Vehicles can be viewed at the Carvana dealership in Austin, Texas on February 20, 2023.
Brandon Bell | Getty Images
Shares Caravan rose more than 30% in after-hours trading Wednesday after the automaker reported record results and turned a profit in the first quarter.
Here’s how the company performed in the first quarter compared to LSEG’s average estimates:
- Earnings per share: 23 cents – It was not immediately clear whether this compared to the expected loss of 74 cents
- Income: $3.06 billion against the expected $2.67 billion
Carvana reported record first-quarter net income of $49 million, compared to a loss of $286 million in the prior-year period. The all-time best result was also published adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA of $235 million, compared with a $24 million loss a year earlier.
The company’s gross profit per unit, the GPU that investors closely watch, was $6,432. Carvana’s adjusted EBITDA margin for the quarter was 7.7%.
Carvana’s net income included an approximately $75 million escalate in the fair value of the Carvana acquisition warrants Root Inc. common shares. There was no impact to GPU or adjusted EBITDA.
“During the first quarter, we achieved the best results in the company’s history, confirming our long-standing belief that Carvana’s online retail model can deliver industry-leading profitability while delivering an industry-leading customer experience,” Carvana CEO and President Ernie Garcia III said in a release.
Garcia said the company’s performance was driven by efficiencies in its business, particularly in remanufacturing vehicles for sale, as well as selling, general and administrative expenses and other areas.
According to Garcia, Carvana expects to continue to escalate its adjusted EBITDA margin as the company continues to grow. He declined to say how much the company thinks those results could grow.
Carvana wrestling in 2024
“I really think in terms of just one quarter that matters for what the future holds for us. If we execute correctly, I think this is probably our best quarter and it feels amazing,” Garcia told CNBC during a telephone interview Wednesday evening.
The company anticipates further cost reductions or efficiency gains to escalate profitability in areas such as advertising, as well as general and operational costs.
Garcia said Carvana is also working to escalate vehicle refurbishments and profitably rebuild vehicle inventories, which hit an all-time low of 13 days in monthly supply in March. Over the past year, it has increased its pre-sale vehicle refurbishment capacity by approximately 60%.
“Overall, sourcing supplies seems relatively uncomplicated at scale, but scaling up remanufacturing capacity is hard,” he told CNBC. “Today, resources are certainly smaller than we would like. We are working difficult to rebuild them, but we are exceptionally well prepared to do so.”
The results follow a major restructuring by the company over the past two years to focus on profitability rather than growth, following bankruptcy fears when Carvana’s shares lost almost all of their value in 2022.
Since then, the company’s shares have recovered. Year-to-date, before the company released its first-quarter results, they were up about 67%. The stock closed Wednesday up about 5% at $87.09 per share.
Joint letter to shareholders z Garcia and CFO Mark Jenkins said the company’s priority is to grow but also achieve profitability.
“We are now focused on the long-term phase of driving profitable growth and pursuing our goal of becoming the world’s largest and most profitable auto retailer and buying and selling millions of cars,” the shareholder letter said.
The company said it expects a sequential escalate in the annualized retail unit growth rate and a sequential escalate in adjusted earnings before interest, taxes, depreciation and amortization in the second quarter.
