10-KPeriod: FY2019

CARVANA CO. Annual Report, Year Ended Dec 31, 2019

Filed February 26, 2020For Securities:CVNA

Summary

Carvana Co. (CVNA) reported significant revenue growth in its 2019 10-K filing, driven by an 88.7% increase in used vehicle unit sales to 177,549 units. The company expanded its market presence significantly, operating in 146 metropolitan markets by the end of 2019, up from 85 markets in the prior year. While revenue nearly doubled to $3.94 billion, Carvana continued to incur substantial net losses, totaling $364.6 million for the year. This loss is attributed to significant investments in expanding its e-commerce platform, logistics network, and marketing efforts to fuel rapid growth. The company highlights its vertically integrated e-commerce platform, differentiated shopping experience, proprietary financing technology, and efficient logistics network as key competitive advantages. However, it also faces considerable risks, including a history of losses, the ability to manage rapid growth effectively, dependence on various third-party technologies, and intense competition within the automotive retail industry. Investors should note the company's ongoing investment in growth strategies, which are expected to continue to pressure profitability in the short term, but are intended to build market share and long-term scalability.

Financial Highlights

42 data points
Beta

Revenue

$3.94B

12.9% Gross Margin

Net Income

-$115.00M

-2.9% Net Margin

EPS (Diluted)

$-0.49

Total Assets

$2.06B

Cash & Equivalents

$76.00M

Free Cash Flow

-$988.00M

Financial Statements
Beta
Revenue$3.94B
Cost of Revenue$3.43B
Gross Profit$507.00M
SG&A Expenses$787.00M
Interest Expense$81.00M
Net Income-$115.00M
EPS (Diluted)$-0.49
Shares Outstanding (Diluted)234.24M

Key Highlights

  • 1Revenue surged by 101.5% to $3.94 billion in 2019, driven by a significant increase in used vehicle unit sales.
  • 2Used vehicle unit sales grew by 88.7% to 177,549 units in 2019.
  • 3Market expansion continued aggressively, with the number of markets served increasing from 85 to 146 by year-end 2019.
  • 4The company reported a net loss of $364.6 million for the year, indicating ongoing investment in growth at the expense of profitability.
  • 5Gross profit per unit (including gift) increased by 36.5% to $2,852, demonstrating improved operational efficiency on a per-unit basis.
  • 6Carvana's balance sheet shows total assets of $2.06 billion and total debt of $1.50 billion (net) as of December 31, 2019, reflecting substantial leverage to fund its growth.

Frequently Asked Questions

Carvana is an e-commerce platform for buying and selling used cars. Its strategy focuses on providing a transparent, convenient, and customer-centric online experience, disrupting the traditional used car market by leveraging technology and an efficient logistics network. Key growth drivers include expanding market reach, increasing vehicle unit sales, optimizing inventory, and enhancing its online platform and mobile capabilities.

As of the filing date (February 26, 2020), Carvana had not achieved profitability. The company reported significant net losses in prior years and continued to incur substantial net losses in 2019 ($364.6 million). Management indicated expectations to continue incurring losses as it invests heavily in growth and expansion initiatives.

Carvana finances its operations and growth through a combination of equity issuances, debt financing (including senior unsecured notes and revolving credit facilities for inventory and receivables), and cash generated from its operations. The company has substantial debt on its balance sheet, which it uses to fund inventory purchases, capital expenditures for infrastructure like inspection and reconditioning centers (IRCs) and vending machines, and marketing efforts.

Carvana faces several key risks, including its history of losses and uncertain path to profitability, the challenge of managing its rapid growth effectively, potential damage to its brand reputation from customer service issues, intense competition from traditional dealerships and online platforms, dependence on third-party technology providers, and significant indebtedness. The company also notes risks related to changes in vehicle pricing, inventory acquisition, and regulatory compliance.