Monday, 23 May 2022 12:22

Carvana Releases Details of Updated Operating Plan

Written by Auto Remarketing Staff
Carvana’s Nashville, TN, vending machine. Carvana’s Nashville, TN, vending machine. Carvana/BusinessWire


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Carvana said it would share an updated operating plan after it announced the cutting of approximately 2,500 workers May 10.

Well, that plan has been released, and it includes not only more details about the future of ADESA operations, Carvana also pinpointed its top two priorities for managing its business.


Those priorities include:


  • Rapidly reducing SG&A expense per retail unit sold while taking care to minimize constraints on growth or impacts to customer experience.
  • Generating positive free cash flow through a combination of retail units, GPU, SG&A expense efficiencies and management of capital expenditures to achieve self-funding without requiring additional equity or debt capital.


“We currently view SG&A expense per retail unit sold as our highest priority and intend to lower it in both the near term and midterm while continuing to grow on the path toward our long-term goals,” Carvana said in a presentation on its investor relations website.


Carvana explained in the past, the company typically executed a seasonal investment cycle in which it would “significantly” ramp up infrastructure and operations in the second half of each year to prepare for seasonal demand late in the following first quarter.


“In 2H18, we underinvested in our operational infrastructure, leading to pinch points that limited sales volume when seasonal demand increased in 1Q19,” Carvana said in the presentation.


“In 2H19, we ramped our investment in preparation for seasonal growth in 1Q20; however, 1Q20 was significantly impacted by COVID-19, leading to elevated levels of SG&A per unit in Q1 followed by leverage in Q2 and Q3,” the company continued.


“In 2H20, we maintained a lower level of seasonal investment due to...

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