Carvana Co. (NYSE: CVNA) has just stunned the market with an extraordinary after-hours surge of 32%, following a day of solid gains during Wednesday’s trading session. This surge, which caught many off guard, follows hot on the heels of the company’s impressive Q1 earnings report, where it not only surpassed but shattered both EPS and revenue forecasts.
Financial Performance
In the first quarter, Carvana reported a staggering revenue of $3.06 billion, marking an impressive 17% increase from the previous year’s figures. This substantial revenue growth significantly outpaced the Street consensus, as tracked by FactSet, which had anticipated revenue of $2.67 billion. Moreover, the company reported a remarkable 16% increase in retail vehicle sales, totaling 91,878 units.
Net income also witnessed a dramatic turnaround, standing at $49 million, or 23 cents per share, compared to a loss of $286 million, or $1.51 per share, in the same quarter last year. Additionally, adjusted EBITDA soared to $235 million, a monumental leap from the $24 million loss recorded a year ago.
Future Outlook
CEO Ernie Garcia expressed his elation at the record-breaking results, underscoring Carvana’s unwavering commitment to delivering exceptional customer experiences while simultaneously driving profitability. Looking ahead, Carvana anticipates a sequential increase in its year-over-year growth rate for vehicles sold in the second quarter, accompanied by a corresponding rise in adjusted EBITDA.
The company remains steadfast in its confidence to meet its 2024 forecasts for both units sold and adjusted EBITDA growth.
Market Sentiment
Despite the overwhelmingly positive performance, sentiment within certain circles, particularly on social media, remains cautiously pessimistic. Doubts linger regarding the sustainability of such rapid growth, especially for a used car dealership. These concerns are further exacerbated by a high short float nearing 30%, indicating a significant level of market skepticism.
Conclusion
Nevertheless, Carvana Co.’s remarkable after-hours surge underscores its resilience and potential for sustained success in the fiercely competitive automotive market. By consistently surpassing expectations and delivering strong financial results, Carvana has positioned itself as a formidable player in the industry, capable of weathering market uncertainties and driving continued growth.
Carvana Co. (NYSE: CVNA) is soaring 34.83% in early Wednesday trading, a remarkable increase of $13.86 from the previous closing price. The surge was fueled by a recent debt restructuring agreement and record-breaking financials.
Which Deal Has CVNA Entered Into?
Carvana (CVNA), the renowned used-car retailer, made a significant announcement on Wednesday, revealing a groundbreaking agreement that will have a profound impact on its financial standing.
By signing an agreement with a group of noteholders, Carvana is set to reduce its total outstanding debt by an impressive sum of over $1.2 billion.
This news sent waves of positivity throughout the market, resulting in a remarkable 31% surge in the company’s shares during premarket trading.
The agreement itself is nothing short of remarkable. It aims to eliminate a staggering 83% of Carvana’s unsecured notes that were scheduled to mature in 2025 and 2027.
This strategic move will also lead to a substantial reduction in required cash interest expenses, with savings exceeding $430 million per year for the next two years.
CVNA Reported Q2 2023 Financials
The second quarter of 2023 proved to be a remarkable period for Carvana, as the company achieved record-breaking financial results.
The total gross profit per unit, referred to as GPU, reached an impressive $6,520, marking a remarkable increase of 94% compared to the second quarter of 2022. This remarkable achievement surpassed the company’s previous best quarter by a notable margin of 27%.
In the past 12 months, Carvana has also made impressive strides in cost reduction, achieving over $1.1 billion in annualized cost reductions.
These accomplishments, combined with the generation of $2.968 billion in revenue from the sale of 76,530 retail units, reflect Carvana’s exceptional performance and resilience in the market.
How CVNA Will Excel Further?
The remarkable execution and impressive financial results by Carvana (CVNA) during the second quarter have undeniably set the stage for future success.
The company’s focus on achieving its three-step plan and returning to a path of sustainable growth has made the business fundamentally stronger. With its strong performance and strategic initiatives, CVNA is positioned for a promising future in the automotive retail industry.
The used-cars online dealer, Carvana Co. (CVNA) has been facing multiple blows since its glory days amid the pandemic have ended, which caused it to become the third-fastest company to reach the Fortune 500. The dealer’s stock is down over a huge 83% year to date and has wiped out all of its pandemic-fueled gains as concerns over the impact of higher inflation and peaking borrowing costs continue to rise. The recent disappointing earnings led the company to struggle with raising funds for acquiring ADESA’s physical auction unit and the borrowing on onerous terms for the deal led it to lay off 12% of its workforce following the expansion in order to curb expenses.
At the latest, late registrations and improper tags from the dealer caused Illinois to suspend its license. However, the reports were overlooked by investors as the company shared its plan for becoming adjusted EBITDA positive by 2023, with significant core earnings. CVNA investors have long been battered, and the news brought them a much-needed ray of hope for the stock. Thus, following the investor presentation on Friday, May 13, 2022, the stock rose by a nice 14.07% in late trading, after being down over 17.5% in the past five days alone. Cheerful investors had the stock trading at a price of $43.70 a share in the after-hours session following a gain of 2.43% in the prior trading.
License Suspension in Illinois
According to Barron’s, Illinois has suspended CVNA’s dealer’s license as it had been supplying customers with out-of-state temporary plates improperly and failed to have the titles transferred to cars sold there in the given time. Customers’ complaints led the state authorities to conduct an investigation which resulted in the license suspension on Thursday. But luckily, investors were more than excited about the company’s plan (as disclosed on Friday in an investor presentation), than to pay heed to one more negative news regarding the company.
CVNA’s Investor Presentation
According to the company’s latest investor presentation, CVNA sees significant core earnings for 2023 as it plans to curb SG&A expenses while generating positive free cash flow and attaining profitability. For generating a sportive free cash flow, the company plans to better manage its capital expenditure and attain self-funding without any need for equity or debt funding. GPU, SG&A, and retail unit efficiencies are also part of the plan.
Source: DC_Studio
The company’s recent 2500 employee lay-off (12%) was also a part of reducing the expenses and better matching staff levels with sales volume. CVNA plans to further align the two through in-sourcing in operational groups, better optimization, as well as lower payroll. Additionally, the company also plans to reduce its advertising and dollar spend up ahead. To achieve a “significant” positive EBITDA for 2023, the company plans to slash the capital expenditure budget on a quarterly basis.
ADESA’s Acquisition and the Blows
The car dealership recently acquired ADESA’s U.S. physical auction business from KAR Global. While the acquisition bought it 56 ADES U.S. locations, the deal went through after a fair share of troubles and hurdles. After posting worse-than-expected earnings, the company’s financial crisis spilled over into debt markets as it struggled to sell bonds to raise funds for the $2.2 billion ADESA deal. Thus, the company was then forced to turn to Apollo Global Management, Inc. for $1.6 billion to save the deal. Apollo bought half of the company’s debt, but the new bonds fell, leaving the company with a vulnerable balance sheet at costly financing that kicked the liquidity can down the road.
With borrowing on onerous terms, CVNA was then forced to let go of roughly 12% of its employees to help manage expenses amid its costly expansion. While the lay-off was taken negatively in itself, how it was done was another whole story. Claims suggest employees were shocked as they were let go through a mere email.
While ADESA and CVNA are enthusiastic about the collaboration expecting to bolster growth, volatility and uncertainty have been battering the care market as supply chain bottlenecks continue amid the peaking inflation and rising interest rates on top of the wider economic instability.
A Quick Peek at CVNA’s Latest Earnings
In the latest earnings report for the March quarter of 2022, CVNA came out with its first sales dip since 2014. The quarterly loss expanded to $2.89 a share against the prior year’s 0.46 per share, while analysts were expecting $1.72 per share.
Moreover, the gross profit went down by 12% to $298 million while revenue was $3.4 billion just above the analysts’ expectations with a YOY increase of 56%.
While previously, the company said that it expects to achieve above $4,000 GPU and approximate EBITDA breakeven in the last three quarters of 2022; it has now pushed the outlook back a few quarters.
Conclusion
Demand has been waning for used cars (new as well) amid the semiconductor chip shortages on top of spiking inflation and rising interest rates as the economy continues its downfall and recession looms overhead. Contributing to the downfall have been impacts from the war in Ukraine, the omicron variant, and the wider geopolitical and economic instability. Consequently, the fan-favorite and pandemic darling, CVNA has plunged exponentially as the used-car market has taken a hit altogether. The car boom has become a car bust, leaving CVNA in a vulnerable financial position, and forcing it to lay off employees even. But the company remains hopeful as it shared a detailed plan for how it intends to achieve profitability by 2023.
Carvana Co. (CVNA) declined in the after-market after announcing to acquire ADESA for $2.2 billion in cash. CVNA values at $120, losing more than 4% compared to yesterday’s closing price. The stock closed at $126.05 at the end of the last trading session. The stock volume traded in the last trading session was around 3.6 million shares. The current market cap of the company is around $21.78 billion.
CVNA acquired ADESA
Carvana Co. (CVNA) has agreed to buy ADESA’s US physical auction business for $2.2 billion in cash. ADESA US has 56 facilities and roughly 4,500 corporate and operational employees. In 2021, ADESA’s US company processed over a million transactions on these 4,000-acre properties with 6.5 million square feet of structures.
The combined company would provide considerable infrastructure and team to extend and improve Carvana’s customer offering with a broader variety of automobiles and quicker delivery times.
The two companies, Carvana and ADESA US, significantly relate and complement each other. ADESA US’s reconditioning plants can add about 2M units per year to Carvana’s yearly output. With ADESA US and current Carvana inspection and reconditioning centers within 100 miles of most Americans, buyers will have exposure to more automobiles.
Carvana has secured committed debt financing of up to $3.275 billion from JPMorgan Chase Bank NA and Citigroup Inc. They will also get $1 billion through debt financing for further improvements across the 56 sites. Carvana’s financial advisors are Citi and J.P Morgan. Its legal advisors are Kirkland & Ellis LLP.
CVNA CEO’ Remarks
Founder and CEO Ernie Garcia said that the company is happy that ADESA USA has joined Carvana. A nationwide infrastructure network and a wealthy business will help Carvana become the largest and most successful vehicle reseller. We will be able to give our retail customers more selection, value, and delivery times, while simultaneously raising the bar for our wholesale clients.
Conclusion
The company had announced 125% in the 3rd quarter of 2021. The company has yet to announce its fourth quarter and fiscal 2021 results. The acquisition in cash shows the company has a strong balance sheet and is moving forward to grow the company.
Carvana Co. (NYSE: CVNA) revealed that it has decided to offer up to $1.0 billion in aggregate principal amount of Senior Notes, including $500,000,000 aggregate principal amount of Senior Notes due 2025 and $500,000,000 aggregate principal amount of Senior Notes due 2028. These Senior Notes would be based on certain market conditions and other factors.
The company is planning to use a portion of the profit from these offerings to redeem in full $600 million aggregate principal amount of its outstanding 8.875% of Senior Notes which are due in 2023. Carvana has decided to use the remaining net profit to pay expenses and for many other business purposes.
The leading e-commerce platform for buying and selling used cars has also revealed that the notes will not be registered under the Securities Exchange Act of 1933 and will not be sold or offered to any person without registration or those who are not qualified to buy these notes. These notes will only be offered to those qualified buyers who fulfilled the requirements in accordance with Rule 144A.
Carvana Co. has also announced that it is foreseeing a record-breaking performance in Q3 2020 in various metrics including Total revenue, Retail units sold, Total gross profit per unit, and EBITDA margin. The company said that the momentum it saw in Q2 also accelerated into the Q3. Carvana saw a record-breaking performance in 2020 and provides the best experience to its customer and adopt all changes which 2020 brought in its business.
Carvana Co. (NYSE: CVNA) shares went up 30.61% as it gained +53.16 during the trading session of Tuesday. In the past 52-weeks of trading, this company stock has fluctuated between the low range of $22.16 and a high range of $235.00. It has traded up 923.60% from its 52-weeks low and traded down -3.48% from its 52-weeks high. Looking at its liquidity, it has a current ratio of 4.20. This company market capitalization has remained high, hitting $39.09 billion at the time of writing.
