Carvana Co said on Thursday that it expects to post a profit in the current quarter and plans to further bring down excess used-car inventory as the retailer sharpens its focus on cutting costs, sending its shares surging 26% in aftermarket trading.
The company also reported a smaller-than-expected loss, benefiting from cost cuts.
“We’ve already got our plans for the next 9 to 12 months to keep the pedal down and keep making a lot of progress in unit economics,” CEO Ernie Garcia said on an investor call.
The debt-laden company cut its inventory and slashed advertising expenses to inch closer to profitability and attain positive free cash flow.
The Tempe, Arizona-based company, which has been struggling to sell cars, has taken a series of steps, including job reductions, over the past year to cut costs.
Carvana (CVNA) said its adjusted earnings before interest, taxes, depreciation, and amortization, (EBITDA) are expected to be positive in the second quarter.
“It is clear our strategy and execution are working as evidenced by our 61% increase in gross profit per unit, the best first quarter GPU in company history,” said Garcia.
Carvana’s first-quarter net loss narrowed to $286 million, or $1.51 per share. Analysts were expecting a loss of $2 per share.
Its revenue fell 25.5% to $2.61 billion, in line with estimates.
“We still have a long way to go to achieve our broader goals, but we are on the right path, and we are moving quickly,” Garcia added.