10-QPeriod: Q1 FY2017

CARVANA CO. Quarterly Report for Q1 Ended Mar 31, 2017

Filed June 6, 2017For Securities:CVNA

Summary

This 10-Q filing for Carvana Co. (CVNA) from June 2017 provides an update following its recent Initial Public Offering (IPO). A significant event highlighted is the company's IPO completion on May 3, 2017, raising approximately $210.7 million in net proceeds. These proceeds were primarily used to repay outstanding borrowings under the Verde Credit Facility, cover organizational and IPO expenses, and fund general corporate purposes, including working capital, operating expenses, and potential business development opportunities. The company also reiterates its critical accounting policies and discloses no material changes since its prospectus filing. Importantly, Carvana emphasizes a broad range of risk factors that could impact its future performance, including its history of losses, ability to manage rapid growth, dependence on inventory acquisition and sales, reliance on automotive finance receivables for gross profits, and various operational and regulatory challenges. Investors should note the company's ongoing focus on managing its growth while navigating a competitive and evolving market.

Financial Highlights

22 data points
Beta

Revenue

$159.07M

6.1% Gross Margin

Net Income

-$38.44M

-24.2% Net Margin

EPS (Diluted)

$-0.06

Cash & Equivalents

$8.31M

Free Cash Flow

-$71.44M

Financial Statements
Beta
Revenue$159.07M
Cost of Revenue$149.33M
Gross Profit$9.75M
SG&A Expenses$45.91M
Interest Expense$2.06M
Net Income-$38.44M
EPS (Basic)$-0.06

Key Highlights

  • 1Completed Initial Public Offering (IPO) on May 3, 2017, raising approximately $210.7 million in net proceeds.
  • 2Net IPO proceeds were primarily used to repay the Verde Credit Facility, cover transaction expenses, and fund general corporate purposes, including working capital and growth initiatives.
  • 3No material changes to critical accounting policies or risk factors disclosed since the April 28, 2017 prospectus filing.
  • 4Disclosure controls and procedures were deemed effective as of the end of the period.
  • 5No changes in internal control over financial reporting materially affecting controls during the quarter.
  • 6The company's vehicle inventory financing agreement was amended to allow re-borrowing at 100% of the previous payoff amount.
  • 7Carvana faces numerous risk factors including history of losses, managing rapid growth, inventory acquisition/sales, and reliance on automotive finance receivables.

Frequently Asked Questions

Carvana completed its IPO on May 3, 2017, raising approximately $210.7 million in net proceeds. These funds were primarily used to repay all outstanding borrowings under the Verde Credit Facility, cover approximately $5.5 million in expenses related to organizational transactions and the IPO, and the remainder was allocated for general corporate purposes. This includes funding working capital, operating expenses, and selectively pursuing business development opportunities like acquisitions or investments.

According to the filing, there have been no material changes to Carvana's critical accounting policies and use of estimates from those previously described in its prospectus. Similarly, there have been no material changes to the risk factors disclosed in its April 28, 2017 prospectus.

Carvana's primary market risk exposure is to changes in inflation or interest rates. Their most significant exposure is to changes in LIBOR-based interest rates, with approximately $189.7 million outstanding under a variable Floor Plan Facility at March 31, 2017. A 100-basis point increase in interest rates could result in an approximate change to annual interest expense of $1.9 million.

Carvana states that while they are involved in various claims and legal actions in the ordinary course of business, they do not believe the ultimate resolution of these actions will have a material adverse effect on their financial position, results of operations, liquidity, or capital resources. However, they acknowledge that litigation can have adverse impacts due to defense costs and diversion of management resources.