Carvana records Q2 net loss, notes returns from ADESA U.S. acquisition

Carvana Co. said Thursday it posted a net loss of $439 million in the quarter ending June 30 — a far cry from its landmark $45 million profit one year ago but smaller than its $506 million first-quarter loss.

The online used-vehicle retailer, which has been challenged in part by high used-vehicle prices, reported progress on integrating its operations with those of ADESA U.S., the large physical auction network it acquired in May from KAR Global.

Carvana took in revenue of about $3.88 billion for the quarter, up 16 percent compared with the year-earlier period. The retailer sold 117,564 cars and trucks in the second quarter, up 9 percent. However, the profit it made per vehicle retailed plunged to $3,368, a decrease of $1,752.

Carvana has had regulatory tangles with state and local licensing agencies. In May, the company said it would dismiss 2,500 employees, or about 12 percent of its work force and that top executives would forgo their salaries for the rest of 2022.

In a letter to shareholders, Carvana CEO Ernie Garcia and CFO Mark Jenkins said the second quarter presented continuing challenges with high used-vehicle prices, rising interest rates and other macroeconomic pressures. Carvana is adapting to the current used-market environment and views it as a chance to become “more efficient,” they wrote.

Through the first half, Carvana posted a net loss of $945 million. By contrast, it posted a net loss of just $37 million through the first half of 2021.

Carvana said it saw the first returns from its purchase of ADESA U.S., which was finalized May 9. Carvana struck a $2.2 billion deal with wholesale auctions company KAR Global to acquire the network and gain access to its 56 physical sites.

In the shareholder letter, Garcia and Jenkins said the company is “extremely happy with [its] integration progress so far.”

Since May 9, Carvana has embedded market hubs at 18 ADESA locations. It also boosted its inspection and reconditioning capability to more than 500 vehicles per week at ADESA sites that mesh well with its own reconditioning locations, which are mostly in coastal regions, according to the shareholder letter.

In the partial quarter after the sale was finalized, the ADESA U.S. marketplace recorded 111,883 vehicle transactions, Carvana said. That generated $108 million in revenue and $20 million gross profit, the company said.

Carvana said it closed one of its two inspection and reconditioning centers in the Cleveland metropolitan area in the quarter. It opened a new reconditioning and inspection location near Richmond, Va., in July, and it plans to open two more such locations in 2022.

Carvana shares were up 13 percent to $37.80 in after-hours trading Wednesday.

Q2 net revenue: $3.88 billion, up 16 percent from a year earlier.

Q2 net loss: $439 million net loss, a swing from $45 million in net profit a year earlier.

Q2 retail vehicles sold: 117,564, up 9 percent

Q2 total gross profit per vehicle: $3,368, down 34 percent