Carvana reported a Q1 adjusted EPS loss of $1.51, topping analyst expectations of $1.96 EPS loss. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) came in at negative $24 million for the quarter, though Carvana says this metric will be positive in the current quarter.
“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,” said Carvana CEO Ernie Garcia in a statement. “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.”
The company also said retail units sold of 79,240 and revenue of $2.606 billion each fell by 25% respectively compared to Q1 last year, but Carvana says that was driven by “internal prioritization of profitability initiatives.” Though the company sold fewer cars, the total non-GAAP GPU (gross profit per unit) climbed to $4,796, an increase of 61% compared to Q1.
Improvements in Carvana’s operations, and a steadying of the used-car market in terms of prices, may be aiding Carvana’s fortunes at the moment. What is hurting Carvana and its beaten-down stock price is the debt load the company is currently burdened by, which now sits at $8.7 billion. By contrast, the company’s cash hoard was only $488 million at the end of Q1.
While Carvana has attempted to lessen its debt load with new private debt exchange offers, shares got a boost last week when Bloomberg reported creditors with about 90% of Carvana’s bonds instead offered a debt-for-equity swap. The bondholders also reportedly offered to exchange some of Carvana's interest expense with additional debt, known as a payment-in-kind.
“While many ‘unknowns’ exist, we are hard-pressed to envision a successful, sizable debt-for-equity swap at Carvana not proving a significant positive for CVNA shares,” Oppenheimer analyst Brian Nagel wrote in a note to clients. Nagel said the debt-for-equity swap was a “potentially BIG lifeline” for Carvana.
Shares of Carvana were up over 40% in early Friday trading.