Carvana reports first-ever annual profit, reduces debt by $1 billion

Carvana, a used vehicle reseller, announced its first-ever yearly profit on February 22. This was due to an agreement with bondholders to reduce the company’s outstanding debt by $1 billion, which helped to improve its liquidity. As a result, the company’s shares increased by a fifth after-hours. Carvana expects adjusted core profit to be “significantly above” $100 million in the first quarter. 

During the company’s quarterly earnings call, Carvana officials stated that they had observed outcomes from their most recent innovations and were still working on new ones.

For instance, they allow prospective sellers to list their vehicles for sale and complete the transaction from a desktop or mobile device when sourcing cars for resale. Mark Jenkins, Carvana’s Chief Financial Officer, stated that his team is actively refining their algorithms to ensure accurate valuation of every car they appraise.

To strengthen its balance sheet, Carvana has been reducing advertising, other costs, and inventory. In July, the company agreed to reduce its outstanding debt with most of its term bondholders. The company expects that the first quarter of 2024 will have a comparable retail gross profit per unit (GPU) to the fourth quarter, with potential for growth. Additionally, they anticipate that the number of retail units sold will be slightly higher than the previous year. 

Moreover, the company has developed a new technology called CARLI to inspect and recondition used cars for resale. According to a shareholder letter, CARLI technology streamlines the inspection process, tracks parts ordering, and uses machine learning (ML) to identify and manage costs. 

During the call, Jenkins affirmed that the company has reduced non-vehicle retail sales costs by over $900 since their peak over a year ago. “We achieved this by improving reconditioning processes, procuring better parts, and achieving greater overall efficiency.”