CVNA 2019 Proxy Statement

- 27 - entrepreneurial spirit. As a result, the CEO’s target 2018 total cash, including both base salary and target annual incentive plan amount, is below the market 25 th percentile of our compensation peer group. The resulting payout range for Mr. Garcia, our chief executive officer, is $0–$530,667, with a target of $266,667. For both Mr. Jenkins, our chief financial officer, and Mr. Huston, our chief operating officer, the payout range is $0–$497,500, with a target of $250,000. For both Mr. Keeton, our chief brand officer, and Mr. Gill, our chief product officer, the payout range is $0–$437,800, with a target bonus of $220,000. Performance Metrics and Goals The performance period for the annual incentive is our fiscal year. The committee selected retail units sold, gross profit per unit ex-Gift, and EBITDA margin ex-Gift as the performance metrics for our 2018 annual incentive plan because these are the primary metrics we use in evaluating our own performance when communicating our financial results to our investors. The committee believes that these performance measures help focus the executives on growing retail units sold and revenue, increasing total gross profit per unit, and demonstrating operating leverage. The detailed definition of each measure and rationale of selection are provided below: PERFORMANCE METRICS USED IN THE 2018 AIP WEIGHT DEFINITION RATIONALE OF SELECTION Retail Units Sold 40% The number of vehicles sold to customers in a given period, net of returns under our seven-day return policy. We view retail units sold as a key measure of our growth for several reasons. First, retail units sold is the primary driver of our revenues and, indirectly, gross profit, since retail unit sales enable multiple complementary revenue streams, including financing, VSCs, GAP waiver coverage, and trade-ins. Second, growth in retail units sold increases the base of available customers for referrals and repeat sales. Third, growth in retail units sold is an indicator of our ability to successfully scale our logistics, fulfillment, and customer service operations. Gross Profit per Unit ex-Gift 40% The gross profit before compensation expense related to the 100k Milestone Gift (as hereinafter defined) is included in cost of sales, divided by retail units sold in that period. Total gross profit per unit ex-Gift is driven by sales of used vehicles, each of which generates additional revenue sources including wholesale sales of vehicles we acquire from customers as trade-ins, gains on the sales of loans originated to finance the vehicle, revenue from GAP waiver coverage, and commissions on sales of VSCs. We believe total gross profit per unit ex-Gift is a key measure of our growth and long-term profitability.