10-QPeriod: Q3 FY2019

CARVANA CO. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 6, 2019For Securities:CVNA

Summary

Carvana Co. (CVNA) reported significant year-over-year growth in its Q3 2019 10-Q filing, with total net sales and operating revenues increasing by 104.7% to $1.09 billion. This revenue surge was primarily driven by a substantial 91.5% increase in used vehicle sales, reflecting successful market expansion and improved penetration in existing markets. The company's strategic focus on scaling its online platform and vertically integrated supply chain is evident in the reported unit sales growth of 83.3% for used vehicles. Despite the top-line growth, Carvana continued to operate at a net loss, although the loss attributable to Carvana Co. narrowed significantly on a per-share basis due to increased share count. The company demonstrated strong execution in expanding its market reach, growing from 78 markets at the end of Q3 2018 to 146 markets by the end of Q3 2019. This expansion, coupled with increased brand awareness and inventory selection, fueled the growth in retail units sold. The financial results also highlight Carvana's ongoing investments in infrastructure and technology to support its aggressive growth strategy, which is reflected in increased operating expenses, particularly in SG&A.

Financial Highlights

43 data points
Beta

Revenue

$1.09B

12.6% Gross Margin

Net Income

-$30.09M

-2.7% Net Margin

EPS (Diluted)

$-0.12

Total Assets

$1.68B

Cash & Equivalents

$94.94M

Free Cash Flow

-$203.08M

Financial Statements
Beta
Revenue$1.09B
Cost of Revenue$957.31M
Gross Profit$137.54M
SG&A Expenses$207.97M
Interest Expense$20.99M
Net Income-$30.09M
EPS (Basic)$-0.12

Key Highlights

  • 1Total net sales and operating revenues grew by 104.7% to $1.09 billion for the three months ended September 30, 2019, compared to the prior year period.
  • 2Used vehicle sales increased by 91.5% to $931.0 million for the three months ended September 30, 2019, driven by a significant rise in retail unit sales.
  • 3Retail unit sales grew by 83.3% to 46,413 for the three months ended September 30, 2019, compared to 25,324 in the prior year period.
  • 4The number of operational markets expanded significantly to 146 as of September 30, 2019, from 78 as of September 30, 2018.
  • 5Total gross profit increased by 140.0% to $137.5 million for the three months ended September 30, 2019.
  • 6Selling, general, and administrative (SG&A) expenses increased by 75.1% to $208.0 million, reflecting continued investment in growth initiatives.
  • 7The company's net loss attributable to Carvana Co. was $39.0 million, or $(0.78) per share, compared to a loss of $16.0 million, or $(0.50) per share, in the prior year period, reflecting ongoing investments.

Frequently Asked Questions

Carvana's primary revenue drivers were used vehicle sales, which saw a significant increase of 91.5% year-over-year, and wholesale vehicle sales, which grew by 331.1%. Other sales and revenues, largely composed of gains on the sale of finance receivables and commissions from VSCs and GAP waiver coverage, also experienced substantial growth of 162.4%.

Carvana funds its growth through a combination of operating cash flow, debt financing, and equity issuances. The company utilizes a Floor Plan Facility to finance vehicle inventory and Finance Receivable Facilities to fund originated loans. Additionally, they have issued senior unsecured notes and conducted equity offerings to raise capital. The company stated that its current liquidity and expected future financing are sufficient to fund operations for at least the next 12 months.

Carvana aims to increase total gross profit per unit by reducing the average days to sell inventory, optimizing the utilization of its inspection and reconditioning centers (IRCs) and logistics network, increasing conversion rates on existing products like financing and VSCs, adding new products and services, and improving the monetization of its finance receivables. They also focus on increasing the purchase of vehicles from customers and optimizing their purchasing and pricing strategies.

The '100k Milestone Gift' refers to a one-time award program initiated by the CEO, Ernest Garcia III, where he contributes Class A common stock to the company to fund restricted stock unit awards to employees. This expense impacts Cost of Sales and SG&A. Carvana provides 'ex-Gift' metrics (e.g., Gross Profit ex-Gift) to present a clearer view of operational performance by excluding the non-recurring compensation expense related to this gift program.