Carvana shares spike 30% as used car retailer posts record first quarter

Shares
of


Carvana
popped
more
than
30%
during
after-hours
trading
Wednesday
after
the
used
car
retailer
reported
record
results
and
turned
a
profit
during
the
first
quarter.

Here
is
how
the
company
performed
in
the
first
quarter,
compared
with
average
estimates
compiled
by
LSEG:

• 
  Earnings
  per
  share:
  23
  cents
  —
  it
  was
  not
  immediately
  clear
  if
  it
  was
  comparable
  to
  the
  loss
  of
  74
  cents
  expected
• 
  Revenue:
  $3.06
  billion
  vs.
  $2.67
  billion
  expected

Carvana
reported
record
first-quarter
net
income
of
$49
million,
compared
to
a
$286
million
loss
during
the
prior-year
period.
It
also
posted
an
all-time-best
adjusted
earnings
before
interest,
taxes,
depreciation
and
amortization,
or
EBITDA,
of
$235
million,
up
from
a
$24
million
loss
a
year
earlier.

The
company’s
gross
profit
per
unit,
or
GPU,
which
is
closely
watched
by
investors,
was
$6,432.
Carvana’s
adjusted
EBITDA
profit
margin
for
the
quarter
was
7.7%.

Carvana’s
net
income
included
a roughly
$75
million gain
in
the
fair
value
of
Carvana’s
warrants
to
acquire


Root
Inc.
common
stock.
This
did
not
impact
its
GPU
or
adjusted
EBITDA.

“In
the
first
quarter,
we
delivered
our
best
results
in
company
history,
validating
our
long-held
belief
that
Carvana’s
online
retail
model
can
drive
industry-leading
profitability
while
delivering
industry-leading
customer
experiences,”
Carvana
CEO
and
Chairman
Ernie
Garcia
III
said
in
a
release.

Garcia
said
the
company’s
performance
was
driven
by
efficiency
gains
in
its
operations,
especially
the
reconditioning
of
vehicles
for
sale
as
well
as
selling,
general,
and
administrative
expenses,
among
other
areas.

Carvana
expects
to
continue
to
grow
its
adjusted
EBITDA
profit
margin
further
as
the
company
continues
to
grow,
according
to
Garcia.
He
declined
to
disclose
how
much
high
the
company
believes
it
can
grow
those
results.

“I
really
do
think
in
terms
of
just
a
single
quarter
carrying
meaning
about
what
the
future
holds
for
us.
If
we
execute
properly,
I
think
this
is
probably
our
biggest
quarter
and
it
feels
awesome,”
Garcia
told
CNBC
during
a
phone
interview
Wednesday
night.

The
company
anticipates
further
cost
reductions
or
efficiency
gains
to
increase
profitability
through
areas
such
as
advertising
as
well
as
overhead
and
operational
expenses.

Garcia
said
Carvana
also
is
working
on
increasing
vehicle
reconditioning
and
profitably
rebuilding
its
vehicle
inventory,
which
was
nearing
an
all-time
monthly
low
of
13
days’
supply
in
March.
It
has
increased
its
reconditioning
capacity
of
vehicles
to
prepare
for
sale
by
roughly
60%
during
the
past
year.

“Acquiring
inventories,
generally
speaking,
feel
relatively
straightforward
to
scale,
but
growing
the
recondition
capacity
is
difficult,”
he
told
CNBC. “Inventory
today
is
certainly
tighter
than
we
would
like
for
it
to
be.
We’re
working
hard
to
build
it
back
up,
but
we’re
extremely
well
positioned
to
do
it.”

The
results
follow
a

major
restructuring
by
the
company
over
the
past
two
years
to
focus
on
profitability
rather
than
growth,
after
bankruptcy
concerns
when
Carvana’s
stock
lost
nearly
all
of
its
value
in
2022.

Shares
of
the
company
have
recovered
since
then.
They
had
climbed
roughly
67%
year
to
date
before
the
company
reported
its
first-quarter
results.
The
stock
closed
Wednesday
up
about
5%
at
$87.09
per
share.

A
joint
letter
to

shareholders
from
Garcia
and
finance
chief
Mark
Jenkins
said
the
company
has
prioritized
growth,
but
doing
so
profitability.

“We
are
now
focused
on
our
long-term
phase
of
driving
profitable
growth
and
pursuing
our
goal
of
becoming
the
largest
and
most
profitable
auto
retailer
and
buying
and
selling
millions
of
cars,”
read
the
shareholder
letter.

For
the
second
quarter,
the
company
said
it
expects
a
sequential
increase
in
its
year-over-year
growth
rate
in
retail
units,
and
a
sequential
increase
in
adjusted
earnings
before
interest,
taxes,
depreciation
and
amortization.

CORRECTION:
Carvana,
a
used
car
retailer,
reported
record
results
and
turned
a
profit
during
the
first
quarter.
An
earlier
version
misstated
the
company’s
business.