Carvana (CVNA) Q4 2022 earnings summary

Executive summary

• FY22 was a difficult year: revenue rose 6.2% to $13.604B, but retail units fell 3.0% and gross profit per unit dropped 33.4% to $3,022. Management shifted priorities toward expense reduction, operating efficiency and profitability.

• Management said the pressure of 2022 drove greater productivity and plans to sustain higher productivity while prioritizing customer experience and infrastructure utilization.

Financial highlights

• Revenue increased 6.2% to $13.604B; gross profit declined 35.4% to $1.246B, reflecting lower retail and wholesale gross profit and reduced other sales.

• Net loss widened to $2.894B from $287M; basic and diluted EPS were both $(15.74), versus $(1.63) in 2021.

• Adjusted EBITDA was $(1.041)B, with a (7.7)% Adjusted EBITDA margin, versus a 0.5% margin in 2021; GAAP net loss margin was (21.3)%.

• SG&A rose 34.6% to $2.736B; costs included $50M of restructuring charges and a $26M CEO Milestone Gift expense. Advertising expense was $490M.

• Interest expense increased to $486M from $176M; non-cash goodwill impairment was $847M. Income tax expense was $1M.

Outlook and guidance

• 2023 retail units are expected to face further pressure from reduced used-vehicle demand, higher benchmark rates, faster depreciation and profitability initiatives.

• Near-term priorities are customer experience, efficiency, expense reduction, brand awareness and using existing infrastructure to support efficient retail-unit growth; the stated objective is profitability and positive free cash flow.

• Management expected operating cash and existing financing arrangements to fund operations for at least 12 months from the financial-statement issuance date.

• Long-term plans include growing retail sales, market penetration and complementary-product revenue, while increasing infrastructure utilization and monetizing finance receivables more effectively.