Carvana CVNA · USD

NOTE 16 — COMMITMENTS AND CONTINGENCIES Accrued Limited WarrantyAs 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 $25 million and $21 million, as of December 31, 2025 and 2024, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. The expense was $154 million, $116 million, and $87 million for the years ended December 31, 2025, 2024, and 2023, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.Purchase ObligationsThe Company has purchase obligations for certain customary services related to operating a wholesale auction business of $84 million in aggregate over the next three years, as of December 31, 2025. These purchase obligations are recorded as liabilities when the services are rendered.Legal MattersFrom 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); 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); and Saleem Erakat v Carvana Operations HC LLC, N.D. Cal. Case No. 3:26-cv-00263-AGT.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.

NOTE 9 — DEBT INSTRUMENTS Debt instruments, excluding finance leases, which are discussed in Note 15 — Leases, as of December 31, 2025 and 2024 consisted of the following:December 31,20252024(in millions)Asset-based financing:Floor plan facility$58 $67 Financing of beneficial interests in securitizations374 354 Real estate financing485 485 Transportation fleet financing23 — Total asset-based financing940 906 Senior Secured Notes (1)3,929 4,358 Senior Unsecured Notes107 205 Total debt4,976 5,469 Less: current portion(211)(302)Less: unamortized debt issuance costs (2)(36)(46)Plus: unamortized premium (3)18 27 Total included in long-term debt, net$4,747 $5,148 (1) Includes zero and $105 million of accrued paid-in-kind ("PIK") interest as of December 31, 2025 and 2024, respectively. Accrued PIK interest increases the principal amount of Senior Secured Notes on each semi-annual interest payment date.(2) 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 consolidated balance sheets. Unamortized debt issuance costs related to revolving debt arrangements are presented within other assets on the accompanying consolidated balance sheets and not included here.(3) 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 FacilitiesFloor Plan FacilityThe 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.

NOTE 14 — INCOME TAXESAs 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 $4 million for the year ended December 31, 2025 are included as reductions to the non-controlling interests in the accompanying consolidated statements of stockholders' equity (deficit). Payments on behalf of Carvana Co. Sub LLC are recorded through the income tax provision in the accompanying consolidated statements of operations.Net (loss) income before income taxes was $(890) million, $400 million, and $175 million for the years ended December 31, 2025, 2024, and 2023, respectively. The Company had an income tax (benefit) provision of $(2.8) billion, $(4) million, and $25 million for the years ended December 31, 2025, 2024, and 2023, respectively.During the year ended December 31, 2025, management performed an assessment of the recoverability of deferred tax assets. This assessment considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. These objective and subjective factors included, but were not limited to, a recent history of sustained profitability and utilization of deferred tax assets, which is objective and verifiable, and anticipated future earnings, including consideration of historical and future excess tax benefits related to equity-based compensation.

NOTE 15 — LEASESThe 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 LeasesAs of December 31, 2025, 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 2038. 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 the years ended December 31, 2025, 2024, and 2023 was $9 million, $7 million, and $5 million, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.The Company's operating leases are included in operating lease right-of-use assets, other current liabilities, and operating lease liabilities on the accompanying consolidated balance sheets.Refer to Note 6 — Related Party Transactions for further discussion of operating leases with related parties.Finance LeasesThe 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 consolidated balance sheets.

Our Chief Information Security Officer ("CISO"), who has extensive cybersecurity knowledge and experience, including over 16 years in the field of information security and over eight years of experience leading enterprise security programs in financial services and technology organizations, is primarily responsible for assessing and managing cybersecurity risk. The CISO oversees a team of dedicated information security professionals (the “Information Security Team”) who focus on specialty areas such as application security, security compliance, security architecture and engineering, vulnerability management, and security operations, each with relevant experience and industry certifications in their respective areas. The Information Security Team leverages a variety of processes and controls to stay informed of and manage cybersecurity risk. It partners with a variety of business units, including our Engineering, Legal, Privacy, Compliance, Internal Audit, Technology, and Product teams to identify and control emerging risks. The Information Security and privacy teams also from time to time engage consultants and other third parties to assist in investigating and remediating security incidents, monitoring of security vulnerabilities, and performing annual internal and external penetration tests based on best practices and industry standards such as the Open Web Application Security Project (OWASP) Top Ten. Our Information Governance Committee, whose members include representatives from the Information Security Team and key senior leaders from relevant stakeholder groups, meets quarterly to review and discuss, among other topics, the implementation and management of these cybersecurity processes. The Information Security Team additionally has adopted security control principles based on ISO 27002:2022 and partners with counterparts in our legal department to use various formalized incident management and monitoring standards and incident response plans and playbooks, which define immediate steps in the event of a cybersecurity incident, roles and responsibilities, as well as materiality criteria to allow for efficient and effective incident management. This includes a third-party vendor management procedure, under which we conduct vendor risk assessments and, when appropriate, ongoing threat monitoring.

NOTE 10 — STOCKHOLDERS' EQUITY Classes of Common Stock and LLC UnitsCarvana 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.

NOTE 1 — BUSINESS ORGANIZATION Description of BusinessCarvana 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.OrganizationCarvana 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.

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.The following table presents the calculation of basic and diluted net earnings per share during the years ended December 31, 2025, 2024, and 2023:Years Ended December 31,202520242023(in millions, except number of shares, which are reflected in thousands, and per share amounts)Numerator:Net income$1,895 $404 $150 Net income (loss) attributable to non-controlling interests488 194 (300)Net income attributable to Carvana Co. Class A common stockholders - basic1,407 210 450 Impact on net income of assumed conversions from LLC Units488 — (300)Net income attributable to Carvana Co. Class A common stockholders - diluted$1,895 $210 $150 Denominator:Weighted-average shares of Class A common stock outstanding137,634 122,346 109,347 Nonvested weighted-average restricted stock awards— (2)(24)Weighted-average shares of Class A common stock outstanding - basic137,634 122,344 109,323 Dilutive effect of Class A common shares:Stock Options (1)3,182 3,173 979 Restricted Stock Units and Awards (1)4,304 6,689 4,815 Class A Units (2)77,760 — 83,976 Class B Units (2)1,397 — 1,485 Weighted-average shares of Class A common stock outstanding - diluted224,277 132,206 200,578 Net earnings per share of Class A common stock - basic$10.22 $1.72 $4.12 Net earnings per share of Class A common stock - diluted$8.45 $1.59 $0.75 (1) Calculated using the treasury stock method, if dilutive(2) Calculated using the if-converted stock method, if dilutiveShares 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.