Carvana (CVNA) Q4 2018 earnings summary

Executive summary

• FY18 retail units sold rose 112.7% to 94,108, continuing a 20-quarter streak of triple-digit growth; 2018 deliveries exceeded the combined total for the prior five years.

• Growth accompanied improved unit economics: gross profit per unit ex-Gift reached $2,133, while EBITDA margin ex-Gift improved to -9.9%.

• Long-term targets are to sell 2m+ cars annually and become the most profitable automotive retailer.

Financial highlights

• FY18 revenue increased 127.7% YoY to $1,955.5m; gross profit rose 188.9% to $196.7m.

• FY18 net loss was $254.7m vs. $164.3m in FY17; net loss attributable to Class A common stockholders was $67.3m, or $2.24/share.

• Adjusted for the one-time 100k Milestone Gift, gross profit was $200.7m and EBITDA was -$194.4m; adjusted EBITDA margin was -9.9% vs. -16.9% in FY17.

• Q4 revenue was $584.8m, gross profit $56.1m, net loss $86.4m, and net loss attributable to Carvana Co. $28.7m.

• Operating cash use rose to $414.3m in FY18; investing cash use was $150.3m and financing cash inflow was $466.3m.

Outlook and guidance

• Plans call for continued retail-unit growth through higher penetration in existing markets and entry into additional markets; 2018 expansion reached 85 markets.

• Continued investment in advertising, technology, inventory, logistics, IRCs and vending machines is expected; operating expenses are anticipated to increase substantially.

• Management expected existing liquidity, including future debt and equity financing, to fund operations, lease obligations, debt service, capex and working capital for at least 12 months.

• Mature markets may show more seasonal results, with used-car sales typically strongest late in Q1 and weakest in Q4; management expects seasonality to become more evident over time.