A Carvana glass tower sits illuminated on Feb. 23, 2022, in Oak Brook, Illinois.
Armando L. Sanchez | Tribune News Service | Getty Images
Carvana on Thursday said it expects to achieve positive adjusted earnings during the second quarter of this year — earlier than many anticipated — as the used car retailer executes a restructuring focused on cost-cutting and profits over growth.
The stock was up by more than 25% in extended trading Thursday to above $9 a share. Carvana closed Thursday at $7.20 per share.
The company, which pre-announced first-quarter results in March, beat Wall Street’s expectations for adjusted losses per share, recording a loss of $1.51 per share, versus Refinitiv consensus estimates of $2. Revenue of $2.61 billion came in exactly in line with Refinitiv projections.
The embattled used car retailer has been working to reduce costs, narrow losses and increase profits per vehicle. The company’s stock fell roughly 98% last year as it overspent to gain sales and increase vehicle inventory amid weakening demand.
Carvana said Thursday it achieved a previously announced reduction in selling, general and administrative expenses of $1 billion a quarter early.
The company last year announced plans to achieve a positive adjusted EBITDA this year, however pulled that guidance due to “current industry and macroeconomic conditions.” Carvana last reported a positive adjusted EBITDA of $20 million during the third quarter of 2021.
“The first quarter was a big step in the right direction and there are more steps to come. Given our strong start to the year, we expect to achieve positive adjusted EBITDA in Q2 2023,” Carvana CEO Ernie Garcia said in an earnings release. “It is clear our strategy and execution are working as evidenced by our 61% increase in gross profit per unit, the best first quarter GPU in company history.”
Wall Street was watching for additional steps in the restructuring of the company as well as improvements in total gross profit per unit, specifically. GPU was $4,303, an increase of 52% compared to the first quarter of 2022.
Sales also came in ahead of expectations, at 79,240 units, compared with a previously stated forecast of between 76,000 and 79,000 units. Sales during the same quarter last year were 105,000 units.
For the first quarter, Carvana reported a net loss of $286 million, down from a loss of $506 million a year earlier. On an adjusted basis, the company lost $24 million, down from a loss of $348 million a year earlier and narrower than its $291 million loss during the fourth quarter.
“I think we’ve proven than we can do much better than we ever have in the past,” Garcia said Thursday on a call with investors.
Carvana was a coveted stock during the Covid pandemic, as consumers moved toward online car purchasing and the used vehicle market skyrocketed due to a lack of inventory of new vehicles. But the company failed to capitalize at the right time and launched the restructuring of the business.