10-KPeriod: FY2017

CARVANA CO. Annual Report, Year Ended Dec 31, 2017

Filed March 6, 2018For Securities:CVNA

Summary

Carvana Co. (CVNA) reported significant year-over-year revenue growth in its 2017 10-K filing, driven primarily by a substantial increase in used vehicle sales. The company expanded its market presence, doubling the number of operational markets from 21 to 44, which directly correlated with a 135.9% increase in retail unit sales. Despite this top-line growth, Carvana continued to operate at a net loss, with losses widening compared to the previous year, largely due to increased selling, general, and administrative expenses associated with its aggressive expansion strategy. The company successfully completed its Initial Public Offering (IPO) in May 2017, raising significant capital, and also secured additional funding through the sale of convertible preferred stock. This capital is being utilized to fuel further market expansion, technology investments, and general corporate purposes. Carvana's business model relies on scaling its e-commerce platform and vertically integrated supply chain to achieve economies of scale and improve profitability per unit over time, though significant investments are still being made.

Financial Highlights

42 data points
Beta

Revenue

$858.87M

7.9% Gross Margin

Net Income

-$62.84M

-7.3% Net Margin

Total Assets

$641.14M

Cash & Equivalents

$172.68M

Free Cash Flow

-$278.41M

Financial Statements
Beta
Revenue$858.87M
Cost of Revenue$790.78M
Gross Profit$68.09M
SG&A Expenses$223.40M
Interest Expense$7.66M
Net Income-$62.84M

Key Highlights

  • 1Net sales and operating revenues increased by 135.2% to $858.9 million in 2017, up from $365.1 million in 2016.
  • 2Used vehicle sales, the primary revenue driver, grew by 133.0% to $796.9 million in 2017.
  • 3Retail unit sales more than doubled, increasing by 135.9% to 44,252 units in 2017, compared to 18,761 in 2016.
  • 4The number of operational markets expanded significantly from 21 to 44 by the end of 2017.
  • 5Total gross profit increased by 254.7% to $68.1 million in 2017, with total gross profit per unit rising to $1,539.
  • 6The company incurred a net loss of $164.3 million in 2017, an increase from $93.1 million in 2016, due to substantial investments in growth.
  • 7Carvana completed its Initial Public Offering (IPO) in May 2017, raising approximately $205.8 million in net proceeds.

Frequently Asked Questions

Carvana is an e-commerce platform for buying used cars. Its primary revenue stream comes from the net sales of used vehicles. Additional revenue is generated from wholesale vehicle sales, vehicle service contracts (VSCs), GAP waiver coverage, and gains on the sale of automotive finance receivables originated to finance customer purchases.

Carvana is funding its expansion through a combination of sources. In 2017, it successfully completed an Initial Public Offering (IPO), raising significant capital, and also sold convertible preferred stock. The company also utilizes its Floor Plan Facility to finance vehicle inventory and has entered into various agreements to sell its originated finance receivables to third parties, which provides additional liquidity.

In 2017, Carvana reported a net loss of $164.3 million, an increase from the prior year, driven by substantial investments in expanding its market reach, increasing its operational infrastructure, and marketing efforts. While the company saw significant growth in revenue and gross profit per unit, it is still operating at a loss as it prioritizes growth and scaling its platform. Management expects operating expenses to increase substantially with continued investment, potentially leading to further losses in the near term, but aims to achieve economies of scale and long-term profitability.

Carvana's key operating metrics include Retail Units Sold (the primary measure of growth), Number of Markets (indicating geographic expansion), Average Monthly Unique Visitors (reflecting brand strength and advertising effectiveness), Inventory Units Available on Website (showing selection breadth), Average Days to Sale (impacting profitability), and Total Gross Profit per Unit (a measure of overall profitability on each sale).