Carvana & Co (CVNA)
Core auto operations lost $210M in 2024; reported $990M operating income depends on financing activities. Gross Profit/Unit overstated by 109%.
- Accrued Paid-in-kind (PIK) Interest accounts for 70% of total Interest, positively benefits operating cash flow
- Related Party Revenue accounts for 95% of net profit
Analysis
1. Gain on Sale of Financing Receivables
Carvana generates significant revenue and gross profit from selling financing receivables — essentially reselling customer auto loans. We consider this to be a non-operating activity, which is recognized and reported as revenue.
| in $ million | 2022 | 2023 | 2024 |
|---|---|---|---|
| Total Revenue | 13,604 | 10,771 | 13,673 |
| Thereof: Gain on Loan Sales | 5% | 7% | 8% |
| Total Gross Profit | 1,246 | 1,724 | 2,876 |
| Thereof: Gain on Loan Sales | 59% | 44% | 40% |
By excluding gain on sale of receivables from reported operating income, we arrive at core operating income, which solely reflects the core operating car business (retail & wholesale). Without loan sales, Carvana's core car business has been unprofitable every year since 2022.
2024: Reported Operating Income was $990M, but after removing $1,200M in Gain on Sale of Receivables, Core Operating Income was -$210M.
2. Misleading Non-GAAP Metrics (Gross Profit per Unit)
Carvana reports "Gross Profit per Unit" as part of their Key Operating Metrics. Carvana calculates this metric by dividing total Gross Profit (including wholesale and sale of finance receivables) only by retail units sold. This creates a misleading picture of per-unit economics.
To measure the Gross Profit per Unit sold for the retail segment, we take Gross Profit per retail-unit, which significantly deviates from the reported Gross Profit per Unit metric.
| Year | 2022 | 2023 | 2024 |
|---|---|---|---|
| Gross Profit / Unit (reported) | 3,022 | 5,511 | 6,908 |
| Retail-Only Gross Profit per Unit (adjusted)1 | 900 | 2,385 | 3,312 |
| Deviation (%) | 236% | 131% | 109% |
2024: Reported Gross Profit/Unit was $6,908, but Retail-Only Gross Profit per Unit was just $3,312 — a deviation of 109%.