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Carvana Inflates Earnings With New Calculation Method

Used car dealer excluding additional expenses from new Adjusted EBITDA calculation.

August 4, 2022

With shares down 85% year-to-date, Carvana (CVNA) is changing how it calculates non-GAAP earnings to exclude costs associated with its acquisition of ADESA, a vehicle auction business. Specifically, Carvana is acquiring ADESA’s physical assets in the U.S. Going forward, Carvana will exclude the costs associated with maintaining those physical assets.

In its latest quarterly filing, Carvana inserted new language that redefines its methodology for calculating Adjusted EBITDA

“Following our acquisition of ADESA, we are also excluding depreciation and amortization expense which is expensed as part of cost of sales which has historically been only a small component of cost of sales.”

Notice the change extends beyond ADESA’s physical assets. The new language suggests Carvana also plans to exclude depreciation expense for the vending machines from which it displays and sells vehicles.

Notably, Carvana’s treatment of D&A expense appears inconsistent in the latest quarterly filing. On page 8, Carvana states D&A expense in PP&E was $85 million in the quarter ended June 30, 2022. On page 49— in its Adjusted EBITDA reconciliation— Carvana excludes just $76 million in D&A expense (COS & SG&A).


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