10-QPeriod: Q2 FY2019

CARVANA CO. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 7, 2019For Securities:CVNA

Summary

Carvana Co. (CVNA) reported significant revenue growth in the second quarter of 2019, with total net sales and operating revenues increasing by 107.5% year-over-year to $986.2 million. This growth was primarily driven by a substantial increase in used vehicle sales, up 95.4% to $855.8 million, fueled by a 94.9% rise in retail unit sales to 44,000 units. The company continued its aggressive market expansion, more than doubling its markets served to 137 from 65 year-over-year. Despite strong top-line performance, Carvana's net loss also widened significantly, from $51.3 million in Q2 2018 to $64.1 million in Q2 2019, reflecting ongoing investments in growth, increased selling, general, and administrative expenses, and higher interest expenses. The balance sheet shows a substantial increase in vehicle inventory and finance receivables, indicating continued investment in scaling the business. The company also raised significant capital through equity offerings, underscoring its need for funding to support its growth trajectory. While revenue and unit sales demonstrate strong operational momentum, the increasing net loss highlights the capital-intensive nature of Carvana's expansion strategy and the ongoing challenge of achieving profitability.

Financial Highlights

42 data points
Beta

Revenue

$986.22M

14.0% Gross Margin

Net Income

-$20.32M

-2.1% Net Margin

EPS (Diluted)

$-0.09

Total Assets

$1.47B

Cash & Equivalents

$40.20M

Free Cash Flow

-$125.26M

Financial Statements
Beta
Revenue$986.22M
Cost of Revenue$848.43M
Gross Profit$137.79M
SG&A Expenses$181.84M
Interest Expense$19.32M
Net Income-$20.32M
EPS (Basic)$-0.09

Key Highlights

  • 1Total net sales and operating revenues surged 107.5% to $986.2 million in Q2 2019.
  • 2Used vehicle sales increased 95.4% to $855.8 million, driven by a 94.9% rise in retail unit sales to 44,000.
  • 3The company expanded its market presence significantly, growing from 65 markets to 137 markets year-over-year.
  • 4Vehicle inventory increased substantially to $606.5 million from $412.2 million at year-end 2018.
  • 5Finance receivables held for sale also saw a large increase, reaching $177.7 million, up from $105.2 million.
  • 6Net loss widened from $51.3 million in Q2 2018 to $64.1 million in Q2 2019.
  • 7Total assets grew to $1.47 billion from $991.0 million at year-end 2018, reflecting expansion and investment.

Frequently Asked Questions

Carvana's primary revenue driver is used vehicle sales, which reached $855.8 million in the second quarter of 2019, a 95.4% increase year-over-year. This growth was propelled by a 94.9% increase in retail unit sales to 44,000 vehicles, demonstrating strong customer demand and successful market expansion.

Carvana reported a net loss of $64.1 million for the second quarter of 2019, an increase from $51.3 million in the prior year period. The widening net loss is primarily attributed to significant investments in growth, including increased selling, general, and administrative expenses related to market expansion and infrastructure development, as well as higher interest expenses stemming from increased debt levels.

Carvana is funding its growth through a combination of equity and debt financing. The company raised significant capital through equity offerings in 2019 and continues to utilize its Floor Plan Facility and Finance Receivable Facilities to manage inventory and finance receivables. The balance sheet reflects substantial increases in vehicle inventory and finance receivables, indicating continued investment in scaling operations.

Carvana's growth strategy focuses on increasing retail unit sales by expanding into new markets and deepening penetration in existing ones. They aim to achieve this through investments in their e-commerce platform, vertically integrated supply chain, advertising, and customer service. The company also seeks to enhance profitability by reducing average days to sale, increasing conversion rates on ancillary products, and optimizing vehicle acquisition and pricing.