Co. related to the Company's equity compensation plans such as the exercise of options, issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock, Carvana Group is required to issue to Carvana Co. a number of Class A Units equal to 1.25 times the number of shares of Class A common stock being issued in connection with the exercise of such options or issuance of other types of equity compensation, subject to adjustment for stock splits, stock dividends, reclassifications, and similar transactions. Activity related to the Company's equity compensation plans may result in a change in ownership which will impact the amount recorded as non-controlling interest and additional paid-in capital.
The non-controlling interest related to the Class B Units is determined based on the respective participation thresholds and the share price of Class A common stock on an as-converted basis. To the extent that the number of as-converted Class B Units change or Class B Units are forfeited, the resulting difference in ownership will be accounted for as equity transactions adjusting the non-controlling interest and additional paid-in capital.
During the three months ended March 31, 2026 and 2025, the total adjustments related to exchanges of LLC Units and non-controlling interest related to restricted stock unit ("RSU") vesting and stock option ("NQSO") exercises were a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of $3 million and $1 million, respectively, which have been included in exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises in the accompanying unaudited condensed consolidated statements of stockholders' equity.
As of March 31, 2026, Carvana Co. owned approximately 64.9% of Carvana Group with the LLC Unitholders owning the remaining 35.1%. The net income attributable to the non-controlling interests on the accompanying unaudited condensed consolidated statements of operations represents the portion of the net income attributable to the economic interest in Carvana Group held by the non-controlling LLC Unitholders calculated based on the weighted average non-controlling interests' ownership during the periods presented.
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in millions) | |||||||||||
| Transfers from non-controlling interests: | |||||||||||
| Increase as a result of exchanges of LLC Units and adjustments to non-controlling interests related to RSU vesting and NQSO exercises | $ | 3 | $ | 1 | |||||||
| Total transfers from non-controlling interests | $ | 3 | $ | 1 |
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 12 — EQUITY-BASED COMPENSATION
Equity-based compensation is recognized based on amortizing the grant-date fair value on a straight-line basis over the requisite service period, which is generally the vesting period of the award, less actual forfeitures. A summary of equity-based compensation recognized during the three months ended March 31, 2026 and 2025 is as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Restricted Stock Units | $ | 26 | $ | 21 | |||||||||||||||||||
| Options | 5 | 5 | |||||||||||||||||||||
| Total equity-based compensation | 31 | 26 | |||||||||||||||||||||
| Equity-based compensation capitalized to property and equipment | (3) | (2) | |||||||||||||||||||||
| Equity-based compensation capitalized to inventory | (1) | (1) | |||||||||||||||||||||
| Equity-based compensation, net of capitalized amounts | $ | 27 | $ | 23 |
During the three months ended March 31, 2026 and 2025, the Company capitalized $3 million and $2 million, respectively, of equity-based compensation to property and equipment related to software development and $1 million each period to inventory related to reconditioning and inbound transportation of vehicles. Equity-based compensation expense in cost of sales was $1 million during each of the three months ended March 31, 2026 and 2025. Equity-based compensation expense in selling, general and administrative expense was $26 million and $25 million during the three months ended March 31, 2026 and 2025, respectively.
As of March 31, 2026, the total unrecognized equity-based compensation related to outstanding awards was $212 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years. Total unrecognized equity-based compensation will be adjusted for actual forfeitures.
2017 Omnibus Incentive Plan
In connection with the IPO, the Company adopted the 2017 Omnibus Incentive Plan (the "2017 Incentive Plan"). The number of shares authorized for issuance under the 2017 Incentive Plan is subject to an automatic annual increase (the "Automatic Increase") of the lesser of two percent of the Company's outstanding Class A common stock or an amount determined by the Compensation and Nominating Committee of the Board. On January 1, 2025, the number of shares authorized for issuance under the 2017 Incentive Plan increased by two percent of the then outstanding Class A common stock under the Automatic Increase. As of March 31, 2026, 20 million shares remained available for future equity-based award grants under this plan.
Employee Stock Purchase Plan
In May 2021, the Company adopted an employee stock purchase plan (the "ESPP"), which went into effect on July 1, 2021. The ESPP allows substantially all employees, excluding members of senior management, to acquire shares of the Company's Class A common stock through payroll deductions over six-month offering periods, commencing on January 1 and July 1 of each year. The per share purchase price is equal to 90% of the fair market value of a share of the Company's Class A common stock on the last day of the offering period. Participant purchases are limited to maximums that may vary between $10,000 and $25,000 of stock per calendar year. The Company is authorized to grant up to 0.5 million shares of Class A common stock under the ESPP.
During the three months ended March 31, 2026 and 2025, the Company did not issue any shares of Class A common stock and as of March 31, 2026, 361,986 shares of Class A common stock remained available for future issuance. During each of the three months ended March 31, 2026 and 2025, the Company recognized less than $1 million of equity-based compensation expense related to the ESPP.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Class A Units
During 2018, the Company granted certain employees Class A Units with service-based vesting over two- to four-year periods and a grant-date fair value of $18.58 per Class A Unit. The grantees entered into the Exchange Agreement under which each LLC Unitholder (and certain permitted transferees thereof) may receive shares of the Company's Class A common stock in exchange for their LLC Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to conversion ratio adjustments for stock splits, stock dividends, reclassifications, and similar transactions and subject to vesting.
Class B Units
In March 2015, Carvana Group adopted the LLC Equity Incentive Plan. Under the LLC Equity Incentive Plan, Carvana Group could grant Class B Units to eligible employees, non-employee officers, consultants and directors with service-based vesting, typically four to five years. In connection with the completion of the IPO, Carvana Group discontinued the grant of new awards under the LLC Equity Incentive Plan, however the LLC Equity Incentive Plan will continue in connection with administration of existing awards that remain outstanding. Grantees may receive shares of the Company's Class A common stock in exchange for Class B Units on a four-to-five conversion ratio, or cash at the option of the Company, subject to conversion ratio adjustments for stock splits, stock dividends, reclassifications, and similar transactions and subject to vesting and the respective participation threshold for Class B Units. Class B Units do not expire. There were no Class B Units issued during the three months ended March 31, 2026 or 2025. As of March 31, 2026, outstanding Class B Units had participation thresholds between $0.00 to $12.00.
NOTE 13 — NET EARNINGS PER SHARE
Basic and diluted net earnings per share is computed by dividing the net earnings attributable to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Diluted net earnings per share is computed by giving effect to all potentially dilutive shares. Potentially dilutive shares have been excluded from the computation of diluted net earnings per share when their effect is anti-dilutive. Net earnings for all periods presented is attributable only to Class A common stockholders, due to no activity related to convertible preferred stock during those periods.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table presents the calculation of basic and diluted net earnings per share during the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in millions, except number of shares, which are reflected in thousands, and per share amounts) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 405 | $ | 373 | |||||||||||||||||||
| Net income attributable to non-controlling interests | 155 | 157 | |||||||||||||||||||||
| Net income attributable to Carvana Co. Class A common stockholders - basic and diluted | $ | 250 | $ | 216 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding | 142,749 | 134,058 | |||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding - basic | 142,749 | 134,058 | |||||||||||||||||||||
| Dilutive effect of Class A common shares: | |||||||||||||||||||||||
| Stock Options (1) | 2,635 | 3,436 | |||||||||||||||||||||
| Restricted Stock Units (1) | 2,701 | 5,093 | |||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding - diluted | 148,085 | 142,587 | |||||||||||||||||||||
| Net earnings per share of Class A common stock - basic | $ | 1.75 | $ | 1.61 | |||||||||||||||||||
| Net earnings per share of Class A common stock - diluted | $ | 1.69 | $ | 1.51 |
(1) Calculated using the treasury stock method, if dilutive.
Shares of Class B common stock do not share in the losses or income of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted net earnings per share of Class B common stock under the two-class method has not been presented.
The following table presents potentially dilutive securities, as of the end of the period, excluded from the computations of diluted net earnings per share of Class A common stock for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Stock Options (1) | — | 97 | |||||||||||||||||||||
| Restricted Stock Units (1) | 136 | 308 | |||||||||||||||||||||
| Class A Units (2) | 76,145 | 79,171 | |||||||||||||||||||||
| Class B Units (2) | 1,298 | 1,532 |
(1) Represents number of instruments outstanding at the end of the period that were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive.
(2) Represents the weighted-average as-converted LLC units that were evaluated under the if-converted method for potentially dilutive effects and were determined to be anti-dilutive.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 14 — INCOME TAXES
As described in Note 1 — Business Organization and Note 10 — Stockholders' Equity, as a result of the IPO, Carvana Co. began consolidating the financial results of Carvana Group. Carvana Group is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Carvana Group is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Carvana Group is passed through to and included in the taxable income or loss of its members (LLC Unitholders), including Carvana Co., based on its allocable share held in Carvana Group. Nonetheless, many states require that partnerships make mandatory tax payments on behalf of members who are non-residents of the respective states. Accordingly, if Carvana Group generates taxable income and is required to remit income tax on behalf of its members, it will make payments to the states through composite tax returns and non-resident withholding. These payments are treated as distributions to the affected members because the amounts remitted are a payment of income tax on behalf of the affected members. Payments on behalf of non-controlling members of $2 million for each of the three months ended March 31, 2026 and 2025 are included as reductions to the non-controlling interests in the accompanying unaudited condensed consolidated statements of stockholders' equity. Payments on behalf of Carvana Co. Sub LLC are recorded through the income tax provision in the accompanying unaudited condensed consolidated statements of operations.
As described in Note 10 — Stockholders' Equity, the Company acquires LLC Units in connection with exchanges with LLC Unitholders. During the three months ended March 31, 2026 and 2025, the Company recognized a gross deferred tax asset of $2 million and $3 million, respectively, associated with the difference in basis in its investment in Carvana Group related to these acquisitions of LLC Units.
The Company recognizes uncertain income tax positions when it is more-likely-than-not the position will be sustained upon examination. As of March 31, 2026 and December 31, 2025, the Company has not identified any uncertain tax positions and has not recognized any related reserves.
The Company's effective tax rates for the three months ended March 31, 2026 and 2025 were 8.1% and 0.5%, respectively. The Company's tax provision for interim periods is determined by using an estimated annual effective tax rate based on anticipated blended federal and state income tax rates, adjusted for discrete items arising in that quarter. Each quarter, the Company updates the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The increase in its effective tax rate was primarily due to the impact of releasing the valuation allowance on its deferred tax assets in the fourth quarter of 2025. The Company's effective tax rate for the three months ended March 31, 2026 differed from the expected U.S. federal statutory rate of 21% primarily due to income attributable to non-controlling interests and excess tax benefits related to stock-based compensation.
Tax Receivable Agreement
Carvana Co. expects to obtain an increase in its share of the tax basis in the net assets of Carvana Group when LLC Units are exchanged by the LLC Unitholders and other qualifying transactions. As described in Note 10 — Stockholders' Equity, each change in outstanding shares of Class A common stock results in a corresponding increase or decrease in Carvana Co.'s ownership of LLC Units. The Company intends to treat any exchanges of LLC Units as direct purchases of LLC interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that Carvana Co. would otherwise pay in the future to various taxing authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
In connection with the IPO, the Company entered into a TRA. Under the TRA, the Company generally will be required to pay to the LLC Unitholders 85% of the amount of cash savings, if any, in U.S. federal, state or local tax that the Company actually realizes directly or indirectly (or are deemed to realize in certain circumstances) as a result of (i) certain tax attributes created as a result of any sales or exchanges (as determined for U.S. federal income tax purposes) to or with the Company of their interests in Carvana Group for shares of Carvana Co.'s Class A common stock or cash, including any basis adjustment relating to the assets of Carvana Group and (ii) tax benefits attributable to payments made under the TRA (including imputed interest). The Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. To the extent that the Company is unable to timely make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid.
If the Internal Revenue Service or a state or local taxing authority challenges the tax basis adjustments that give rise to payments under the TRA and the tax basis adjustments are subsequently disallowed, the recipients of payments under the
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
agreement will not reimburse the Company for any payments the Company previously made to them. Any such disallowance would be taken into account in determining future payments under the TRA and would, therefore, reduce the amount of any such future payments. Nevertheless, if the claimed tax benefits from the tax basis adjustments are disallowed, the Company’s payments under the TRA could exceed its actual tax savings, and the Company may not be able to recoup payments under the TRA that were calculated on the assumption that the disallowed tax savings were available.
The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, (ii) there is a material breach of any material obligations under the TRA; or (iii) the Company elects an early termination of the TRA, then the TRA will terminate and the Company's obligations, or the Company's successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any LLC Units that have not been exchanged are deemed exchanged for the fair market value of the Company's Class A common stock at the time of termination.
As of March 31, 2026 and December 31, 2025, the Company recorded a TRA liability of $2.2 billion and $2.3 billion, respectively, of which $1.7 billion each period is due to related parties. As of March 31, 2026 and December 31, 2025, $98 million and $37 million, respectively, are included in other current liabilities on the accompanying unaudited condensed consolidated balance sheets. During the three months ended March 31, 2026 and 2025, the Company made TRA payments of $37 million and $17 million, respectively, of which $29 million and $13 million, respectively, was paid to related parties.
The following table presents a roll forward of the Company's TRA liability from December 31, 2025, the first period in which the remaining TRA liability was recorded, through March 31, 2026. Comparative roll forward information for the period from December 31, 2024 through March 31, 2025 has not been presented because the remaining TRA liability had not been recorded as of December 31, 2024.
| Three Months Ended March 31, 2026 | |||||
| (in millions) | |||||
| Beginning balance | $ | 2,265 | |||
| Reductions to TRA: | |||||
| TRA payments | (37) | ||||
| Ending balance | 2,228 | ||||
| Less: current portion | (98) | ||||
| TRA liability, net of current portion | $ | 2,130 |
NOTE 15 — LEASES
The Company is party to various lease agreements for real estate and transportation equipment. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company also assesses whether each lease is an operating or finance lease at the lease commencement date. Rent expense of operating leases is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances.
Operating Leases
As of March 31, 2026, the Company is a tenant under various operating leases related to certain of its hubs, vending machines, inspection and reconditioning centers, auction locations, storage, parking, dealerships, and corporate offices. The initial terms expire at various dates between 2026 and 2039. Many of the leases include one or more renewal options ranging from one to twenty years and some contain purchase options. The Company leases and subleases certain of its real estate to third parties. Lease and sublease income for each of the three months ended March 31, 2026 and 2025 was $2 million and is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Company's operating leases are included in operating lease right-of-use assets, other current liabilities, and operating lease liabilities on the accompanying unaudited condensed consolidated balance sheets.
Refer to Note 6 — Related Party Transactions for further discussion of operating leases with related parties.
Finance Leases
The Company has finance leases for certain equipment in its transportation fleet. The leases have initial terms of two to five years, some of which include extension options for up to four additional years and require monthly payments. The Company's finance leases are included in current portion of long-term debt and long-term debt on the accompanying unaudited condensed consolidated balance sheets.
Lease Costs and Activity
The Company's lease costs and activity during the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Lease costs: | |||||||||||||||||||||||
| Finance leases: | |||||||||||||||||||||||
| Amortization of finance lease assets | $ | 24 | $ | 23 | |||||||||||||||||||
| Interest obligations under finance leases | 2 | 3 | |||||||||||||||||||||
| Total finance lease costs | $ | 26 | $ | 26 | |||||||||||||||||||
| Operating leases: | |||||||||||||||||||||||
| Fixed lease costs to non-related parties | $ | 17 | $ | 16 | |||||||||||||||||||
| Fixed lease costs to related parties | 1 | 1 | |||||||||||||||||||||
| Total operating lease costs | $ | 18 | $ | 17 | |||||||||||||||||||
| Cash payments related to lease liabilities included in operating cash flows: | |||||||||||||||||||||||
| Operating lease liabilities to non-related parties | $ | 26 | $ | 24 | |||||||||||||||||||
| Operating lease liabilities to related parties | $ | 1 | $ | 1 | |||||||||||||||||||
| Interest payments on finance lease liabilities | $ | 2 | $ | 3 | |||||||||||||||||||
| Cash payments related to lease liabilities included in financing cash flows: | |||||||||||||||||||||||
| Principal payments on finance lease liabilities | $ | 19 | $ | 20 |
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Maturity Analysis of Lease Liabilities
The following table summarizes maturities of lease liabilities as of March 31, 2026:
| Operating Leases (1) | |||||||||||||||||||||||||||||
| Finance Leases | Related Party (2) | Non-Related Party | Total Operating | Total | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Remainder of 2026 | $ | 63 | $ | 1 | $ | 79 | $ | 80 | $ | 143 | |||||||||||||||||||
| 2027 | 47 | 2 | 99 | 101 | 148 | ||||||||||||||||||||||||
| 2028 | 20 | 2 | 92 | 94 | 114 | ||||||||||||||||||||||||
| 2029 | 13 | 2 | 74 | 76 | 89 | ||||||||||||||||||||||||
| 2030 | 8 | — | 67 | 67 | 75 | ||||||||||||||||||||||||
| Thereafter | — | — | 183 | 183 | 183 | ||||||||||||||||||||||||
| Total minimum lease payments | 151 | 7 | 594 | 601 | 752 | ||||||||||||||||||||||||
| Less: amount representing interest | (14) | (1) | (133) | (134) | (148) | ||||||||||||||||||||||||
| Total lease liabilities | $ | 137 | $ | 6 | $ | 461 | $ | 467 | $ | 604 |
(1) Leases that are on a month-to-month basis, short-term leases, and lease extensions that the Company does not expect to exercise are not included.
(2) Related party lease payments exclude rent payments due under the DriveTime lease agreements for locations where the Company shares space with DriveTime, as those are variable lease payments contingent upon the Company's utilization of the leased assets.
As of March 31, 2026 and December 31, 2025, none of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.
Lease Terms and Discount Rates
The weighted-average remaining lease terms and discount rates as of March 31, 2026 and 2025 were as follows, excluding short-term operating leases:
| As of March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Weighted-average remaining lease terms (years) | |||||||||||
| Operating leases | 7.0 | 7.2 | |||||||||
| Finance leases | 2.7 | 2.5 | |||||||||
| Weighted-average discount rate | |||||||||||
| Operating leases | 7.3 | % | 7.3 | % | |||||||
| Finance leases | 6.3 | % | 6.0 | % |
NOTE 16 — COMMITMENTS AND CONTINGENCIES
Accrued Limited Warranty
As part of its retail strategy, the Company provides a 100-day or 4,189-mile limited warranty to customers to repair certain broken or defective components of each used vehicle sold. As such, the Company accrues for such repairs based on actual claims incurred to-date and repair reserves based on historical trends. The liability was $30 million and $25 million as of March 31, 2026 and December 31, 2025, respectively, and is included in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. The expense was $49 million and $35 million for the three
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
months ended March 31, 2026 and 2025, respectively, and is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
Purchase Obligations
The Company has purchase obligations for certain customary services related to operating a wholesale auction business of $78 million in aggregate over the next three years, as of March 31, 2026. These purchase obligations are recorded as liabilities when the services are rendered.
Legal Matters
From time to time, the Company is involved in various claims, legal actions, and governmental inquiries. For example, the Company is currently a party to legal and regulatory disputes, including intellectual property disputes and putative class action lawsuits, alleging, among other things, patent infringement, the violation of federal securities laws and state laws regarding consumer protection, stockholders' rights, labor and employment, and the titling and registration of vehicles sold to its customers. These disputes include, but are not limited to, Carvana, LLC v. IBM Corp., United States District Court for the Southern District of New York (Case No. 7:23-cv-08616-KMK-VR); Dana Jennings, et al. v. Carvana, LLC, United States District Court for the Eastern District of Pennsylvania (Case No. 5:21-cv-05400-EGS); and Syretta Harvin et al. v. Carvana, LLC et al., United States District Court for the Eastern District of Pennsylvania (Case No. 2:23-cv-02068-MRP).
Saleem Erakat v. Carvana Operations HC LLC, N.D. Cal. Case No. 3:26-cv-00263-AGT was settled for an immaterial amount during the three months ended March 31, 2026.
Additionally, the Attorney General offices of various states, from time to time, conduct inquiries regarding the Company's inspection, reconditioning, advertising, sale, delivery, titling, registration, lending practices, and post-sale service of retail vehicles. The Company works closely with government agencies to respond to these requests and fully cooperates with any such inquiries, which if not amicably resolved, have resulted, and may again result in state Attorney General offices filing claims against the Company.
Securities Class Action
On August 3, 2022, a putative class action complaint titled John Brent v. Carvana Co., et al. was filed in the United States District Court for the District of New Jersey against the Company and certain of the Company's executive officers. The complaint was filed on behalf of a purported class of stockholders and asserts violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 10b-5. The complaint sought unspecified damages and an award of fees, costs, and expenses. On September 29, 2022, a second putative class action complaint titled Rodeo Collection Ltd. v. Carvana Co., et al. was filed in the United States District Court for the District of New Jersey, alleging similar claims, and seeking the same form of relief. The two cases were then consolidated and subsequently transferred to the United States District Court for the District of Arizona (the "Arizona District Court") as In re Carvana Co. Securities Litigation, United States District Court for the District of Arizona (Case No. CV-22-2126-PHX-MTL). On February 14, 2023, a consolidated complaint was filed in the Arizona District Court, alleging new claims for violation of Section 20A of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended (the "Securities Act"), and naming as new defendants certain Carvana directors, officers, and underwriters. The Arizona District Court granted the Company's motion to dismiss the consolidated complaint on February 29, 2024 and gave the plaintiff leave to file an amended complaint, which was filed on March 29, 2024. On December 16, 2024, the Company's motion to dismiss the consolidated complaint, as amended, was granted with respect to alleged violations of Section 20A of the Exchange Act and Section 12(a)(2) of the Securities Act, granted in part and denied in part with respect to alleged violations of Section 10(b) and Rule 10b-5 of the Exchange Act and Section 11 of the Securities Act, and denied with respect to alleged violations of Section 20(a) of the Exchange Act and Section 15 of the Securities Act. The Company is engaged in discovery and intends to continue vigorously defending the remaining claims under this action in all respects. At this time, the Company is not in a position to assess the likelihood of any potential loss or adverse effect on its financial condition or to estimate the amount or range of potential losses, if any, from this action.
As of March 31, 2026 and December 31, 2025, the Company had an accrual for unresolved legal matters, including, if applicable, those discussed above, of $14 million each period. The accrual is classified in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets and selling, general and administrative
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
expenses in the accompanying unaudited condensed consolidated statements of operations. If an unfavorable ruling or development were to occur, there exists the possibility of a material adverse impact on the Company's business, results of operations, financial condition or cash flows.
Future litigation may be necessary to defend the Company and its partners by determining the scope, enforceability and validity of third party proprietary rights or to establish its proprietary rights. The results of any current or future litigation or government inquiries cannot be predicted with certainty, and regardless of the outcome, litigation and government inquiries can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
NOTE 17 — FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company holds certain assets that are required to be measured at fair value on a recurring basis, and beneficial interests in securitizations for which it elected the fair value option. A description of the fair value hierarchy and the Company's methodologies are included in Note 2 — Summary of Significant Accounting Policies in its most recent Annual Report on Form 10-K.
The following tables are a summary of fair value measurements and hierarchy level at March 31, 2026 and December 31, 2025:
| March 31, 2026 | |||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds | $ | 1,265 | $ | 1,265 | $ | — | $ | — | |||||||||||||||
| Beneficial interests in securitizations | $ | 492 | $ | — | $ | — | $ | 492 | |||||||||||||||
| Warrants | $ | 15 | $ | — | $ | — | $ | 15 | |||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds | $ | 1,297 | $ | 1,297 | $ | — | $ | — | |||||||||||||||
| Beneficial interests in securitizations | $ | 486 | $ | — | $ | — | $ | 486 | |||||||||||||||
| Warrants | $ | 58 | $ | — | $ | — | $ | 58 | |||||||||||||||
Money Market Funds
Money market funds consist of highly liquid investments with original maturities of three months or less and are classified in cash and cash equivalents and restricted cash in the accompanying unaudited condensed consolidated balance sheets.
Beneficial Interests in Securitizations
Beneficial interests in securitizations include rated notes and certificates of the securitization trusts, the same securities as issued to other investors as described in Note 8 — Securitizations and Variable Interest Entities. Beneficial interests in securitizations are initially treated as Level 2 assets when the securitization transaction occurs in close proximity to the end of the period and there is a lack of observable changes in the economic inputs. When the securitization transaction does not occur in close proximity to the end of the period and there have been observable changes in the economic inputs, beneficial interests in securitizations are classified as Level 3.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Company's beneficial interests in securitizations include rated notes and certificates and other assets, all of which are classified as Level 3 due to the lack of observable market data. The Company determines the fair value of its rated notes based on non-binding broker quotes. The non-binding broker quotes are based on models that consider the prevailing interest rates, recent market transactions, and current business conditions. The Company determines the fair value of its certificates and other assets using a combination of non-binding market quotes and internally developed discounted cash flow models. The discounted cash flow models use discount rates based on prevailing interest rates and the characteristics of the specific instruments. As of March 31, 2026 and December 31, 2025, the range of discount rates were 5.3% to 10.0% and 5.2% to 10.0%, respectively, and the weighted average of discount rates were 9.0% both periods. Significant increases or decreases in the inputs to the models could result in a significantly higher or lower fair value measurement. The Company elected the fair value option on its beneficial interests in securitizations, which allows it to recognize changes in the fair value of these assets in the period the fair value changes. Changes in the fair value of the beneficial interests in securitizations are reflected in other expense (income), net in the accompanying unaudited condensed consolidated statements of operations.
For beneficial interests in securitizations measured at fair value on a recurring basis, the Company's transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period on a quarterly basis. There were no transfers out of Level 3 during the three months ended March 31, 2026 or 2025.
The Company sells certain of its beneficial interests in securitizations that are not required to be retained by the Risk Retention Rules. For the three months ended March 31, 2026 the Company sold $16 million in beneficial interests in securitizations. For the three months ended March 31, 2025, the Company did not sell any beneficial interests in securitizations.
The following table presents additional information about Level 3 beneficial interests in securitizations measured at fair value on a recurring basis for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Opening Balance | $ | 486 | $ | 464 | |||||||||||||||||||
| Received in securitization transactions | 75 | 59 | |||||||||||||||||||||
| Payments received | (55) | (51) | |||||||||||||||||||||
| Change in fair value | 2 | 3 | |||||||||||||||||||||
| Sales of beneficial interests | (16) | — | |||||||||||||||||||||
| Ending Balance | $ | 492 | $ | 475 |
Warrants
Root Warrants
In October 2021, the Company purchased Series A convertible preferred shares in Root, Inc. ("Root"), an equity security that does not have a readily determinable fair value. The Company elected to measure this investment using a measurement alternative pursuant to the accounting standards and recorded the investment at its cost of $126 million, which will subsequently be adjusted for observable price changes. The Company considered all relevant transactions since the date of its investment and has not recorded any impairments or upward or downward adjustments to the carrying amount of its investment in Root, as there have not been changes in the observable price of its equity interest through March 31, 2026.
Also in October 2021, the Company entered into a commercial agreement with Root, under which the Root auto insurance products were to be embedded into the Company's e-commerce platform. In accordance with the provisions of the commercial agreement, the Company received eight tranches of warrants to purchase shares of Root's Class A common stock (the "Root Warrants"). Three tranches of Root Warrants, for 2.4 million, 3.2 million, and 1.6 million shares of Root's Class A common stock, respectively, expired on September 1, 2025. Also on September 1, 2025, a fourth tranche of Root Warrants for 1.4 million shares of Root's Class A common stock became exercisable and on February 28, 2026, a fifth tranche of Root Warrants for 1.5 million shares of Root's Class A common stock became exercisable, both upon achievement of certain
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
insurance sales metrics through the integrated auto insurance solution embedded into the Company's e-commerce platform. The remaining three tranches vest based upon achievement of additional defined milestones tied to insurance sales through the integrated solution and are considered derivative instruments. All remaining tranches of Root Warrants, including the fourth and fifth tranches that became exercisable on September 1, 2025 and February 28, 2026, respectively, expire September 1, 2027.
Through June 30, 2025, the Company used a Monte Carlo simulation to estimate the fair value of these Root Warrants. The expiration of the first three tranches of Root Warrants on September 1, 2025 eliminated the prior interdependencies between the different tranches of Root Warrants. After September 2025, the Company used a Black-Scholes model to estimate the fair value of these Root Warrants, which are classified as Level 3. The primary unobservable input utilized in determining the fair value of the Root Warrants was the expected volatility of Root's class A common stock, which was implied from the historical volatility of such common stock. As of March 31, 2026 and 2025, the expected volatility utilized in the valuations was 90% and 100%, respectively.
At contract inception, the Company recognized an asset of $30 million for the Root Warrants and deferred revenue, classified in other assets and other liabilities, respectively. In 2022, the Company determined it was probable that the volume of insurance products required to earn the Root Warrants would be achieved and recorded an additional $75 million of Root Warrants and deferred revenue based on the contract inception date fair value as determined by the Monte Carlo simulation applied as of such date. As of March 31, 2026 and December 31, 2025, the deferred revenue balance was $31 million and $36 million, respectively. During the three months ended March 31, 2026 and 2025, the Company recognized $5 million in Root Warrant revenue in each period. The deferred revenue is recognized over the expected contract performance period within other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.
The following table presents changes in the Company's Level 3 Root Warrants measured at fair value:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Opening balance | $ | 56 | $ | 120 | |||||||||||||||||||
| Unrealized (loss) gain | (42) | 158 | |||||||||||||||||||||
| Ending balance | $ | 14 | $ | 278 |
In relation to the Root Warrants, the Company recognized a decrease in fair value of $42 million and an increase in fair value of $158 million during the three months ended March 31, 2026 and 2025, respectively, which are included in other expense (income), net in the accompanying unaudited condensed consolidated statements of operations.
Fair Value of Financial Instruments
The carrying amounts of restricted cash, accounts receivable, accounts payable and accrued liabilities, and accounts payable to related party approximate fair value due to their respective short-term maturities. The carrying value of the short-term revolving facilities was determined to approximate fair value due to their short-term duration and variable interest rates that approximate prevailing interest rates as of each reporting period. The carrying value of sale leasebacks was determined to approximate fair value as each of the transactions were entered into at prevailing interest rates during each respective period and they have not materially changed as of or during the periods ended March 31, 2026 and December 31, 2025. The carrying value of the financing of beneficial interests in securitizations was determined to approximate fair value because in the event of a decline in the fair value of the pledged collateral of the financing, the repurchase price of the pledged collateral will be increased by the amount of the decline.
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The fair value of the Senior Notes, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined using Level 2 inputs based on quoted market prices for the identical liability. The fair value of the Senior Notes as of March 31, 2026 and December 31, 2025 was as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (in millions) | |||||||||||
| Carrying value, net of unamortized debt issuance costs and unamortized premium | $ | 4,025 | $ | 4,025 | |||||||
| Fair value | $ | 4,273 | $ | 4,403 |
The fair value of finance receivables, which are not carried at fair value on the accompanying unaudited condensed consolidated balance sheets, was determined utilizing the estimated sales price based on the historical experience of the Company. Such fair value measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy. The carrying value and fair value of the finance receivables as of March 31, 2026 and December 31, 2025 were as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (in millions) | |||||||||||
| Carrying value | $ | 982 | $ | 813 | |||||||
| Fair value | $ | 1,067 | $ | 886 |
NOTE 18 — SUPPLEMENTAL CASH FLOW INFORMATION
The following table summarizes supplemental cash flow information for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in millions) | |||||||||||
| Supplemental cash flow information: | |||||||||||
| Cash payments for interest | $ | 198 | $ | 139 | |||||||
| Cash payments for taxes | $ | 1 | $ | 1 | |||||||
| Non-cash investing and financing activities: | |||||||||||
| Capital expenditures financed through long-term debt | $ | 25 | $ | — | |||||||
| Capital expenditures included in accounts payable and accrued liabilities | $ | 3 | $ | — | |||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | 5 | $ | 7 | |||||||
| Property and equipment acquired under finance leases | $ | — | $ | 4 | |||||||
| Equity-based compensation expense capitalized to property and equipment | $ | 3 | $ | 2 | |||||||
| Fair value of beneficial interests received in securitization transactions | $ | 75 | $ | 59 | |||||||
| Reductions of beneficial interests in securitizations and associated long-term debt | $ | 40 | $ | 36 | |||||||
CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the accompanying unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the accompanying unaudited condensed consolidated statements of cash flows for all periods presented:
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 2,410 | $ | 2,327 | $ | 1,858 | |||||||||||||||||
| Restricted cash | 102 | 102 | 46 | ||||||||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,512 | $ | 2,429 | $ | 1,904 |
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