Carvana tops 200,000 cars sold in a quarter for the first time

What happened

Carvana sold 217,385 cars to retail customers in the three months to Wednesday 30 September, its first quarter above 200,000, the company reported on Wednesday 28 October. ^{[1, 2, 3]}

That was 39 percent more than the 155,941 of a year earlier, the company reported. Revenue was $8.040 billion, against $5.647 billion, an increase of 42 percent. Gross profit was $1.521 billion, against $1.148 billion. ^{[1, 3]}

Operating income was $714 million, up from $552 million, and net income $483 million, against $263 million, after a $53 million loss on paying off notes due in 2030 early. Of that, $289 million was attributable to Carvana Co., after $194 million belonging to other holders of its operating company's units. Chief executive Ernie Garcia put net income at $480 million on the call. ^{[1, 5]}

Why it matters

Carvana said the used-car industry was about flat over the year, so its growth came from taking market share. It put its yearly pace at 870,000 units, about 2 percent of the used market and 1.5 percent of the whole car market. The growth came with a thinner profit per car, the company said. ^{[1, 4]}

Profit per car

Total gross profit per unit was $6,997, $365 less than a year earlier. Carvana said the main causes were lower loan rates for customers relative to benchmark rates and a smaller wholesale profit per car. ^{[1, 4]}

The company estimated that higher fuel prices and fast-rising benchmark interest rates cost about $200 per unit in the quarter. Operations expense per car sold was up $109, which chief financial officer Mark Jenkins said on the call was 'primarily due to higher fuel and logistics costs.' ^{[1, 4, 5]}

What the company expects

Carvana said it expects more retail units sold in the fourth quarter than in the third, 'as long as the environment remains stable.' It said full-year adjusted EBITDA, a profit measure that leaves out interest, taxes, depreciation and some other items, should land 'in the higher end' of its $2.7 billion to $3.0 billion range. ^{[1, 2]}

From its fourth-quarter results call, the company said, it does not plan to give quarterly or annual outlooks, and in 2027 it plans to lead with measures under US accounting rules. It restated its goal as 3 million retail units a year at a 12.5 percent operating margin between 2030 and 2035. Jenkins called the change 'a natural step in our evolution as a company.' ^{[1, 4, 5]}

What settles it next

Carvana's fourth-quarter results will show whether retail units grew from the third quarter, as the company expects; the letter gives no date for them. CarMax plans a strategic update on Tuesday 3 November, its release said. ^{[1, 6]}

Who it reaches

Carvana (CVNA) is direct: the results, the outlook and the reporting change are its own. CarMax (KMX) is adjacent: it calls itself the nation's largest retailer of used autos, and Garcia said on the call that Carvana is 'knocking on the door of becoming the largest.' CarMax reported 227,391 retail used units in its own quarter, which ended a month earlier, on Monday 31 August. ^{[5, 6]}