Strong Growth for Carvana, but Sales Fall Short

Carvana Co. (NYSE: CVNA), which sells used cars online and delivers them via distinctive "vending machine" retail facilities, reported on March 6 a net loss of $47.2 million for the fourth quarter, versus a loss of $35.7 million a year ago. That's despite sales and revenue that were both more than double the prior-year period.

The raw numbers

For the fourth quarter of 2017:

Metric Q4 2017 Change (YOY)
Revenue $265.1 million 148%
Retail units sold 13,517 141%
Gross profit $21.9 million 798%
Gross profit per unit sold $1,619 272%
EBITDA margin (15.5%) 15.1 ppts improved
Net profit (loss) ($47.2 million) $11.5 million worse

And for the full year:

Metric 2017 Change (YOY)
Revenue $858.9 million 135%
Retail units sold 44,252 136%
Gross profit $68.1 million 255%
Gross profit per unit sold $1,539 50%
EBITDA margin (16.9%) 6.3 ppts improved
Net profit (loss) ($164.3 million) $71.2 million worse

Carvana's quarter in a nutshell

Carvana, which went public in April of last year, is currently in aggressive expansion mode. It has been using the proceeds of its initial public offering to fund new brick-and-mortar retail sites, which it calls "markets," across the United States.

Carvana opened five new markets in the fourth quarter, bringing its total to 44 as of the end of 2017, up from just 21 a year prior. Carvana's sales and revenue both more than doubled from a year ago, but its 141% sales growth fell just short of its own guidance, which had called for an increase of between 143% and 168% from the fourth quarter of 2016. Gross profit per unit of $1,619 fell into the upper part of its guidance range, and was up from just $435 a year ago -- but it was down sequentially from $1,742 in the third quarter of 2017.

Still, things are trending broadly in the right direction. Among other improvements, Carvana's customer acquisition costs are falling, thanks to operational improvements as the company expands and reduced reliance on advertising.

What Carvana's CEO said

CEO Ernie Garcia said that the company's rapid growth has made for imperfect guidance predictions:

Looking ahead: Carvana's guidance

For the first quarter, Carvana expects:

  • Retail unit sales of between 17,000 and 18.500, an increase of 104% to 122%.
  • Total revenue of between $325 million and $355 million, up 104% to 123%.
  • Total gross profit per unit of between $1,650 and $1,750, up from $1,169 in the first quarter of 2017.
  • EBITDA margin of between negative 15% and negative 13%, versus negative 21.6% in the first quarter of 2017.

Garcia noted that Carvana has already opened 10 new markets in 2018, bringing its total to 54 as of March 6.

Carvana's guidance for the full year is as follows:

  • Retail unit sales of between 89,000 and 93,000, up 101% to 110% from 2017.
  • Revenue between $1.725 billion and $1.825 billion, up 101% to 112%.
  • Total gross profit per unit between $1,950 and $2,150, up from $1,539.
  • EBITDA margin between negative 9% and negative 7%, up from negative 16.9%.
  • 30 to 40 new markets in 2018, versus 23 added in 2017.

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