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  "documentTitle": "Carvana Co. (CVNA)",
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  "presentationDate": "2019-03-01 00:00:00",
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  "pageNumber": 42,
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  "notes": "The slide uses a table to demonstrate the impact of the 'ex-gift' adjustment on gross profit per unit.",
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      "kind": "callout",
      "text": "Interestingly, management appears to treat the \"gift\" as a component of COGS (and capitalizes some costs in inventory) rather than as part of compensation expense in SG&A, thereby inflating GPU by adjusting for it",
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      "text": "Total gross profit per unit: $2,302",
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      "text": "In Q3 FY18, to commemorate Carvana's 100,000th vehicle sold, CEO Ernie Garcia III announced that he would grant all current employees 165 CVNA shares from his personal holdings upon their one-year employment anniversaries. For tax purposes, these \"gifts\" will be structured as stock grants (thereby counting against taxable GAAP earnings) to be offset by matching contributions of stock from Garcia to the Company. Of course, management believes that this does not represent a \"real\" cost to the Company, since the gift is ultimately coming out of Garcia's pocket. However, with management struggling to keep turnover under control and incapable of generating profits, we interpret this \"gift\" as a clever incentive designed to preserve a reasonable level of employee loyalty, and minimize additional cash outlay for wages. However, if Carvana is incapable of continuing to prop-up its stock, employees may be less welling to accept this type of equity compensation in the future.",
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      "kind": "paragraph",
      "text": "If Carvana needs to pay employees a one-year bonus to encourage employee loyalty, reduce turnover and as a substitute for cash, why should this be excluded from Company expenses?",
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      "kind": "paragraph",
      "text": "Spruce Point is often amused by the creative ways in which management teams adjust earnings to inflate company profitability. Carvana has given us a new one: \"ex-gift.\"",
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      "text": "Source: CVNA Q3 FY 2018 10-Q",
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      "kind": "table",
      "text": "Retail units sold 25,324; Number of markets 78; Average monthly unique visitors 2,433,815; Inventory units available on website 11,152; Average days to sale 63; Total gross profit per unit (incl. Gift) $2,263; Total gross profit per unit ex-Gift $2,302",
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      "kind": "title",
      "text": "Carvana's Contribution To Corporate Finance Lexicon: \"Ex-Gift\"",
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