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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______

Commission File Number: 001-38073

CARVANA CO.
(Exact name of registrant as specified in its charter)
Delaware81-4549921
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1930 W. Rio Salado ParkwayTempeArizona85281
(Address of principal executive offices)(Zip Code)
(480) 719-8809
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, Par Value $0.001 Per ShareCVNANew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes  No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of November 1, 2021, the registrant had 85,587,265 shares of Class A common stock outstanding and 87,200,276 shares of Class B common stock outstanding.






INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2021 and 2020
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits






PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and par values)
September 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$297 $301 
Restricted cash107 28 
Accounts receivable, net178 79 
Finance receivables held for sale, net368 275 
Vehicle inventory2,285 1,036 
Beneficial interests in securitizations312 131 
Other current assets, including $10 and $6, respectively, due from related parties
143 73 
Total current assets3,690 1,923 
Property and equipment, net1,333 909 
Operating lease right-of-use assets, including $20 and $22, respectively, from leases with related parties
273 156 
Intangible assets, net5 6 
Goodwill9 9 
Other assets, including $7 and $4, respectively, due from related parties
50 32 
Total assets$5,360 $3,035 
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities, including $23 and $16, respectively, due to related parties
$700 $342 
Short-term revolving facilities455 40 
Current portion of long-term debt74 65 
Other current liabilities, including $4 and $3, respectively, from leases with related parties
32 20 
Total current liabilities1,261 467 
Long-term debt, excluding current portion3,134 1,617 
Operating lease liabilities, excluding current portion, including $15 and $19, respectively, from leases with related parties
256 148 
Other liabilities1 1 
Total liabilities4,652 2,233 
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of September 30, 2021 and December 31, 2020
  
Class A common stock, $0.001 par value - 500,000 shares authorized; 85,569 and 76,512 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
  
Class B common stock, $0.001 par value - 125,000 shares authorized; 87,200 and 95,592 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
  
Additional paid-in capital785 742 
Accumulated deficit(400)(354)
Total stockholders' equity attributable to Carvana Co.385 388 
Non-controlling interests323 414 
Total stockholders' equity708 802 
Total liabilities & stockholders' equity$5,360 $3,035 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Sales and operating revenues:
Used vehicle sales, net$2,650 $1,289 $6,954 $3,245 
Wholesale vehicle sales, including $15, $1, $37, and $1, respectively, from related parties
552 130 1,349 259 
Other sales and revenues, including $52, $26, $143, and $69, respectively, from related parties
278 125 758 256 
Net sales and operating revenues3,480 1,544 9,061 3,760 
Cost of sales, including $17, $1, $21, and $3, respectively, to related parties
2,957 1,282 7,648 3,210 
Gross profit523 262 1,413 550 
Selling, general and administrative expenses, including $7, $5, $19, and $14, respectively, to related parties
546 269 1,413 784 
Interest expense, including $0, $0, $0, and $1, respectively, to related parties
48 20 121 69 
Other (income) expense, net(3)(9)(16)5 
Net loss before income taxes(68)(18)(105)(308)
Income tax provision    
Net loss(68)(18)(105)(308)
Net loss attributable to non-controlling interests (36)(11)(59)(200)
Net loss attributable to Carvana Co. $(32)$(7)$(46)$(108)
Net loss per share of Class A common stock, basic and diluted$(0.38)$(0.10)$(0.56)$(1.73)
Weighted-average shares of Class A common stock, basic and diluted (1)
84,779 70,005 81,427 62,244 
(1) Weighted-average shares of Class A common stock outstanding have been adjusted for unvested restricted stock awards.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In millions, except number of shares, which are reflected in thousands)
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated DeficitNon-controlling InterestsTotal Stockholders' Equity
Balance, December 31, 201950,507 $ 101,219 $ $281 $(183)$94 $192 
Net loss— — — — — (60)(124)(184)
Exchanges of LLC Units116 — (19)— — — — — 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 2 — — 2 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (2)— — (2)
Issuance of Class A common stock to settle vested restricted stock units38 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(8)— — — (2)— — (2)
Options exercised7 — — — — — — — 
Equity-based compensation— — — — 7 — — 7 
Balance, March 31, 202050,660 $ 101,200 $ $286 $(243)$(30)$13 
Net loss— — — — — (41)(65)(106)
Issuance of Class A common stock, net of underwriters' discounts and commissions and offering expenses18,333 — — — 1,059 — — 1,059 
Adjustments to the non-controlling interests related to equity offering— — — — (643)— 643  
Exchanges of LLC Units285 — — — 1 — (1) 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 21 — — 21 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (21)— — (21)
Issuance of Class A common stock to settle vested restricted stock units61 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(26)— — — (4)— — (4)
Options exercised101 — — — 3 — — 3 
3



Equity-based compensation— — — — 8 — — 8 
Balance, June 30, 202069,414 $ 101,200 $ $710 $(284)$547 $973 
Net loss— — — — — (7)(11)(18)
Exchanges of LLC Units1,039 — — — 5 — (5) 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 47 — — 47 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (47)— — (47)
Issuance of Class A common stock to settle vested restricted stock units30 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(2)— — — (3)— — (3)
Options exercised57 — — — 2 — — 2 
Equity-based compensation— — — — 7 — — 7 
Balance, September 30, 202070,538 $ 101,200 $ $721 $(291)$531 $961 


4



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Continued)
(Unaudited)
(In millions, except number of shares, which are reflected in thousands)
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated DeficitNon-controlling InterestsTotal Stockholders' Equity
Balance, December 31, 202076,512 $ 95,592 $ $742 $(354)$414 $802 
Net loss— — — — — (36)(46)(82)
Exchanges of LLC Units3,247 — (3,073)— 12 — (12) 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 225 — — 225 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (225)— — (225)
Issuance of Class A common stock to settle vested restricted stock units62 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(2)— — — (9)— — (9)
Options exercised15 — — — — — — — 
Equity-based compensation— — — — 10 — — 10 
Balance, March 31, 202179,834 $ 92,519 $ $755 $(390)$356 $721 
Net income— — — — — 22 23 45 
Exchanges of LLC Units3,189 — (3,118)— 12 — (12) 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 217 — — 217 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (217)— — (217)
Issuance of Class A common stock to settle vested restricted stock units59 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(2)— — — (8)— — (8)
Options exercised26 — — — 1 1 
Equity-based compensation— — — — 11 — — 11 
Balance, June 30, 202183,106 $ 89,401 $ $771 $(368)$367 $770 
Net loss— — — — — (32)(36)(68)
Exchanges of LLC Units2,400 — (2,201)— 8 — (8) 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 199 — — 199 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (199)— — (199)
5



Issuance of Class A common stock to settle vested restricted stock units42 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(1)— — — (8)— — (8)
Options exercised22 — — — — — — — 
Equity-based compensation— — — — 14 — — 14 
Balance, September 30, 202185,569 $ 87,200 $ $785 $(400)$323 $708 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Nine Months Ended September 30,
20212020
Cash Flows from Operating Activities:
Net loss$(105)$(308)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense72 52 
Loss on disposal of property and equipment1 6 
Provision for bad debt and valuation allowance16 11 
Gain on loan sales(528)(129)
Equity-based compensation expense28 18 
Amortization and write-off of debt issuance costs and bond premium8 6 
Originations of finance receivables(5,315)(2,493)
Proceeds from sale of finance receivables, net5,375 2,479 
Principal payments received on finance receivables held for sale136 60 
Unrealized gain on beneficial interests in securitization(6)(4)
Changes in assets and liabilities:
Accounts receivable(111)(46)
Vehicle inventory(1,230)(198)
Other assets(86)(18)
Accounts payable and accrued liabilities319 112 
Operating lease right-of-use assets(117)(18)
Operating lease liabilities121 23 
Net cash used in operating activities(1,422)(447)
Cash Flows from Investing Activities:
Purchases of property and equipment, including $0 and $22, respectively, from related parties
(390)(270)
Principal payments received on beneficial interests in securitizations38 9 
Net cash used in investing activities(352)(261)
Cash Flows from Financing Activities:
Proceeds from short-term revolving facilities8,733 3,426 
Payments on short-term revolving facilities(8,318)(3,868)
Proceeds from issuance of long-term debt1,525 203 
Payments on long-term debt(46)(18)
Payments of debt issuance costs(21)(12)
Net proceeds from issuance of Class A common stock 1,059 
Proceeds from equity-based compensation plans1 5 
Tax withholdings related to restricted stock awards(25)(9)
Net cash provided by financing activities1,849 786 
Net increase in cash, cash equivalents and restricted cash75 78 
Cash, cash equivalents and restricted cash at beginning of period329 118 
Cash, cash equivalents and restricted cash at end of period$404 $196 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 — BUSINESS ORGANIZATION

Description of Business

Carvana Co. and its wholly-owned subsidiary Carvana Co. Sub LLC (collectively, "Carvana Co."), together with its consolidated subsidiaries (the "Company"), is the leading e-commerce platform for buying and selling used cars. The Company is transforming the used car sales experience by giving consumers what they want — a wide selection, great value and quality, transparent pricing, and a simple, no pressure transaction. Using the website, customers can complete all phases of a used vehicle purchase transaction, including financing their purchase, trading in their current vehicle, and purchasing complementary products such as vehicle service contracts ("VSC") and GAP waiver coverage. Each element of the Company's business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.

Organization

Carvana Co. is a holding company that was formed as a Delaware corporation on November 29, 2016 for the purpose of completing its initial public offering ("IPO") and related transactions in order to operate the business of Carvana Group, LLC and its subsidiaries (collectively, "Carvana Group"). Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Carvana Group, except the Company's Senior Notes (as defined in Note 9 — Debt Instruments) which were issued by Carvana Co. and guaranteed by its and Carvana Group's existing domestic restricted subsidiaries.

In accordance with Carvana Group LLC's amended and restated limited liability company agreement (the "LLC Agreement"), Carvana Co. is the sole manager of Carvana Group and conducts, directs and exercises full control over the activities of Carvana Group. There are two classes of common ownership interests in Carvana Group, Class A common units (the "Class A Units") and Class B common units (the "Class B Units"). As further discussed in Note 10 — Stockholders' Equity, the Class A Units and Class B Units (collectively, the "LLC Units") do not hold voting rights, which results in Carvana Group being considered a variable interest entity ("VIE"). Due to Carvana Co.'s power to control and its significant economic interest in Carvana Group, it is considered the primary beneficiary of the VIE and the Company consolidates the financial results of Carvana Group. As of September 30, 2021, Carvana Co. owned approximately 48.9% of Carvana Group and the LLC Unitholders (as defined in Note 10 — Stockholders' Equity) owned the remaining 51.1%.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K filed on February 25, 2021. In addition, in 2021, the Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.
    
The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of September 30, 2021, results of operations and changes in stockholder's equity for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary.

8


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Liquidity

Since inception, the Company has incurred losses, and expects to incur additional losses in the future as it continues to build inspection and reconditioning centers ("IRCs") and vending machines, serve more of the U.S. population, and enhance technology and software. Since March 31, 2020, the Company has completed equity offerings of approximately 18 million shares of Class A common stock for net proceeds of approximately $1.1 billion and has issued a total of $2.5 billion in senior unsecured notes due between 2025 and 2029, from which approximately $627 million of the proceeds were used to repay its senior unsecured notes due in 2023. In March 2021, the Company's forward flow partner committed to purchase a total of $4.0 billion of the Company's finance receivables through March 2022, and such facility had approximately $2.3 billion of unused capacity as of September 30, 2021. In addition, the Company has a $1.75 billion floor plan facility effective through March 31, 2023. Management believes that current working capital, results of operations, and existing financing arrangements are sufficient to fund operations for at least one year from the financial statement issuance date.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations.

Adoption of New Accounting Standards

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional guidance for a limited period of time related to contract modifications and hedge accounting to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The standard is effective from March 12, 2020 through December 31, 2022, except for hedging relationships existing as of December 31, 2022 that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company may elect to take advantage of this optional guidance in its transition away from LIBOR within certain debt contracts but does not expect a material impact on its consolidated financial statements. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"), which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB's monitoring of global reference rate activities. As of September 30, 2021, the Company had not modified any contracts or had any hedge accounting activity in which it utilized the optional guidance under ASU 2020-04 and ASU 2021-01.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 for its fiscal year beginning January 1, 2021 and it did not have a material effect on its consolidated financial statements.






9


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 3 — PROPERTY AND EQUIPMENT, NET

The following table summarizes property and equipment, net as of September 30, 2021 and December 31, 2020:
September 30,
2021
December 31,
2020
(in millions)
Land and site improvements$268 $132 
Buildings and improvements609 477 
Transportation fleet274 190 
Software155 113 
Furniture, fixtures and equipment79 60 
Total property and equipment excluding construction in progress1,385 972 
Less: accumulated depreciation and amortization on property and equipment(259)(171)
Property and equipment excluding construction in progress, net1,126 801 
Construction in progress207 108 
Property and equipment, net$1,333 $909 

Depreciation and amortization expense on property and equipment was approximately $27 million and $19 million for the three months ended September 30, 2021 and 2020, respectively, and approximately $72 million and $51 million for the nine months ended September 30, 2021 and 2020, respectively. These amounts primarily relate to selling, general and administrative activities and are included as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

NOTE 4 — GOODWILL AND INTANGIBLE ASSETS, NET

On April 12, 2018, the Company acquired Car360, Inc. ("Car360"), a provider of app-based photo capture technology. The following table summarizes intangible assets and goodwill related to the Car360 acquisition as of September 30, 2021 and December 31, 2020:

Useful LifeSeptember 30,
2021
December 31,
2020
(in millions)
Intangible assets:
Developed technology7 years$9 $9 
Non-compete agreements5 years1 1 
Intangible assets, acquired cost10 10 
Less: accumulated amortization(5)(4)
Intangible assets, net$5 $6 
GoodwillN/A$