10-QPeriod: Q3 FY2017

CARVANA CO. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 7, 2017For Securities:CVNA

Summary

Carvana Co. (CVNA) demonstrated substantial growth in the nine months ended September 30, 2017, driven by a significant increase in retail unit sales, up 133.5% year-over-year. This expansion was fueled by aggressive market penetration, with the company increasing its number of operating markets from 16 to 39. Revenue surged by 129.9% to $593.8 million, with used vehicle sales being the primary contributor. Despite the strong top-line growth, the company continued to experience net losses, widening to $117.1 million for the period. This loss is attributable to significant investments in SG&A, particularly in advertising and compensation to support rapid expansion. The company also successfully completed its IPO in May 2017, raising $205.9 million in net proceeds, which were used to repay debt and for general corporate purposes, strengthening its liquidity position with cash and cash equivalents reaching $103.5 million at period end.

Financial Highlights

41 data points
Beta

Revenue

$225.38M

9.1% Gross Margin

Net Income

-$4.38M

-1.9% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$495.17M

Cash & Equivalents

$103.45M

Free Cash Flow

-$71.56M

Financial Statements
Beta
Revenue$225.38M
Cost of Revenue$204.96M
Gross Profit$20.42M
SG&A Expenses$58.68M
Interest Expense$838K
Net Income-$4.38M
EPS (Basic)$-0.06

Key Highlights

  • 1Retail unit sales grew by 133.5% to 30,735 units for the nine months ended September 30, 2017, indicating strong customer adoption.
  • 2Total net sales and operating revenues increased by 129.9% to $593.8 million for the same period, driven by used vehicle sales and expanded market reach.
  • 3The company significantly expanded its operational footprint, growing from 16 to 39 markets by September 30, 2017, enabling broader customer access.
  • 4Carvana completed its Initial Public Offering (IPO) in May 2017, raising $205.9 million in net proceeds, improving its liquidity and financial flexibility.
  • 5Total gross profit increased by 175.7% to $46.2 million, with a notable jump in total gross profit per unit to $1,503, up 18.1% from the prior year.
  • 6Selling, general, and administrative (SG&A) expenses more than doubled to $156.6 million, reflecting substantial investments in growth initiatives like advertising and headcount.
  • 7Despite revenue growth and improved gross profit per unit, the company reported a net loss of $117.1 million for the nine-month period, an increase from the prior year's loss of $57.4 million.

Frequently Asked Questions

Carvana operates an e-commerce platform for buying used cars, aiming to simplify and improve the traditional car buying experience. Revenue is primarily generated from the sale of used vehicles. Additional revenue streams include gains from the sale of automotive finance receivables originated to finance customer purchases, sales of vehicle service contracts (VSCs), GAP waiver coverage, and wholesale sales of trade-in vehicles.

Carvana has aggressively expanded its market presence, growing from 16 markets at the beginning of 2017 to 39 markets by September 30, 2017. This expansion is a key driver of its retail unit sales growth, by increasing the number of consumers who have access to its online platform and home delivery services. Each new market requires an initial capital expenditure, and larger markets may later incorporate vending machines for customer pick-up.

For the nine months ended September 30, 2017, Carvana reported a significant increase in total net sales and operating revenues of 129.9% to $593.8 million, primarily driven by a 133.5% surge in retail unit sales. Total gross profit also saw a substantial increase of 175.7% to $46.2 million. However, the company incurred a net loss of $117.1 million, an increase from $57.4 million in the prior year, due to increased operating expenses, particularly in selling, general, and administrative costs, which are being invested to support rapid growth.

The Initial Public Offering (IPO) completed in May 2017 was a significant event for Carvana. It raised $205.9 million in net proceeds, which were used to repay debt and for general corporate purposes, strengthening the company's liquidity. The IPO also provided increased financial flexibility for future growth initiatives and capital expenditures, such as further market expansion and technology development.