View:
January 9, 2020
David K. Jones
Chief Financial Officer
Vroom, Inc.
1375 Broadway, Floor 11
New York, New York 10018
Re: Vroom, Inc.
Draft Registration Statement on Form S-1
Filed December 13, 2019
CIK No. 0001580864
Dear Mr. Jones:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1
Risk Factors
Our business is dependent upon access to desirable vehicle inventory . . .,
page 21
1. Please revise to quantify your dependence upon the one third-party
auction source from
which you acquire a significant amount of your inventory, so that
readers can understand
your dependence upon this source. In an appropriate place in your
prospectus, please
revise to quantify each of your sources of inventory, given your stated
intention to
increase inventory from consumers.
Our business is dependent upon our ability to expeditiously sell inventory. . .
.. , page 22
2. We note you disclose that "[h]istorically, the rate at which customers
return vehicles has
David K. Jones
FirstName LastNameDavid K. Jones
Vroom, Inc.
Comapany2020
January 9, NameVroom, Inc.
January 9, 2020 Page 2
Page 2
FirstName LastName
been relatively low but there is no assurance that that rate will
remain similar to our
historical levels' and that "[i]f [you] have higher than expected
return rates, such
inventory would continue to depreciate in value . . . ." Please
disclose your historical
customer return rates to put your disclosure in greater context.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Operating and Financial Metrics, page 66
3. We note your disclosure that you regularly review a number of metrics
to evaluate your
business, measure your performance, identify trends in your business,
prepare financial
forecasts and make strategic decisions and you focus heavily on
metrics related to unit
economics as improved gross profit per unit is a key element of your
growth and
profitability strategies. We also note your disclosure relates
exclusively to your
Ecommerce segment. Please balance your disclosure with the related
metrics for your
other two segments.
4. Please balance your discussion of your key operating and financial
metrics by identifying
material risks or limitations in using those particular metrics, as
applicable.
TDA, page 74
5. We note your discussion that TDA gross profit decreased primarily
because of a decrease
in vehicle gross profit per unit stemming from increases in
reconditioning and logistics
costs in your Vroom VRC as you significantly expanded your ecommerce
business. Since
TDA is your retail store, please discuss why expansion of your
ecommerce business
impacts gross profit at your retail store level.
Selling, general and administrative expenses, page 76
6. Refer to the table on page 76 showing the components of selling,
general and
administrative expenses. We note that "other" consists of 20% of the
total of selling,
general and administrative expenses. Please tell us the components of
"other" and
disclose separately amounts of "other" exceeding 5% of selling,
general and
administrative expenses.
Critical Accounting Policies and Estimates
Goodwill and Intangible Assets, page 82
7. Please clarify whether the Ecommerce and Wholesale reporting units
also required a
quantitative test. In addition, please provide information for
investors to assess the
probability of future goodwill impairment charges. For example, please
disclose whether
any of your reporting units are at risk of failing the quantitative
impairment test or that the
fair value of each of your reporting units are substantially in excess
of carrying value and
are not at risk of failing. If a reporting unit is at risk of failing,
you should disclose:
the percentage by which fair value exceeded carrying value at the
date of the most
David K. Jones
Vroom, Inc.
January 9, 2020
Page 3
recent step one test;
the amount of goodwill allocated to the reporting unit;
a more detailed description of the methods and key assumptions
used and how the
key assumptions were determined;
a discussion of the degree of uncertainty associated with the
assumptions; and
a description of potential events and/or changes in circumstances
that could
reasonably be expected to negatively affect the key assumptions.
Please refer to Item 303(a)(3)(ii) of Regulation S-K, which requires a
description of
known uncertainties, and Section V of the Commission's Guidance
Regarding
Management's Discussion and Analysis of Financial Condition and
Results of Operations,
SEC Release No. 34-48960, issued December 19, 2003 and available on
our website at
www.sec.gov.
Business, page 85
8. In an appropriate place in your prospectus, please describe the
material terms and
conditions associated with customer returns and refunds. See Item
101(c)(1)(vi) of
Regulation S-K.
Principal Stockholders, page 115
9. Please disclose the natural persons who exercise sole or shared voting
and/or dispositive
powers with respect to the shares held by entities affiliated with
Catterton, General
Catalyst Group VII, L.P., Auto Holdings, LLC and Cascade Investment,
LLC.
Note 3. Revenue Recognition
Product Revenue, page F-17
10. We note your disclosure that your customers may enter into a retail
installment sales
contract to finance the purchase of used vehicles and you sell these
contracts on a non-
recourse basis to various financial institutions. You receive a fee from
the financial
institution based on the difference between the interest rate charged to
the customer that
purchased the used vehicle and the interest rate set by the financial
institution. These fees
are recognized upon sale and assignment of the installment sales
contract to the financial
institution. Please tell us how the sale of the retail installment sales
contract
FirstName LastNameDavid K. Jones
complies with ASC Topic 860, Transfers and Servicing of Financial
Assets. In addition,
Comapanyus how you account for retail installment sales contracts that remain
unsold at the end
tell NameVroom, Inc.
January 9, 2020 Page 3period.
of the reporting
FirstName LastName
David K. Jones
FirstName LastNameDavid K. Jones
Vroom, Inc.
Comapany2020
January 9, NameVroom, Inc.
Page 4
January 9, 2020 Page 4
FirstName LastName
Part II
Item 17. Undertakings, page II-4
11. Please revise to include the undertakings required by Item 512(a)(6)
of Regulation S-K.
General
12. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Patrick Kuhn at 202-551-3308 or Adam Phippen at
202-551-3336 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Jacqueline Kaufman at 202-551-3797 or Mara Ransom at 202-551-3264 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade
& Services
cc: Marc Jaffe