Carvana reports narrower-than-expected first-quarter loss; shares get a bump

The company reported a narrower-than-expected first-quarter loss, causing shares to rally more than 25% in after hours-trading.

Carvana reports narrower-than-expected first-quarter loss; shares get a bump

Carvana Co. shares rose in Thursday's after-hours trade after the Tempe, Arizona-based used-car retailer cut expenses earlier than expected in the first quarter.

The company has also stated that it expects to have positive adjusted earnings for the second quarter. You can track the stock on this page.

Carvana reported a revenue drop of 25% to $2.6 Billion in the first quarter compared to the $3.5 Billion in the same period last year. Retail vehicle units for the company fell by 25%, to 79.240 vehicles. This compares to 105.185 in the first three months of 2022.

Carvana's internal prioritization of profitability initiatives was a major factor in the decline in revenue and units sold at retail.

The first quarter was an important step forward and more will follow. Ernie Garcia said that given the strong start of the year, Carvana expects to have a positive adjusted EBITDA by Q2 2023. Our strategy and execution is working, as demonstrated by the 61% increase in gross profits per unit in our first quarter GPU.

According to a filing with the Securities and Exchange Commission, the company reported a loss of $286,000,000, or $1.51 per share, for the first three months of 2019. This compares to $506,000,000, or $2.89 per share, during the first quarter in 2022.

Carvana's first-quarter earnings and revenue beat the Zacks Consensus Estimate. The consensus estimate predicted a loss per share of $1.84 and revenues of $2.57 Billion in Q1.

The company reported a negative adjusted EBIDTA (EBITDA) of $24 millions, compared with a negative EBITDA (348 million) in the first quarter 2022. According to the U.S. Securities and Exchange Commission, the company reported a gross profit of $4,303 per unit, an increase of 52% over the first quarter 2022.

Garcia stated on the earnings conference that Carvana had made several steps to prepare the company for a lower "targeted retail volume in the first half 2023." These moves improved the gross profit per unit, expenses, and laid the foundation to steer the business towards a positive adjusted EBITDA.

Carvana cuts $100M in expenses

According to the filing, Carvana has sold or securitized around $1.3 billion in loan principal since the start of the second quarter.

The company achieved its goal of reducing quarterly costs by $100 million earlier than expected, resulting in a $1 billion annualized cost reduction.

I think we are in a better position from a stock perspective heading into the Q2. Garcia told analysts on Thursday that it had taken a year to get sales to catch-up with our inventory and relative size. 'And I believe we're very pleased with the progress. There's still a quarter-and-a-half, or maybe two quarters, before we can get everything in alignment.

Since December 2022, the company has reduced its vehicle inventory by 21 percent. According to the filing, the company had 57,000 vehicles in stock at the end of first quarter and sold 79240, with a 65-day turn time. This is consistent with "many historic periods."

Carvana continues its profitability initiatives

Carvana expects its inventory and advertising costs to stabilize in the next quarter. It also expects to "continue to execute its profitability initiatives" for several more quarters.

Carvana anticipates that retail sales will decrease in the second quarter due to rapid changes in the business. It continues to optimize its marketing costs and normalize inventory. It anticipates a total gross profit of $5,000 per unit in the second quarter.

Carvana, a company that operates 37 car vending machine across the country, has decided to stop expanding its operations until it completes all projects.

Carvana's earnings come after an announcement made earlier this month by a group creditors, including Apollo Global Management and Pacific Investment Management, that proposed a debt for equity swap to increase the liquidity of the company.