What is Carvana's primary business model and revenue generation strategy?

Carvana operates an e-commerce platform for buying used cars. Its primary revenue comes from the sale of used vehicles. Additionally, Carvana generates revenue from selling Vehicle Service Contracts (VSCs), gains on the sale of automotive finance receivables originated to finance vehicle purchases, and wholesale sales of trade-in vehicles or other acquired cars.

How is Carvana's expansion strategy reflected in its financial performance?

Carvana is aggressively expanding by opening new markets. This expansion is a key driver of increased retail unit sales and overall revenue growth. However, it also leads to significant increases in Selling, General, and Administrative (SG&A) expenses, particularly in areas like compensation, advertising, and market occupancy costs, as the company invests in infrastructure and personnel to support its growth.

What is the significance of the company's IPO in May 2017?

The IPO in May 2017 was a critical event, providing Carvana with approximately $205.9 million in net proceeds. These funds were used to strengthen the balance sheet by repaying debt (specifically the Verde Credit Facility) and to provide working capital for future growth initiatives, including further market expansion and technology development. It also provided increased liquidity.

How does Carvana manage its inventory and what are the implications for its operations?

Carvana manages its used vehicle inventory through a vertically-integrated supply chain. This includes sourcing vehicles, reconditioning them to 'Carvana Certified' standards, and listing them with detailed online information. The company aims to reduce 'average days to sale' to improve vehicle turnover and profitability. Efficient inventory management is crucial for controlling costs and maximizing the selling price of vehicles.

CVNA 10-Q Quarterly Report Q2 FY2017 — Revenue, Net Income, EPS

Summary

Carvana Co. (CVNA) reported significant year-over-year growth in its second quarter 2017 results, driven by a substantial increase in retail unit sales and expansion into new markets. The company successfully completed its Initial Public Offering (IPO) in May 2017, raising over $200 million, which was used to repay debt and fund general corporate purposes. Total net sales and operating revenues more than doubled, reaching $209.4 million for the quarter, fueled by a 145.3% increase in used vehicle unit sales to 10,682. This growth trajectory is supported by the expansion of their operational footprint, with the number of markets nearly doubling to 30. While revenue surged, the company continues to operate at a loss, with a net loss of $38.9 million for the quarter, though the rate of cash used in operating activities decreased compared to the prior year, indicating improving operational efficiency as the business scales. Key strategic initiatives include continued market expansion, investment in technology and infrastructure, and efforts to increase gross profit per unit. The company is focusing on reducing the average days a vehicle stays in inventory, optimizing its inspection and reconditioning center (IRC) and logistics network utilization, and enhancing the conversion rates of ancillary products like financing and Vehicle Service Contracts (VSCs). Despite a slight decrease in average selling price per used vehicle, total gross profit per unit saw a healthy increase, demonstrating progress in monetizing each sale. Carvana's scalable, vertically-integrated e-commerce model is positioning it for continued rapid growth, but investors should monitor the path to profitability and the increasing SG&A expenses associated with expansion.

Financial Highlights

40 data points

Beta

Revenue

$209.37M

0.1% Gross Margin

Net Income

-$14.54M

-0.1% Net Margin

EPS (Diluted)

$-0.28

Total Assets

$484.88M

Cash & Equivalents

$144.43M

Free Cash Flow

-$32.42M

Financial Statements

Beta

Revenue	$209.37M
Cost of Revenue	$193.33M
Gross Profit	$16.04M
SG&A Expenses	$52.01M
Interest Expense	$2.51M
Net Income	-$14.54M
EPS (Basic)	$-0.28

Key Highlights

1Total net sales and operating revenues grew by 142.0% to $209.4 million for the three months ended June 30, 2017, compared to $86.5 million in the prior year period.
2Retail used vehicle unit sales increased by 145.3% to 10,682 units for the quarter, reflecting strong demand and market expansion.
3The number of operating markets more than doubled, increasing from 14 to 30 by the end of the quarter, demonstrating aggressive geographic expansion.
4Total gross profit per unit sold increased by 8.3% to $1,501 for the three months ended June 30, 2017, indicating improved monetization of each sale.
5The company successfully completed its IPO on May 3, 2017, raising $205.9 million in net proceeds, which improved liquidity and was used to repay debt and fund general corporate purposes.
6Selling, General, and Administrative (SG&A) expenses more than doubled to $52.0 million, primarily driven by expansion into new markets and increased headcount.
7Despite revenue growth, the company reported a net loss of $38.9 million for the quarter, though cash used in operating activities decreased year-over-year.

CARVANA CO. Quarterly Report for Q2 Ended Jun 30, 2017

Summary

Financial Highlights

Key Highlights

Frequently Asked Questions