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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, 2022

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.)
300 E. Rio Salado ParkwayTempeArizona85281
(Address of principal executive offices)(Zip Code)
(480) 719-8809
(Registrant's telephone number, including area code)
1930 W. Rio Salado ParkwayTempeArizona85281
(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, a 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 October 31, 2022, the registrant had 105,947,745 shares of Class A common stock outstanding and 82,900,276 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, 2022 and December 31, 2021
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021
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, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$316 $403 
Restricted cash161 233 
Accounts receivable, net359 206 
Finance receivables held for sale, net485 356 
Vehicle inventory2,577 3,149 
Beneficial interests in securitizations350 382 
Other current assets, including $5 and $12, respectively, due from related parties
221 163 
Total current assets4,469 4,892 
Property and equipment, net3,326 1,560 
Operating lease right-of-use assets, including $14 and $17, respectively, from leases with related parties
689 369 
Intangible assets, net76 4 
Goodwill847 9 
Other assets, including $1 and $7, respectively, due from related parties
214 181 
Total assets$9,621 $7,015 
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities, including $19 and $27, respectively, due to related parties
$1,009 $656 
Short-term revolving facilities575 2,053 
Current portion of long-term debt213 152 
Other current liabilities, including $4 and $3, respectively, from leases with related parties
81 29 
Total current liabilities1,878 2,890 
Long-term debt, excluding current portion6,616 3,208 
Operating lease liabilities, excluding current portion, including $10 and $13, respectively, from leases with related parties
669 361 
Other liabilities84 31 
Total liabilities9,247 6,490 
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of September 30, 2022 and December 31, 2021
  
Class A common stock, $0.001 par value - 500,000 shares authorized; 105,932 and 89,930 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
  
Class B common stock, $0.001 par value - 125,000 shares authorized; 82,900 shares issued and outstanding as of September 30, 2022 and December 31, 2021
  
Additional paid-in capital1,544 795 
Accumulated deficit(1,270)(489)
Total stockholders' equity attributable to Carvana Co.274 306 
Non-controlling interests100 219 
Total stockholders' equity374 525 
Total liabilities & stockholders' equity$9,621 $7,015 
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,
2022202120222021
Sales and operating revenues:
Retail vehicle sales, net$2,492 $2,650 $8,186 $6,954 
Wholesale sales and revenues, including $6, $15, $27 and $37, respectively, from related parties
697 552 1,976 1,349 
Other sales and revenues, including $39, $52, $137 and $143, respectively, from related parties
197 278 605 758 
Net sales and operating revenues3,386 3,480 10,767 9,061 
Cost of sales, including $2, $17, $20 and $21, respectively, to related parties
3,027 2,957 9,714 7,648 
Gross profit359 523 1,053 1,413 
Selling, general and administrative expenses, including $7, $7, $20 and $19, respectively, to related parties
656 546 2,104 1,413 
Interest expense153 48 333 121 
Other (income) expense, net58 (3)68 (16)
Net loss before income taxes(508)(68)(1,452)(105)
Income tax provision  1  
Net loss(508)(68)(1,453)(105)
Net loss attributable to non-controlling interests (225)(36)(672)(59)
Net loss attributable to Carvana Co.$(283)$(32)$(781)$(46)
Net loss per share of Class A common stock, basic and diluted$(2.67)$(0.38)$(7.88)$(0.56)
Weighted-average shares of Class A common stock, basic and diluted (1)
105,857 84,779 99,134 81,427 
(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, 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 
3



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)
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 


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, 202189,930 $ 82,900 $ $795 $(489)$219 $525 
Net loss— — — — — (260)(246)(506)
Exchanges of LLC Units27 — — — 1 — (1)— 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 1 — — 1 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (1)— — (1)
Contribution of Class A common stock from related party(97)— — — — — — — 
Issuance of Class A common stock to settle vested restricted stock units139 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes— — — — (12)— — (12)
Options exercised63 — — — 2 — — 2 
Equity-based compensation— — — — 43 — — 43 
Balance, March 31, 202290,062 $ 82,900 $ $829 $(749)$(28)$52 
Net loss— — — — — (238)(201)(439)
Issuances of Class A common stock, net of underwriters' discounts and commissions and offering expenses15,625 — — — 1,227 — — 1,227 
Adjustment to non-controlling interests related to equity offerings— — — — (554)— 554 — 
Exchanges of LLC Units19 — — — — — — — 
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)
Contribution of Class A common stock from related party(2)— — — — — — — 
Issuance of Class A common stock to settle vested restricted stock units48 — — — — — — — 
Issuance of Class A common stock under ESPP27 — — — 1 — — 1 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes— — — — 5 — — 5 
Options exercised10 — — — — — — — 
Equity-based compensation— — — — 18 — — 18 
Balance, June 30, 2022105,789 $ 82,900 $ $1,526 $(987)$325 $864 
Net loss— — — — — (283)(225)(508)
5



Contribution of Class A common stock from related party(14)— — — — — — — 
Issuance of Class A common stock as restricted stock awards and to settle vested restricted stock units142 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes — — — (1)— — (1)
Options exercised15 — — — 1 — — 1 
Equity-based compensation— — — — 18 — — 18 
Balance, September 30, 2022105,932 $ 82,900 $ $1,544 $(1,270)$100 $374 
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,
20222021
Cash Flows from Operating Activities:
Net loss$(1,453)$(105)
Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization expense179 72 
    Equity-based compensation expense57 28 
    Loss on disposal of property and equipment3 1 
    Provision for bad debt and valuation allowance11 16 
    Amortization and write-off of debt issuance costs20 8 
    Unrealized loss on warrants to acquire Root's Class A common stock77  
    Unrealized loss (gain) on beneficial interests in securitization1 (6)
Changes in finance receivable related assets:
    Originations of finance receivables(5,690)(5,315)
    Proceeds from sale of finance receivables, net5,628 5,375 
    Gain on loan sales(361)(528)
    Principal payments received on finance receivables held for sale146 136 
Other changes in assets and liabilities:
    Vehicle inventory638 (1,230)
    Accounts receivable40 (111)
    Other assets(75)(86)
    Accounts payable and accrued liabilities155 319 
    Operating lease right-of-use assets(132)(117)
    Operating lease liabilities178 121 
    Other liabilities(7) 
Net cash used in operating activities(585)(1,422)
Cash Flows from Investing Activities:
    Purchases of property and equipment(451)(390)
    Payments for acquisitions, net of cash acquired(2,189) 
    Principal payments received on and proceeds from sale of beneficial interests72 38 
Net cash used in investing activities(2,568)(352)
Cash Flows from Financing Activities:
    Proceeds from short-term revolving facilities10,596 8,733 
    Payments on short-term revolving facilities(12,074)(8,318)
    Proceeds from issuance of long-term debt3,435 1,525 
    Payments on long-term debt(111)(46)
    Payments of debt issuance costs(75)(21)
    Net proceeds from issuance of Class A common stock1,227  
    Proceeds from equity-based compensation plans4 1 
    Tax withholdings related to restricted stock units and awards(8)(25)
Net cash provided by financing activities2,994 1,849 
Net (decrease) increase in cash, cash equivalents and restricted cash(159)75 
Cash, cash equivalents and restricted cash at beginning of period636 329 
Cash, cash equivalents and restricted cash at end of period$477 $404 
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"), auto insurance, 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 10 — 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 11 — 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, 2022, Carvana Co. owned approximately 55.7% of Carvana Group and the LLC Unitholders (as defined in Note 11 — Stockholders' Equity) owned the remaining 44.3%.

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 24, 2022.
    
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, 2022, results of operations and changes in stockholder's equity for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021. 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. In the second quarter of 2022, the Company completed an equity offering of 15.6 million shares of Class A common stock for net proceeds of $1.2 billion and issued a total of $3.275 billion in aggregate principal amount of 10.25% senior unsecured notes due 2030 (the "2030 Notes"). The Company used a portion of the net proceeds from the Class A common stock offering for general corporate purposes and to pay any costs, fees and expenses incurred by it in connection with the offering. The Company used the net proceeds from the issuance and sale of the 2030 Notes (a) to finance the $2.2 billion acquisition of the U.S. physical auction business of ADESA, Inc. ("ADESA") and other ancillary transactions in connection therewith, and to pay related fees and expenses in connection therewith and (b) for working capital, capital expenditures and other general corporate purposes. In March 2022, the Company's forward flow partner committed to purchase a total of $5.0 billion of the Company's finance receivables through March 2023, and such facility had $1.9 billion of unused capacity as of September 30, 2022. In addition, the Company has a $2.2 billion floor plan facility effective through September 22, 2023, and $2.0 billion thereafter through March 22, 2024. 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 October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606 instead of being recorded at fair value. The Company early adopted ASU 2021-08 in the second quarter of 2022 and it did not have a material effect on its condensed consolidated financial statements as there were no business combinations affected by the retrospective application to January 1, 2022.



NOTE 3 — BUSINESS COMBINATIONS

Acquisition of ADESA U.S. Physical Auction Business
    
On May 9, 2022, the Company completed its previously announced acquisition of 100% of the equity interests in the U.S. physical auction business of ADESA from KAR Auction Services, Inc. for approximately $2.2 billion in cash. Proceeds from the issuance and sale of the 2030 Notes were used to fund the acquisition. The acquisition included 56 auction sites throughout the U.S. with 6.5 million square feet of buildings on more than 4,000 acres of land, significantly expanding the Company's infrastructure and enhancing its customer offering by facilitating a broader selection of vehicles and faster delivery times.

9


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the preliminary allocation of the purchase price consideration to identifiable assets acquired and liabilities assumed as of September 30, 2022:
Preliminary Purchase Price Allocation
(in millions)
Assets Acquired
Current assets$208 
Property and equipment1,281 
Operating lease right-of-use assets188 
Intangible assets79 
Other assets1 
Total Assets Acquired1,757 
Liabilities Assumed
Current liabilities233 
Operating lease liabilities167 
Total Liabilities Assumed400 
Net Assets Acquired1,357 
Purchase price consideration2,195 
Goodwill$838 

Identifiable intangible assets acquired consist of the following:

Fair ValueUseful Life
Customer relationships$50