Carvana Q1'19 revenues up 110% YoY

Carvana Q1 2019 revenues up 110% YoY

:call_me_hand:t3: my “shaka” sign of approval as a Native Polynesian-Hawaiian.

Holy moly, 21 consecutive quarters of triple-digit revenue growth! And finally, after 20 consecutive quarters of triple digit growth in the number of retail used car units sold, this quarter “fell short” showing an increase of only 99%!!

All the above by a company, acknowledged in my original Carvana post here on 11/26/18, that:

(a) is disrupting and transforming the retail used car sector with their company’s custom-built business model and e-Commerce platform.
(b) is not a software company with recurrent revenue,
(c) sells things, i.e., used cars,
(d) is capital intensive,
(e) has low gross margins akin to its automotive retail industry,
(f) has a low P/S of 1.09 and EV/Revenue of 4.74,
(g) continues aggressive expansion into new markets and expansion of its network of inspection and reconditioning centers (IRCs).

Equally gratifying is Carvana’s ongoing kick-ass stock price performance as of 5/8/2019:
• up 119% year-to-date
• up 184% over the recent past 52-week period, and
• YTD substantially out-performing my favorites, e.g., AMRN, TWLO, ZS and MDB, as shown in this Big Chart.
• Over the recent past 52-week period, performing well in comparison with the other aforementioned companies, except against AMRN’s overwhelming performance in this ?Big Chart.

Today 5/9/19, the day after reporting its Q1 results, Carvana closed up 5.2% at $75.38, after a tumultuous day on Wall Street, awaiting and uncertain about the outcome of U.S. -China trade talk.


In his 5/08/2019 Letter to Shareholders, Carvana (CVNA) co-founder and CEO Ernie Garcia III reported the following for Q1 2019:……
[Note: Throughout the letter there is reference to items as “including Gift” that include the impact of the compensation expense related to the 100k Milestone Gift to employees, in accordance with GAAP. There is also reference to several measures that are presented “ex-Gift,” which exclude the impact of the 100k Milestone Gift to employees.]

Q1 2019:

We grew units and revenue by 99% and 110% respectively in Q1 YoY, marking our 21st consecutive quarter of triple-digit revenue growth. Unless otherwise noted, all financial comparisons stated below are versus Q1 2018.

Q1 2019 GAAP Results
• Retail units sold totaled 36,766 an increase of 99%
• Revenue totaled $755.2 million, an increase of 110%
• Total gross profit, including Gift, was $88.5 million, an increase of 159%
• Net loss, including Gift, was $82.6 million, an increase of 57%
• Basic and diluted net loss, including Gift, per Class A share was $0.69 based on 41.4 million shares of Class A common stock outstanding

Q1 2019 Ex-Gift Results, NON-GAAP
• Total gross profit per unit ex-Gift was $2,429, an increase of $575
• EBITDA margin ex-Gift was (7.4%), an improvement from (12.4%)
• Adjusted net loss per Class A share, was $0.53, based on 150.3 million adjusted shares of Class A common stock outstanding, assuming the exchange of all outstanding LLC Units for shares of Class A common stock

Q1 2019 Other Results
• Opened 24 new markets and 1 vending machine in Pittsburgh, PA, bringing our end-of-quarter totals to 109 and 16, respectively.
• Completed our first auto loan securitization, marking a major step forward in monetizing our finance platform.
• Completed the sale and leaseback of our Indianapolis inspection and reconditioning center (IRC), continuing the efficient financing of our balance sheet.
• Began production at our 6th IRC outside of Cleveland, Ohio.

Recent Events in Q2 2019
• Thus far in Q2 we opened 15 markets and a vending machine in Chicago bringing our totals as of May 8, 2019, to 124 and 17 respectively.
• We elected a new member to our Board—Neha Parikh, President of Hotwire—who brings a wealth of expertise in online customer experience and customer acquisition.
• Began production at our 7th IRC outside of Nashville, Tennessee.

Our IRC build-out will continue to ramp both by expanding existing facilities (adding shifts and lines) and adding new facilities. These additional locations will benefit our customers by moving inventory closer to them on average, which reduces delivery time and delivery expense, thereby increasing conversion all else being equal. However we expect average delivery distances to remain at similar levels in the near term, until the IRC network further expands, and then to come down significantly over time.

FY 2019 Guidance

The CEO letter states: Following solid execution in the first quarter, we are increasing our guidance for units and revenue and reiterating guidance for GPU and EBITDA margin. After a strong start to market launches, we are raising the low end of our market openings range for the year.

**FY 2019 GUIDANCE**	   	
Retail unit sales	    165,000 - 170,000	 Increase of 75% - 81% 
Total Revenue	             $3.5 B - $3.6 B	 Increase of 79% - $84%
Total Gross Profit per unit  $2,450 - $2,650	 Increase from $2,133
EBITDA margin	             (5.5%) - (3.5%)	 Improvement from (9.9%)
Market openings	                 55 - 60	 Increase from 41 market openings in 2018, bringing
		                                 our end-of-year total to 140-145 markets and our
                                                 total U.S. population coverage to at least 65%


Q1 2019 EARNINGS CALL on 5/8/19

CEO Ernie Garcia made the following comments about completion of their first auto loan securitization, marking a major step forward in monetizing their finance platform:…

In the first quarter, we also completed our first securitization. This is a significant accomplishment that required a lot of work and preparation. All the hurdles clear, the deal was completed laying out a template for similar deals in the future and lighting the path for significant progress in the finance contribution to our total GPU. The calculations we have done historically to determine we believe is ultimately achievable for our finance program simply rely on the way other mature issuers in the market are executing similar transaction today. So in a sense, completing our securitization doesn’t really impact our view of where we’re headed at all. That said, it does mark a significant milestone and provides with a nice empirical datapoint with our own loans that cements our view of what is possible. We also did continue to make exciting progress in our business of buying cars from our customers where we grew units by 230% year-over-year, which now represents us buying 40% cars from our customers that we are selling. The experience we offer our customers when we buy a car from them is very simple, They got a, get a value, pick a time for us to pick up their car and we put money in their account. That customer facing simplicity requires complex technology and operations capabilities in the background. And we’re very excited to see it generating the same kinds of reviews from our customers that we’ve seen on the retail side of the business, which we expect to fuel the same kind of explosive growth.


The following corporate financials for AMRN show the following:

• Superb strong growth in retail units sold and revenue by 99% and 110% respectively in Q1 YoY, marking our 21st consecutive quarter of triple-digit revenue growth.

• Explosive share price increases: over 184% during the recent 52-week period; and 119% YTD.

• No positive annual and quarterly net income and earnings.

GICS SECTOR	  Consumer Discretionary   
GISC INDUSTRY	     Automotive Retail	      
MARKET CAP	          $  10.9 B	           
Employees	              3,879             
52-WK HIGH	              74.17	              
PRICE/SHARE 	              71.65	              
52-WK LOW	              24.03	              
Price Y-T-D change	       119%	              
Price change 52-wk	       184%	              
S&P 500 52-wk change	       5.9%	               

EV/EBITDA (mrq)	             -18.67	              
P/E (ttm)	                N/A	              
Fwd P/E	                     -65.14	              
EV/Revenue (ttm)	       4.74	               
P/S (ttm)	               1.09             


**MARKET  NO.   USED 		  WHOLESALE				  NET    Diluted  SHARE**
**CARVANA     CAP    OF   VEHICLE   Change   VEHICLE   Change   REVENUE	Change	 INCOME	   EPS	  PRICE  Change**
**FY/QTR	    ($M)  MKTS UNITS SOLD  YoY	  UNITS SOLD   YoY      ($M)	 YoY	  ($M)	   ($) 	   ($)	  YoY**

Q1 '19   10.88 B  109   36,766     99.1%    6,701   186.1%   755.234   109.6%  (28.549)  (0.60)  41.82    82.4%

**FY 2018	 4.712 B   85   94,108    112.7%   15,125    132.4% 1,955.467	127.7%	(61.754)  (2.24)  32.71	  71.1%**

Q4 '18	 4.712 B   85   27,750    105.3%    4,717    155.8%   584.838	120.6%	(28.704)  (0.74)  32.71   71.1%									          	
Q3 '18	 5.428 B   78   25,324	  116.1%    4,408    145.3%   534.921   137.3%  (16.042)  (0.50)  38.75  164.0%								
Q2 '18	 5.818 B   65   22,570    111.3%    3,658    131.5%   475.286	127.0%	 (9.965)  (0.41)  41.60	 103.2%
Q1 '18	 3.003 B   56   18,464    121.6%    2,342     81.8%   360.422	126.6%	 (7.043)  (0.53)  22.93	 106.6%

**FY 2017	 2.606 B   44   44,252    135.9%    6,509    145.5%   858.870	135.2%	(62.841)  (1.31)  19.12**	
Q4 '17	 2.606 B   44   13,517    141.4%    1,844    152.3%   265.053	148.1%	 (5.480)  (0.45)  19.12	
Q3 '17	 1.949 B   39   11,719    133.3%    1,797    128.3%   225.379	128.0%	 (4.380)  (0.29)  14.68	
Q2 '17	 2.718 B   30   10,682    145.3%    1,580    151.2%   209.365	142.0%	(14.542)  (0.28)  20.47	
Q1 '17		   23    8,334    120.3%    1,288    155.6%   159.073	118.1%	(38.439)  (0.28)  11.10	

**FY 2016		   21   18,761    187.6%    2,651    147.8%   365.148	180.0%  (93.112)**				
Q4 '16		   21    5,600	  155.5%      731             106.827	151.3%	(35.694)  (0.26)		
Q3 '16		   16    5,023	  182.8%      787	       98.844	177.1%	(21.985)  (0.16)		
Q2 '16		   14    4,355	  224.3%      629	       86.526   202.5%	(18.108)  (0.13)		
Q1 '16		   11    3,783	  212.1%      504	       72.951	237.7%	(17.325)  (0.13)		

**FY 2015		    9    6,523	  209.9%    1,070    681.0%   130.392   212.8%**					

Q4 '15		    9	 2,192	  182.8%		       42.514	200.7%				
Q3 '15		    5	 1,776	  206.7%		       35.668	202.4%				
Q2 '15		    5	 1,343	  208.0%		       28.607	202.8%				
Q1 '15		    4	 1,212	  284.8%		       21.603	243.0%				

**FY 2014		    3	 2,105		      137	       41.679**				
Q4 '14		    3	   775				       14.137					
Q3 '14		    3	   579				       11.795					
Q2 '14		    2	   436				        9.449					
Q1 '14		    1	   315				        6.298																				




Excerpts from the latest Q4/FY 2018 report:

Our management team focuses on delivering an exceptional and unparalleled customer experience while simultaneously growing the business rapidly and achieving our financial objectives. We firmly believe wowing the customer is the core of our model and drives all other metrics. To realize our long-term vision, our three primary financial objectives remain unchanged: (1) Grow Retail Units and Revenue; (2) Increase Total Gross Profit Per Unit; and (3) Demonstrate Operating Leverage. We believe continued focus on these goals will lead to a strong long-term financial model.

Long Term Financial Goals

Below we present our long-term financial model that we introduced at our Analyst Day on November 29, 2018. We believe this is the appropriate frame through which to evaluate our results and progress towards each of our financial objectives.

**Carvana (CVNA)	             FY 2016   FY 2017	        FY 2018	        Q1 2019	    TARGET**
YOY Revenue Growth	        180%	  135%	           128%	           110%	       -
Gross Margin 	                5.3%	  7.9%	    10.1%/10.3%	    11.7%/11.8%	   15% - 19%
(include Gift/exclude Gift)
Advertising	                7.4%      6.5%	           5.7%	           5.2%	 1.0% - 1.5%
SG&A ex. Advertising & D&A     21.1%	 18.2%	    14.9%/14.5%	    14.3%/14.0%	 4.5% - 5.5%
(include Gift/exclude Gift)					
D & A	                        1.3%	  1.3%	           1.2%	           1.1%	 0.5% - 1.0%
SG&A Total as % of Revenue     29.8%	 26.0%	    21.7%/21.3%	    20.6%/20.3%	   6% - 8%
(include Gift/exclude Gift)					
Net Loss Margin	             (25.5)%   (19.1)%  (13.0)%/(12.4)%	(10.9)%/(10.5)%	      -
(include Gift/exclude Gift)					
EBITDA Margin (exclude Gift) (23.2)%   (16.9)%	         (9.9)%	         (7.4)%	  8% - 13.5%

Objective #1: Grow Retail Units and Revenue

CVNA reported the following:

We grew units and revenue significantly again in Q1. Retail units sold increased to 36,766, up 99% from 18,464 in the prior year period. Revenue in Q1 grew to $755.2 million, up 110% from $360.4 million in Q1 2018. Our growth in the first quarter was broad-based, driven by gains across our markets nationwide. The 2019 cohort continued the historical trend of new cohorts ramping faster than previous cohorts.

Buying Cars from Customers
We sourced substantially more cars from our customers in Q1 than in any previous quarter, aided by our first TV advertising campaign that highlights Carvana’s offer of buying cars from customers. We are actively enhancing and developing the customer experience for selling a vehicle to Carvana and believe this remains one of our business’s largest opportunities.
Total vehicles acquired from customers grew by 232% in Q1 2019 vs. Q1 2018, meaning that we bought 40% as many cars from our customers as we sold in the first quarter, up from 24% in Q1 2018 and 36% last quarter. The industry leader in our market buys approximately 100% as many cars as they sell, illustrating the huge potential in this business. Wholesale units sold, which are primarily sourced from customers, increased by 186% to 6,701 in Q1 2019 from 2,342 in Q1 2018. Retail units sold sourced from customers increased to about 14% from about 6% in Q1 2018. This was lower than the 17% in Q4 due to the expected rapid growth in auction-sourced inventory in preparation for Q1 2019.
These powerful results reflect the quality of the customer experience we offer, which to date has resulted in even higher NPS scores than our retail business.

Objective #2: Increase Total Gross Profit Per Unit (GPU)

The following are Carvana excerpts:

We achieved another strong quarter of total GPU growth in Q1, demonstrating additional progress toward our $3,000 midterm goal. Items “including Gift” reflect the impact of the compensation expense related to the 100k Milestone Gift to employees, in accordance with GAAP. Ex-Gift items exclude the compensation expense impact of the 100k Milestone Gift to employees and are non-GAAP metrics.

For Q1 2019:

• Total
o Total GPU (incl.Gift): $2,408 vs. $1,854 in Q1 2018
o Total GPU ex-Gift: $2,429 vs. $1,854 in Q1 2018

• Retail
o Retail GPU (incl.Gift): $1,282 vs. $902 in Q1 2018
o Retail GPU ex-Gift: $1,302 vs. $902 in Q1 2018
o Gains in Retail GPU were primarily driven by market conditions, as the prior first quarter was impacted by Hurricane Harvey, incremental shipping revenue, and a reduction in average days to sale to 63 from 70.

• Wholesale
o Wholesale GPU (incl.Gift) was $83 vs.$73 in Q1 2018
o Wholesale GPU ex-Gift was $83 vs. $73 in Q1 2018
o Changes in Wholesale GPU were driven by higher wholesale unit volume (+186%) relative to retail units (+99%), partially offset by lower gross profit per wholesale unit sold ($453 incl. Gift and $456 ex-Gift vs. $579 in Q1 2018).

• Other
o Other GPU was $1,044 vs. $879 in Q1 2018
o Gains in Other GPU were driven by improvement in loan monetization from our inaugural auto loan securitization. Total finance GPU, including gain on loan sale and interest income net of securitization fees and expenses, was $625 in Q1 compared to $561 in Q1 2018. Additional GPU gains were primarily driven by higher attachment of VSC and GAP waiver coverage.

Objective #3: Demonstrate Operating Leverage

The following are Carvana excerpts:

We demonstrated meaningful operating leverage again in Q1 2019 as Net Loss margin incl. Gift levered by 3.7% and EBITDA margin ex-Gift levered by 4.9%, reaching record levels for both metrics. We expect to make additional progress toward our long-term SG&A goals over the remainder of 2019.

For Q1 2019:

Total SG&A levered by 2.5% incl. Gift and 2.8% ex-Gift, primarily reflecting increased cohort advertising leverage and benefits from scale
• Compensation and benefits levered by 0.2% incl. Gift and 0.5% ex-Gift, primarily reflecting benefits from scale
• Advertising levered by 1.7%, reflecting leverage in existing markets, shifting mix towards older markets, and benefits of lower initial CACs in the 2019 cohort.
• Logistics and market occupancy was levered by 0.2%, reflecting improving efficiency and volumes through our fulfillment network.
• Other SG&A levered by 0.4%, primarily reflecting benefits from scale.

For the full year 2019, we expect to significantly improve our EBITDA margin ex-Gift as the underlying leverage in our cohorts continues to become more visible at the corporate level.



Carvana margins demand investor vigilance. So far, during its ongoing growth and expansion phase, Carvana is realizing fiscally positive improvements in all three margins.

In the Carvana Long Term Financial Goals, management set forth a long term target of 15% to 19% for Gross Margin.


Q1 ’19  11.7%      (10.9%)      (3.8%)

FY '18	10.1%	   (11.7%)	(3.2%)

Q4 '18   9.6%      (12.7%)      (4.9%)
Q3 '18	10.7%      (10.9%) 	(2.9%)	
Q2 ‘18	10.3%	    (9.8%)	(2.1%)
Q1 ‘18	 9.5%	   (13.6%)	(2.0%)
FY '17	 7.9%	   (18.1%)	(7.3%)
Q4 ‘17	 8.3%	   (17.0%)     (18.9%)
Q3 ‘17	 9.1%	   (17.0%)	(1.9%)
Q2 ‘17	 7.7%	   (17.2%)	(7.0%)
Q1 ‘17			
FY '16	 5.3%	   (24.5%)     (25.5%)

Regarding gross margin, cost of sales includes the cost to acquire used vehicles and direct and indirect vehicle reconditioning costs associated with preparing the vehicles for resale. Vehicle reconditioning costs include parts, labor, inbound transportation costs and other incremental overhead costs, which are allocated to inventory via specific identification and standard costing. Occupancy and labor costs incurred in connection with expanding production capacity are expensed as incurred as a component of selling, general and administrative expense. The Company has certain inventory that does not meet its specifications to sell to customers and disposes of this inventory through sales at auction or through other channels. The cost of these disposals are recorded on a net basis in cost of sales. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.


SBC/revenue ratios are favorably low.

**PERIOD	 SBC	SBC/Revenue** 
**($ M)**		       
Q1 ’19  7.711      1.0%

Q4 '18  6.205      1.1%
Q3 '18 13.800      2.6%			
Q2 ‘18	2.580	   0.5%	      
Q1 ‘18	1.510	   0.4%	      

FY '18 24.095	   2.5%		
FY '17	5.611	   0.7%	      
FY '16	0.555	   0.2%	      
FY '15	0.490	   0.4%	      



In my previous Carvana posts here, I’ve related that the U.S. retail used car marketplace is not only huge, but also highly fragmented. There are approximately 43,000 used car dealerships in the U.S. according to Borrell Associates’ 2017 Outlook, including approximately 27,000 independent dealerships. The largest dealer brand commands approximately 1.7% of the U.S. market and the top 100 used car retailers that include the likes of big boys CarMax and DriveTime collectively hold only about 7.0% market share, according to, publicly-listed dealership filings and Automotive News. That leaves Carvana mucho room to grow and expand especially as an e-commerce business.

Carvana is disrupting and transforming the retail used car sector with their company’s custom-built business model and e-Commerce platform. Its business plan and operations provide a distinct diversification for my family’s portfolios.

I primarily and normally invest in companies operating in the black with on-going positive growth in revenue, earnings, margins, ROIC-WACC spreads and FCF, among others, with stable capital structure in place. I do make and hold exceptions, e.g., Carvana, Amarin, Twilio, Zscaler and MongoDB, only after conducting my own deep dive due diligence that gives me strong confidence in their business model, operations and corporate leadership and execution to deliver and sustain strong revenue growth with light at the end of the tunnel to achieve positive earnings in the near term.

As always, conduct your own due diligence and decision-making.



Thx to you Ray and your hard work on breaking this all down, I got in at 41 a few months ago, certainly firing on all cylinders. Lets see where this one goes. Again many thx.

1 Like

Crikey - the stock was up 100% since March. I was interested in this and forgot why I was concerned enough to not take a position.

This piece reminded me. The share count dilution is monstrous and profitability going the wrong way……

Still - ecommerce for car selling as per Real Estate has been pretty much a money printing machine to invest in everywhere around the world so I could imagine this coming good.



A recent 4/20/19 TMF article “Why Short-Sellers Are Wrong About Carvana: Shot selling this highly valued stock may seem like a good idea at first, but it’s way off base in the long run” by TMFCop Rich Duprey, that BTW I agree with, might allay your concerns.…

Carvana (NYSE:CVNA) is the third-most-shorted stock on the NYSE, but there is no good reason for investors with an appropriate long-term investing horizon to worry.
Short story long
Short-sellers are likely shorting Carvana’s stock because its valuation has gotten well ahead of its performance. Where Carvana trades at 4.6 times its sales, CarMax goes for just a fraction of its sales at 0.7 times. Even Tesla, which moved to an online-only sales model last month but has also suffered a big hit for missing sales goals, trades for 2.1 times its sales.

According to The Wall Street Journal, over 21 million shares of Carvana stock were sold short. While that’s a 12% drop from the prior period, it still amounts to 56% of Carvana’s float, or the number of shares outstanding, which puts it third, behind only Yeti and Lannett.

However, that still means Carvana’s short interest ratio – the theoretical amount of time it would take short-sellers to cover their position – is 14 days. Anything over seven is considered a lot. Should Carvana’s earnings report beat expectations, or if any other good news alights on the used car dealer, short-sellers could get caught in a short squeeze and send Carvana’s stock soaring. It’s why shorting is a risky game to play.

It would seem those shorting Carvana’s stock believe the underlying business doesn’t yet justify the valuation. Although they could be right for the near term, the used car dealership still has plenty of room to scale up. Despite some wild-eyed goals for the future, Carvana may be a business you don’t want to bet against over the long haul.

Hope the above addresses the short concerns of yours and other readers here. I am very wary of articles written by short-sellers, especially like the one cited at SA.

As always, conduct your own due diligence and decision-making.