Carvana Co (CVNA, Financial), a leading e-commerce platform for buying and selling used cars, released its Q3 2023 earnings report on November 2, 2023. The company reported a net income of $741 million, significantly boosted by a gain on debt extinguishment from a corporate debt exchange. Despite a decrease in retail units sold by 21% and revenue by 18%, the company managed to increase total gross profit by 34% year-over-year, reaching $482 million.
Financial Performance and Challenges
Carvana Co (CVNA, Financial) faced a challenging used vehicle industry environment with elevated used vehicle prices and high-interest rates. Despite these challenges, the company's profitability in Q3 reached an all-time high. The company generated $636 million of net income and more than $300 million of Adjusted EBITDA in Q2 and Q3 combined, validating the profitability of their online sales model.
Financial Achievements
Carvana Co (CVNA, Financial) demonstrated significant progress towards its three-step plan to drive positive free cash flow. The company completed the first step in Q2 by driving the business to positive Adjusted EBITDA. In Q3, the company made significant progress in the second step by reaching positive net income, delivering another quarter of exceptional Adjusted EBITDA results, demonstrating meaningful operating leverage, and continuing to make unit economic gains.
Income Statement, Balance Sheet, and Cash Flow Statement Highlights
The company reported a net income margin of 26.7%, a sequential improvement of 30.2%. Adjusted EBITDA margin was 5.3%, a sequential improvement of 0.1%. Adjusted EBITDA totaled $148 million, including ~$40 million of non-recurring benefits. Basic and diluted earnings per Class A share were $7.05 and $3.60, respectively.
Financial Tables Summary
Carvana Co (CVNA, Financial) reported total gross profit per unit (GPU) of $5,952, an increase of $2,452. Non-GAAP Total GPU was $6,396, an increase of $2,526. Retail units sold totaled 80,987, a decrease of 21%. Revenue totaled $2.773 billion, a decrease of 18%. Total gross profit was $482 million, an increase of 34%.
Company's Performance Analysis
Despite the decrease in retail units sold and revenue, Carvana Co (CVNA, Financial) managed to increase its total gross profit by 34% year-over-year, highlighting the company's ability to leverage costs and improve profitability. The company also demonstrated significant progress towards its three-step plan to drive positive free cash flow, indicating a strong financial position and potential for future growth.
Other Pertinent Details
Carvana Co (CVNA, Financial) closed a corporate debt exchange on September 1, 2023, with approximately 96.4% of noteholders agreeing to exchange $5.520 billion of unsecured notes for cash or new senior secured notes. This reduced total debt by over $1.325 billion, extended maturities, and decreased required cash interest payments by more than $455 million per year for the next two years. The company also extended its Floor Plan Facility with Ally to April 2025.
Explore the complete 8-K earnings release (here) from Carvana Co for further details.
