Carvana, Inc. (NYSE: CVNA) operates an e-commerce platform for buying and selling used cars. The company says they are the fastest growing used car retailer in U.S. history. Shares of the used car retailer are rallying 35% through early trading on Friday, May 5, 2023. Over the past three months, Carvana has seen average daily volume of 15.13 million shares. However, volume of 31.92 million shares or dollar volume of around $308.67 million, has already exchanged hands through early trading.
Shares of Carvana are gaining after the company reported first quarter 2023 financial results. In Q1 2023, Carvana experienced noteworthy progress towards executing its three-step plan aimed at enhancing profitability and resuming growth. Despite challenging macroeconomic conditions and industry shifts, the company posted its best-ever Q1 GPU and Adjusted EBITDA margins. Moreover, Carvana achieved its Q2 SG&A reduction target ahead of schedule. The company remains committed to the remaining steps and expresses gratitude to its hardworking employees.
Key outcomes for Q1 2023 include:
- A 25% decrease in retail units sold, totaling 79,240
- A 25% decrease in revenue, amounting to $2.606 billion
- A 14% increase in total gross profit, reaching $341 million
- A $1,470 increase in GPU, resulting in $4,303 per unit
- A $1,811 increase in Non-GAAP Total GPU, totaling $4,796
- An 11.0% net loss margin, sequentially improving from 50.8%
- A (0.9%) Adjusted EBITDA margin, sequentially improving from (10.3%)
- A $1.51 basic and diluted net loss per Class A share
Other notable developments include the launch of three new vending machines in New York, Texas, and Illinois, and the sale or securitization of approximately $1.3 billion of loan principal since Q2 2023 began. Carvana’s three-step plan comprises driving the business to positive Adjusted EBITDA, achieving significant positive unit economics, and returning to growth after completing the first two steps.
Carvana’s Q1 results displayed substantial progress towards profitability, achieving $100 million Non-GAAP SG&A reductions and surpassing the >$4,000 GPU target ahead of schedule. The company aims to provide a comprehensive outlook for Q2 2023, considering the rapid business changes and to enhance shareholder understanding.
Despite ongoing macroeconomic and industry uncertainties, Carvana anticipates the following for Q2 2023, provided the environment remains stable:
- A decrease in retail units sold compared to Q1, as the company normalizes inventory size, optimizes marketing spend, advances profitability initiatives, and experiences reduced seasonal tailwinds.
- A Non-GAAP Total GPU above $5,000, comprising Non-GAAP Retail GPU above $2,000, Non-GAAP Wholesale GPU above $1,000, and Non-GAAP Other GPU above $2,000.
- Similar Non-GAAP SG&A expenses in Q2 as in Q1, with continued opportunities for further reductions over time.
- Positive Adjusted EBITDA generation, marking the completion of the first step in Carvana’s three-step plan towards achieving positive free cash flow.
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