Carvana Provides Updates on Operating Plan and Capital Structure at Growth Conference
Carvana Co. (NYSE: CVNA), an e-commerce platform for buying and selling used cars, presented at the William Blair 44th Annual Growth Stock Conference.
Key updates include:
Operating Plan: Carvana's internal plan over the past 12 months focused on improving unit economics and profitability. Q1 results show a 16% YoY increase in retail units, a 42% increase in non-GAAP GPU, a 17% decrease in non-GAAP SG&A per unit, and an 860 bps rise in Adjusted EBITDA Margin. Q1 Adjusted EBITDA was $235 million with capital expenditures and non-PIK interest expense of $48 million.
Capital Structure: Carvana repurchased $250 million of 2028 Senior Secured Notes and raised $350 million through its ATM program, expecting $55 million in interest expense savings by 2026 and $620 million less debt by year-end 2026.
- Carvana's retail units grew by 16% YoY in Q1.
- Non-GAAP GPU increased by 42% in Q1.
- Non-GAAP SG&A per unit decreased by 17% in Q1.
- Adjusted EBITDA Margin rose by 860 bps in Q1, achieving an industry-leading 7.7%.
- Q1 Adjusted EBITDA stood at $235 million.
- Carvana repurchased $250 million of 2028 Senior Secured Notes.
- They raised $350 million through the ATM program.
- Expected $55 million in interest expense savings by 2026.
- Projected $620 million reduction in debt by year-end 2026.
- Capital expenditures and non-PIK interest expense totaled $48 million in Q1.
- The company continues to carry significant debt despite the projected reductions.
Insights
Carvana’s significant progress on its unit economics and Adjusted EBITDA margin is noteworthy. The company’s non-GAAP Gross Profit per Unit (GPU) increased by
Moreover, Carvana’s ability to generate significant cash flow with an Adjusted EBITDA of
Carvana’s growth trajectory and operational updates suggest a strategic pivot towards sustainable profitability. The
The capital structure initiatives are also significant. By repurchasing
From a technological perspective, Carvana’s improvements in conversion and customer experience are critical drivers of its recent success. Enhanced algorithms, better user interfaces and efficient logistics likely contributed to these metrics. The ability to scale these improvements across the business affects not only customer satisfaction but also operational efficiency. For instance, better algorithms can optimize pricing, inventory management and logistics, leading to lower operational costs and higher sales volumes.
Technology also plays a important role in maintaining and improving unit economics. Data analytics and machine learning can provide insights into customer behavior, enabling more personalized and effective marketing strategies. This technological backbone supports Carvana’s aggressive growth and efficiency targets for the next 12 months, aiming for material gains across all business components.
Operating Plan
One year ago, Carvana launched an internal plan that identified opportunities to strengthen unit economics over a 12-month period. This effort drove progress across every team, resulting in:
-
Efficiency-driven growth. Despite continued focus on profitability initiatives and unit economics, Carvana grew retail units by
16% YoY in Q1, driven in part by improvements in conversion and customer experience. -
Substantial YoY improvements in unit economics. In Q1, non-GAAP GPU increased
42% , non-GAAP SG&A per unit decreased17% , and Adjusted EBITDA Margin increased 860 bps. -
Industry-leading Adjusted EBITDA margin. In Q1, Carvana delivered its best financial results in company history, driving industry-leading
7.7% Adjusted EBITDA margin and reaching its goal of becoming the most profitable auto retailer for the first time by this measure. -
Significant cash flow progress. Adjusted EBITDA in Q1 was
$235 million $48 million - Further momentum in Q2. The company reiterated its expectation of a sequential increase in its YoY growth rate in retail units and a sequential increase in Adjusted EBITDA in Q2.
Carvana is now rolling out its next 12-month plan, including setting new, ambitious targets for each of its teams with the goal of driving additional material gains across every component of the business.
Capital Structure
Carvana’s strong Adjusted EBITDA provides significant financial flexibility that allows the company to de-lever over time. The company previously announced its intention to pay cash interest on 2028 and 2030 Senior Secured Notes for interest payments beginning in 2025. In Q2, Carvana repurchased
Carvana expects these combined actions to lead to
Carvana’s full presentation can be found by accessing the events and presentations page of the company’s Investor Relations website.
Forward-Looking Statements.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Carvana’s current expectations and projections with respect to, among other things, its financial condition, results of operations and future performance. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “can,” “could,” “may,” “should,” “would,” “will,” the negatives thereof and other words and terms of similar meaning.
Forward-looking statements include all statements that are not historical facts, including expectations regarding forecasted results and financial and operational goals. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Among these factors are risks related to: the larger automotive ecosystem, including consumer demand, global supply chain challenges, and other macroeconomic issues; our substantial indebtedness; our history of losses and ability to maintain profitability in the future; the seasonal and other fluctuations in our quarterly operating results; the highly competitive industry in which we participate; the changes in prices of new and used vehicles; and the other risks identified under the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking statements, which reflect expectations only as of this date. Carvana does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise.
Use of Non-GAAP Financial Measures
To supplement the consolidated financial measures, which are prepared and presented in accordance with GAAP, we also refer to the following Non-GAAP measures in this press release: Adjusted EBITDA, Adjusted EBITDA Margin, Gross Profit, non-GAAP, Total gross profit per retail unit, non-GAAP, SG&A Expenses, non-GAAP, and Total SG&A expenses per retail unit, non-GAAP.
Adjusted EBITDA is defined as net income (loss) plus income tax provision (benefit), interest expense, other operating expense (income), net, other expense (income), net, depreciation and amortization expense in cost of sales and SG&A, goodwill impairment, share-based compensation expense in cost of sales and SG&A, and restructuring expense in cost of sales and SG&A expenses, minus revenue related to our Root Warrants and gain on debt extinguishment.
Gross profit, non-GAAP is defined as GAAP gross profit plus depreciation and amortization expense in cost of sales, share-based compensation expense in cost of sales, and restructuring expense in cost of sales, minus revenue related to our Root Warrants. Total gross profit per retail unit, non-GAAP is Gross profit, non-GAAP divided by retail vehicle unit sales.
SG&A expenses, non-GAAP is defined as GAAP SG&A expenses minus depreciation and amortization expense in SG&A expenses, share-based compensation expense in SG&A expenses, and restructuring expense in SG&A expenses. Total SG&A expenses per retail unit, non-GAAP is SG&A expenses, non-GAAP divided by retail vehicle unit sales.
We believe that this metric is useful to us and to our investors because it excludes certain financial, capital structure, and non-cash items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. We believe that excluding these items enables us to more effectively evaluate our performance period-over-period and relative to our competitors.
| For the Three Months Ended | |||||||
| (dollars in millions, except per unit amounts) | Mar 31, 2023 | Mar 31, 2024 | |||||
| Net income (loss) | $ |
(286 |
) |
$ |
49 |
|
|
| Income tax benefit |
|
(2 |
) |
|
(1 |
) |
|
| Other income, net |
|
(3 |
) |
|
(87 |
) |
|
| Interest expense |
|
159 |
|
|
173 |
|
|
| Operating income (loss) |
|
(132 |
) |
|
134 |
|
|
| Other operating expense, net |
|
1 |
|
|
1 |
|
|
| Depreciation and amortization expense in cost of sales |
|
44 |
|
|
39 |
|
|
| Depreciation and amortization expense in SG&A expenses |
|
49 |
|
|
43 |
|
|
| Share-based compensation expense in SG&A expenses |
|
15 |
|
|
23 |
|
|
| Root warrant revenue |
|
(5 |
) |
|
(5 |
) |
|
| Restructuring expense |
|
4 |
|
|
- |
|
|
| Adjusted EBITDA | $ |
(24 |
) |
$ |
235 |
|
|
| Total revenues | $ |
2,606 |
|
$ |
3,061 |
|
|
| Net income (loss) margin ¹ |
|
-11.0 |
% |
|
1.6 |
% |
|
| Adjusted EBITDA margin |
|
-0.9 |
% |
|
7.7 |
% |
|
| Gross profit | $ |
341 |
|
$ |
591 |
|
|
| Depreciation and amortization expense in cost of sales |
|
44 |
|
|
39 |
|
|
| Root warrant revenue |
|
(5 |
) |
|
(5 |
) |
|
| Gross profit, non-GAAP | $ |
380 |
|
$ |
625 |
|
|
| Retail vehicle unit sales |
|
79,240 |
|
|
91,878 |
|
|
| Total gross profit per retail unit ² | $ |
4,303 |
|
$ |
6,432 |
|
|
| Total gross profit per retail unit, non-GAAP | $ |
4,796 |
|
$ |
6,802 |
|
|
| SG&A expenses | $ |
472 |
|
$ |
456 |
|
|
| Depreciation and amortization expense in SG&A expenses |
|
49 |
|
|
43 |
|
|
| Share-based compensation expense in SG&A expenses |
|
15 |
|
|
23 |
|
|
| Restructuring expense in SG&A expenses |
|
4 |
|
|
- |
|
|
| SG&A expenses, non-GAAP | $ |
404 |
|
$ |
390 |
|
|
| Retail vehicle unit sales |
|
79,240 |
|
|
91,878 |
|
|
| Total SG&A expenses per retail unit ³ | $ |
5,957 |
|
$ |
4,963 |
|
|
| Total SG&A expenses per retail unit, non-GAAP | $ |
5,098 |
|
$ |
4,245 |
|
|
| ¹ In Q1 2024, Net income (loss) margin increased by 1,260 bps YoY |
| ² In Q1 2024, GPU increased |
| ³ In Q1 2024, SG&A per unit decreased |
About Carvana
Carvana’s mission is to change the way people buy and sell cars. Over the past decade, Carvana has revolutionized automotive retail and delighted millions of customers with an offering that is fun, fast, and fair. With Carvana, customers can choose from tens of thousands of vehicles, get financing, trade-in, and complete a purchase entirely online with the convenience of home delivery or local pick up in over 300 U.S. markets. Carvana’s vertically integrated platform is powered by its passionate team, unique national infrastructure, and purpose-built technology. Carvana is a Fortune 500 company and is proud to be recognized by Forbes as one of America’s Best Employers.
For more information, please visit www.carvana.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240606129576/en/
Investors
Mike McKeever
Investors@carvana.com
Media
press@carvana.com
Source: Carvana Co.
FAQ
What were Carvana's Q1 2023 financial results?
How much did Carvana raise through its ATM program?
How much debt did Carvana repurchase in Q2 2023?
What are Carvana's expected interest expense savings by 2026?
What is Carvana's projected debt reduction by year-end 2026?
