Carvana (US:CVNA)2023-07-21 17:17Financial Data and Key Metrics Changes - In Q2, total revenue was $2.968 billion, a decrease of 24% year-over-year but an increase of 14% sequentially [9] - Adjusted EBITDA was positive $155 million in Q2, representing 5.2% of revenue, with nonrecurring items impacting adjusted EBITDA by approximately $70 million [11][25] - Retail units sold totaled 76,530, a decrease of 35% year-over-year and 3% sequentially [9] Business Line Data and Key Metrics Changes - Retail GPU in Q2 was $2,862, up from $1,591 in Q1, driven by improvements in inventory management and cost efficiencies [27] - Non-GAAP total GPU was $7,030, a sequential increase of $2,234, positively impacted by approximately $900 in nonrecurring benefits [27] - Non-GAAP other GPU was $2,940, up from $1,969 in Q1, primarily driven by a greater volume of loans sold [28] Market Data and Key Metrics Changes - Inventory was down over 50% year-over-year and continued to decrease quarter-over-quarter, aligning inventory size with sales volumes [14] - The market is showing signs of normalization, with expectations of increased off-lease volume in the near future [18] - Used car sales are currently about 10% below baseline levels, indicating potential for market recovery [90] Company Strategy and Development Direction - The company is focused on a three-step plan: achieving positive adjusted EBITDA, driving significant positive unit economics, and returning to growth [130] - The acquisition of ADESA is expected to enhance operational efficiency and reduce necessary investments for future growth [62] - The company aims to maintain operational focus and efficiency while preparing for future growth opportunities [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by macroeconomic factors, including high interest rates and vehicle prices, but remains optimistic about future growth [50][90] - The company expects to generate positive adjusted EBITDA in Q3, indicating a continued focus on profitability [12] - Management believes that the operational improvements made over the past year will support sustainable growth moving forward [57] Other Important Information - The company has completed a debt exchange that reduces total debt by over $1.2 billion and cash interest expense by over $430 million annually [30] - Total liquidity resources as of June 30 were approximately $3.5 billion, including $1.5 billion in cash and revolving availability [116] Q&A Session Summary Question: How much of your decline do you think is based on the market? - Management indicated that the decline is influenced by both market conditions and internal initiatives focused on profitability [4] Question: Can you clarify the capital structure regarding debt reduction? - The majority of the $1.2 billion debt reduction is due to collateral exchange rather than cash paydown, providing significant financial flexibility [42] Question: What are the expectations for retail GPU in Q3? - Management expects retail GPU to remain strong, with a forecast of over $5,000, although without the benefit of prior nonrecurring items [76][93] Question: How is the company positioned for future growth? - Management believes that operational efficiencies and a strong customer offering will enable a return to growth when market conditions stabilize [89]