A detailed discussion of the material factors that cause actual results differ from forward looking statements can be found in the Risk Factors section Carvana's most recent Form 10 ks and Form 10 Q. The forward looking statements and risks in this conference call are based on current expectations as of today, and Carvana assumes no obligation to update or revise them whether as a result of new developments or otherwise. Our commentary today will include non GAAP financial metrics. Unless otherwise specified, all references to GPU and SG and A will be to the non GAAP metric and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non GAAP metrics for our reported results can be found in our shareholder letter issued today, a copy of which can be found on our IR website. And with that said, I'd like to turn the call over to Ernie Garcia. Ernie? Thanks, Meg, and thanks everyone for joining the call.

In 2018, we held an Analyst Day where we walked through the long term economics we believed our business model could deliver. That analysis resulted in us projecting a long term EBITDA margin range of 8% to 13.5% at a time when our actual adjusted EBITDA margin was negative 9%. For the last four consecutive quarters we have been in that range and in Q1 in a seasonally weaker quarter, we were reporting 11.5%. This achievement is worth reflecting on. And it begs an important question. Why were we able to accurately forecast how our model would perform as a five year old newly public company that was significantly subscale and 20% of revenue away from our margin target. The answer is that the automotive industry is simpler when you zoom out than it looks when you zoom It is a mature industry with mature unit economics. It is highly fragmented with many industry players using similar processes with similar goals, and similar underlying economics. This reality provides a lot of stability and makes the key to understanding any given player understanding where they are different from the rest of the industry. This is the method we use to determine our own long term model in 2018.

We went line by line using automotive retail history simple mental models for the way our industry works, and a bottom up analysis of the differences in costs and revenues of our business given our novel approach. Zooming out has been predictive over the last seven years and we expect it to be predictive in the future as well. When we went public in 2017, we opened our S-one with a statement of our mission. To change the way people buy cars. What we meant by this that we wanted to build a business so differentiated in selection, experience and value that it just became the way people buy cars. We wouldn't have said that then if we didn't believe it. We've always believed it. But today it is much more apparent externally that our mission is achievable. What happens when we continue growing selection and benefiting from the other positive feedback in our business? What happens when we continue unlocking and sharing value with our customers, further separating our offering in speed, experience and value. What happens when more people hear from their friends and family, that buying a car from Carvana was fast fun and fair. What we think happens is that Carvana becomes the way people buy and sell cars.

We are in an incredible position with an incredible business and an incredible team. In order to continue our rapid march toward fulfilling this mission, we are setting our next objective. To grow to $3,000,000 annual retail sales with 13.5% adjusted EBITDA margins in the next five to ten years. Given the position we're in and the fundamental gains we see in front of us, the path to that goal which we currently view as both very exciting and very achievable is that we continue marching straight to 13.5% EBITDA margin and rapidly grow 3,000,000 units while sharing significant additional value with our customers along the way. While we believe this is a likely path, we are too young a company that is too early in taking advantage of our opportunity and five to ten years is too long of a time to not have flexibility available to us. Accordingly, it is important to communicate our priorities. Over the next five to ten years, we plan to prioritize growth over margin within reasonable margin ranges and plan to manage the speed of our growth to ensure we continue to deliver exceptional customer experiences that we maintain high quality efficient operations.

There are 40,000,000 used cars sold every year in The U. There are an additional 16,000,000 new cars sold every year. Adding this up and using last quarter's unit sales annualized, we are still just about 1% of this market. It's very early in the Carvana story and we are firmly on the path to becoming the way people buy and sell cars. Mark? Thank you, Ernie, and thank you all for joining us today. Our first quarter results were outstanding and driven by our team's ability to achieve further fundamental gains and operating efficiencies while also delivering significant year over year growth. For the fifth consecutive quarter, we earned positive net income and we set new records for retail units sold, revenue adjusted EBITDA, GAAP operating income and GAAP operating margin Unless otherwise noted, all further comparisons will be on a year over year basis. Retail units sold totaled 133,898 in Q1, an increase of 46% and a new company record. Revenue was $4,232,000,000 an increase of 38% and also a new company record. Consistent with past quarters, our growth in the first quarter was driven by our three long term drivers of growth, a continuously improving customer offering, increasing awareness, understanding and trust and increasing inventory selection and other benefits of scale.

We believe as we continue on our path of profitable growth, each driver will improve, creating more positive feedback in our model. Our strong profitability results in Q1 were again driven by sustained and fundamental improvements in GPU and operations expenses as well as levering our overhead expenses. Non GAAP retail GPU was 33.08 an increase of $97 Year over year changes were primarily driven by reductions in reconditioning and inbound transport costs and lower retail depreciation rates, partially offset by lower spreads between wholesale and retail market prices. Non GAAP wholesale GPU was nine sixty four a decrease of $189 Year over year changes were primarily driven by faster growth in retail units than wholesale vehicle and wholesale marketplace units and higher wholesale vehicle depreciation Non GAAP other GPU was $2,868 an increase of $430 Year over year changes in other GPU were primarily driven by higher spreads between origination interest rates and funding costs as well as a higher attachment rate on vehicle service contracts. Non GAAP SG and A expense was $468,000,000 an increase of 20%. Q1 was another strong quarter for demonstrating the power of our model to lever SG and A expenses. Our 46% growth in retail units sold led to a $750 reduction in non GAAP SG and A expense per retail unit sold.

The Carvana operations portion of SG and A expense totaled $16.58 per retail units sold, a decrease of $192 driven by our operational efficiency initiatives. The overhead portion of SG and A expense totaled 160,000,000 an increase of $9,000,000 and a decrease of $449 on a per retail unit basis. We continue to see opportunities for significant improvement in per unit SG and A expenses over time and as we scale. Driven by both continued efficiency and operational expenses as well as leverage in the fixed components of our cost structure. Adjusted EBITDA was $488,000,000 in Q1, an increase of $253,000,000 and a new company record. Adjusted EBITDA margin was 11.5% in Q1, a 3.8 percentage point increase. Our adjusted EBITDA margin of 11.5% was industry leading and is well within our long term financial model EBITDA margin range of 8% to 13.5%. Our adjusted EBITDA is very high quality compared to many rapidly growing companies due to our relatively low non cash expenses. We converted approximately 80% of adjusted EBITDA into $394,000,000 of GAAP operating income and a 9.3% GAAP operating margin in Q1, leading the public auto retail industry. As previously noted, we currently carry many expenses that support retail unit sales and capacity of over 1,000,000 units and expect our GAAP operating income to grow faster than adjusted EBITDA over time.

Q1 was a record quarter that again demonstrated the significant power of our business model. Assuming the environment remains stable looking toward Q2, we expect a sequential increase in both retail units sold and adjusted EBITDA leading to all time company records on both metrics. We remain on track to deliver significant growth in both retail units sold and adjusted EBITDA in FY 2025. In conclusion, our results in Q1 were exceptional. We remain highly motivated by our opportunity to continue driving significant profitable growth. Thank you for your attention. We will now take questions.

We will now begin the question and answer session. Question comes from Ron Josey with Citi. Please go ahead.

Great. Thanks for taking the question. I have two.

I wanted to in the letter, we talked about a lot things in the letter, specifically talked about very clear visibility to continued financial performance and I wanted just to the first part of this question is talk to us a little bit about macro, about how tariffs fit in. Very short term I know and I know you just gave long term guidance, but wanted to hear your thoughts on the here and now and how things are going and how we should how you're thinking about the impact? And then the second question is more on pricing and on GPUs. And just wondering, when you're managing the business and do you manage the business between retail GPUs and total GPUs, meaning that as you can benefit from improving retail GPUs, Does that go into lower pricing, maybe impacting the retail GPU, but yet financing GPUs are better? So I'm trying to understand how we're taking these efficiencies pushing it to greater growth and now how that rolls up to overall profitability of the company. Hopefully that made sense. Thank you.

Thank you. Okay. I'll try to be quick on the first one because I don't know that we have as much interest stuff to say as others might. But I think as it relates to tariffs, I think we've heard reasonable arguments that I think are directionally correct that if tariffs drive up car prices all else constant that's bad. And I think we've heard reasonable arguments that it would be more they would drive up new car prices by more than used car prices. So it may be a directional benefit to used cars. And it may be a benefit to business models that are able to offer a to consumers, which is a business model that we think we fit in that box. So we'll see how that works. I think the general approach that we try to take to this and I think it's been true since the beginning we believe what matters in this industry is what are your expenses compared to everyone else what are your revenues compared to everyone else and what is the experience you deliver compared to everyone And if you're better in those three things then you're going to win and the question is degree and the question is time.

Because it is a competitive industry. It's a mature industry. It's an industry that's very large. And it's an industry where many of the other players have shared economics. And so we try really hard to put all of our energy into those three things. Because you can kind of chase a macro environment in circles. That said, we pay attention. I think the good news is we have an adaptive system. Our system inherently adapts to what it sees. So if customers start to