Carvana Co. — Q1 2022 Form 10-Q Summary
Business context and reporting period
Unaudited results cover the three months ended March 31, 2022, compared with the same period in 2021. Carvana operates an online used-car sales platform and related financing, wholesale, and ancillary-product businesses.
Key financial and operating metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net sales and operating revenues | $3.497 billion | $2.245 billion |
| Gross profit | $298 million | $338 million |
| Gross margin | 8.5% | 15.1% |
| Net loss | $506 million | $82 million |
| Net loss attributable to Carvana Co. | $260 million | $36 million |
| Class A loss per share, basic and diluted | $2.89 | $0.46 |
| Adjusted EBITDA | $(364) million | $(37) million |
| Cash used in operating activities | $593 million | $532 million |
| Cash used in investing activities | $208 million | $75 million |
Retail units sold were 105,185, up 13.8%. Total gross profit per retail unit fell 22.5% to $2,833. At March 31, cash and cash equivalents were $247 million, restricted cash was $295 million, and reported total liquidity resources were $1.707 billion, including available financing and unpledged assets. Total debt, including finance leases, was approximately $6.3 billion; stockholders’ equity was $52 million.
Material changes versus the prior comparable period
- Revenue rose 55.8%, led by used-vehicle sales, up 51.8% to $2.732 billion, and wholesale sales, up 139.6% to $575 million. Retail average selling price increased 33.4% to $25,973, reflecting used-car market appreciation.
- Gross profit declined 11.8% despite higher sales. Used-vehicle gross profit per unit decreased 33.3% to $808, which management attributed mainly to higher reconditioning costs and wholesale acquisition prices.
- Other sales and revenues declined 7.3% to $190 million, primarily as rising benchmark rates reduced gains on loan sales.
- SG&A increased to $727 million from $397 million, including $20 million of CEO Milestone Gift expense in SG&A and $8 million in cost of sales. Interest expense increased to $64 million from $30 million.
- Cash used in operations increased by $61 million year over year; capital expenditures were $220 million, compared with $82 million.
Outlook, risks, contingencies, and unusual items
Management expects continued investment in logistics, reconditioning capacity, technology, advertising, and market expansion, and stated that losses may continue. It believes working capital, operating results, and financing arrangements are sufficient to fund operations for at least one year from the financial-statement issuance date. The filing provides no quantified earnings or revenue guidance.
After quarter-end, Carvana completed a $1.2 billion net-proceeds Class A stock offering and issued $3.275 billion of 10.25% senior unsecured notes due 2030. It used the note proceeds in part to complete the approximately $2.2 billion acquisition of ADESA’s U.S. physical auction business on May 9, 2022. Integration, funding, and execution risks are relevant; acquisition accounting was not yet complete when the filing was prepared.
Disclosed risks include sustained operating losses, rapid-growth execution, used-car prices and demand, inflation and rising interest rates, supply-chain and labor constraints, access to securitization and other financing, and reliance on loan sales for a substantial portion of gross profit. The company also noted COVID-19-related operating effects and volatility connected with the conflict in Ukraine. Ordinary-course legal matters were disclosed; management did not expect their resolution to materially adversely affect the company, while noting litigation outcomes remain uncertain.
A notable compensation item was the CEO Milestone Gift, funded by the CEO’s personal shares for eligible employees. The related Q1 expense was $28 million in total, of which $20 million was recorded in SG&A and $8 million in cost of sales. Management reported compliance with debt covenants at March 31, 2022 and effective disclosure controls.
Important facts for investors to verify
- Whether retail growth can translate into improved gross profit per unit and lower operating losses as vehicle prices, reconditioning costs, and demand change.
- Liquidity and refinancing capacity, including the terms and availability of asset-backed facilities, restricted cash requirements, and the effect of substantial debt and interest costs.
- The total financing and integration impact of the ADESA acquisition, including the use and cost of the 2030 Notes.
- The sustainability of loan-sale gains and access to financing partners and securitization markets as interest rates and credit conditions evolve.
- The scale and accounting impact of CEO Milestone Gift awards and other equity compensation, and the effect of subsequent stock issuance on dilution.