CARVANA CO. Quarterly Report for Q1 Ended Mar 31, 2020

Summary

Carvana Co. reported a net loss of $183.6 million for the first quarter of 2020, an increase from the $82.6 million loss in the same period of 2019. This widening loss was primarily driven by a significant increase in selling, general, and administrative expenses, which more than doubled year-over-year, and higher interest expenses. Despite the increased loss, total net sales and operating revenues grew by a substantial 45.4% to $1.1 billion, largely fueled by a 41.0% increase in used vehicle sales and a 141.0% surge in wholesale vehicle sales. The company expanded its market presence significantly, ending the quarter with 161 markets compared to 109 in the prior year. However, the onset of the COVID-19 pandemic in March 2020 began to impact operations, leading to temporary pauses in new market openings and discretionary spending reductions, while also negatively affecting wholesale gross profit per unit and gains on loan sales due to market disruptions. Despite the challenging environment and widening net loss, Carvana demonstrated strong revenue growth and unit sales expansion. The company ended the quarter with improved liquidity, including $72.4 million in cash and cash equivalents and significant availability under its revolving credit facilities. Management indicated that actions taken in response to COVID-19, along with existing working capital and financing, were believed to be sufficient to fund operations for at least one year. The company also successfully completed a registered direct offering in April 2020, raising approximately $599.5 million in net proceeds, which will bolster its financial position in the face of ongoing economic uncertainty.

Key Highlights

• 1Net loss widened significantly to $183.6 million in Q1 2020 from $82.6 million in Q1 2019, primarily due to increased SG&A and interest expenses.
• 2Total net sales and operating revenues grew robustly by 45.4% year-over-year to $1.1 billion, driven by strong performance in used and wholesale vehicle sales.
• 3Used vehicle sales increased 41.0% to $964.3 million, supported by a 42.6% rise in retail unit sales to 52,427.
• 4Wholesale vehicle sales more than doubled, increasing 141.0% to $79.6 million, driven by a 60.5% increase in wholesale unit sales.
• 5The company expanded its market footprint considerably, reaching 161 markets by the end of the quarter, up from 109 in the prior year.
• 6The COVID-19 pandemic began impacting results in March 2020, leading to reduced advertising, temporary pauses in expansion, and negative impacts on wholesale gross profit and loan sale gains.
• 7Carvana raised approximately $599.5 million in net proceeds from a registered direct offering in April 2020, strengthening its liquidity position.

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