Carvana on Wednesday announced a deal to reduce its debt by $1.2 billion, as well as a big sales beat for the second quarter. In addition, a key profit metric surged. Carvana stock skyrocketed.
The embattled online used-car seller said the arrangement with its bondholders will eliminate 83% of the notes due to mature in 2025 and 2027. That will lower its costs to service debt by more than $430 million per year for the next two years. Before the deal, most of Carvana's $8.5 billion in total debt was in unsecured notes.
"This transaction significantly increases our financial flexibility by reducing our total debt, extending maturities, and lowering near-term cash interest expense as we continue to execute our plan of driving significant profitability and returning to growth," Carvana CFO Mark Jenkins said in a statement.
Carvana said on Wednesday it will try to raise up to $1 billion through a stock sale as it restructures.
Carvana Earnings
For Q2, Carvana lost 55 cents per share on revenue of $2.968 billion. In the year-ago quarter, Carvana posted a loss of $2.35 per share on revenue of $3.884 billion.
Analysts, on average, were expecting a loss of $1.13 per share and revenue of $2.589 billion, according to FactSet.
Gross profit per unit, or GPU, a closely watched metric, reached $6,520, an increase of 94% vs. a year earlier. It also exceeded the previous best quarter — Q2 2021 — by 27%, Carvana said.
The company sold 76,530 retail units and 46,453 wholesale units during the quarter. Retail units were down from Q1 while wholesale units were up. Both were down from the year-ago quarter.
For Q3, Carvana said it expects to achieve positive adjusted EBITDA for the second consecutive quarter.
Carvana Stock
Shares of Carvana soared 40.5% to 55.91 on the stock market today. CVNA stock had jumped 9% in the regular session Tuesday. But shares slumped in late Tuesday trading after the company abruptly moved up its earnings report date by two weeks.
A Reuters report tied Wednesday's surge to a possible short squeeze. More than half of Carvana's publicly available shares were being shorted as of July 18, the report said.
Brick-and-mortar rival CarMax, which has made an online sales push, fell 0.7% to 85.19 Wednesday.
Year to date, the stock has now skyrocketed 973%, including a 490% jump in the past three months.
But it still remains far below its all-time high of $376.83, set in August 2021. Carvana stock had plunged due to mismanagement during the Covid-19 pandemic and a heavy debt burden.
Carvana says it is the nation's largest online used auto retailer.
