SEC Filing | Vroom, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

Table of Contents

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, 2021

☐ 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: 001-39315

VROOM, INC.

(Exact name of registrant as specified in its charter)

Delaware

90-1112566

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1375 Broadway, Floor 11

New York, New York 10018

(Address of principal executive offices) (Zip code)

(855) 524-1300

(Registrant's telephone number, including area code)

Not Applicable

(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	VRM	Nasdaq Global Select

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 ☒

As of November 5, 2021, 136,907,849 shares of the registrants’ common stock were outstanding.

Table of Contents

TABLE OF CONTENTS




		Page
Part I - Financial Information		5
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited)	5
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	6
	Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	57
Part II - Other Information		59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
	Signatures	67

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "anticipate," "believe," "contemplate," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," "target," "will," "would," or the negative of these terms or other similar terms or expressions, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including risks described in the section titled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q, regarding, among other things:



the impact of the COVID-19 pandemic;



we have a history of losses and we may not achieve or maintain profitability in the future;



we may not be able to generate sufficient revenue to generate positive cash flow on a sustained basis, and our revenue growth rate may decline;



our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations;



we have a limited operating history and are still building out our foundational systems;



our recent, rapid growth may not be indicative of our future growth;



if we continue to grow rapidly, we may not be able to manage our growth effectively;



we may not complete the proposed acquisition of United Auto Credit Corporation ("UACC") within the anticipated time frame or at all, be able to successfully integrate the UACC business into our business, or realize the anticipated benefits of the proposed acquisition of UACC or those benefits could take longer than anticipated;



our business is subject to certain risks related to the operation of Texas Direct Auto;



we rely on third-party vendors for key components of our business, which exposes us to increased risks;



we have entered into outsourcing arrangements with third parties related to our customer experience team, and any difficulties experienced in these arrangements could result in an interruption of our ability to sell our vehicles and value-added products;



if the quality of our customer experience, our reputation or our brand were negatively affected, our business, sales and results of operations could be materially and adversely affected;



we face a variety of risks associated with the operation of our vehicle reconditioning centers by us and our third-party service providers, any of which could materially and adversely affect our business, financial condition and results of operations;



we rely primarily on third-party carriers to transport our vehicle inventory throughout the United States. Thus, we are subject to business risks and costs associated with such carriers and with the transportation industry, many of which are out of our control;

Table of Contents



we are expanding our proprietary logistics operations, including vehicle pick-ups and delivery from our last mile hubs and line haul transportation of vehicles between our last mile hubs, which will further expose us to increased risks related to ownership of infrastructure and the transportation of vehicles;



the current geographic concentration where we provide reconditioning services and store inventory creates an exposure to local and regional downturns or severe weather or catastrophic occurrences that may materially and adversely affect our business, financial condition and results of operations;



if we sustain cyber-attacks or other privacy or data security incidents that result in security breaches, we could suffer a loss of sales and increased costs, exposure to significant liability, reputational harm and other negative consequences;



our common stock price may be volatile and the value of our common stock may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price which you paid for them;



we are, and may in the future be, subject to legal proceedings in the ordinary course of our business. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, financial condition and results of operations; and



our actual operating results may differ significantly from our guidance

Other sections of this Quarterly Report on Form 10-Q include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference or incorporate by reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VROOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)


	As of			As of
	September 30,			December 31,
	2021			2020
ASSETS
Current Assets:
Cash and cash equivalents	$	1,326,543		$	1,056,213
Restricted cash		69,574			33,826
Accounts receivable, net of allowance of $4,937 and $2,803, respectively		89,900			60,576
Inventory		601,753			423,647
Prepaid expenses and other current assets		62,390			23,617
Total current assets		2,150,160			1,597,879
Property and equipment, net		30,559			15,092
Intangible assets, net		29,762			34
Goodwill		158,817			78,172
Operating lease right-of-use assets		16,994			17,137
Other assets		23,251			15,742
Total assets	$	2,409,543		$	1,724,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	59,522		$	32,925
Accrued expenses		104,694			59,405
Vehicle floorplan		441,473			329,231
Deferred revenue		64,087			24,822
Operating lease liabilities, current		6,872			6,052
Other current liabilities		66,904			30,275
Total current liabilities		743,552			482,710
Convertible senior notes		609,811			—
Operating lease liabilities, excluding current portion		11,325			12,093
Other long-term liabilities		4,204			2,151
Total liabilities		1,368,892			496,954
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 136,897,954 and 134,043,969 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		135			132
Additional paid-in-capital		2,059,505			2,004,841
Accumulated deficit		(1,018,989	)		(777,871	)
Total stockholders’ equity		1,040,651			1,227,102
Total liabilities and stockholders’ equity	$	2,409,543		$	1,724,056

See accompanying notes to these unaudited condensed consolidated financial statements.

Table of Contents

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue:
Retail vehicle, net	$	735,716		$	249,518		$	1,798,155		$	754,380
Wholesale vehicle		131,306			63,972			377,438			170,469
Product, net		26,544			9,198			64,422			25,979
Other		3,190			317			9,749			1,043
Total revenue		896,756			323,005			2,249,764			951,871
Cost of sales		838,667			297,560			2,092,371			900,432
Total gross profit		58,089			25,445			157,393			51,439
Selling, general and administrative expenses		148,718			61,127			381,482			167,418
Depreciation and amortization		3,376			1,191			9,276			3,239
Loss from operations		(94,005	)		(36,873	)		(233,365	)		(119,218	)
Interest expense		7,028			2,259			14,720			6,382
Interest income		(2,930	)		(1,289	)		(7,288	)		(3,960	)
Revaluation of preferred stock warrant		—			—			—			20,470
Other income, net		(10	)		(26	)		(58	)		(111	)
Loss before provision for income taxes		(98,093	)		(37,817	)		(240,739	)		(141,999	)
Provision for income taxes		29			33			379			138
Net loss	$	(98,122	)	$	(37,850	)	$	(241,118	)	$	(142,137	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.72	)	$	(0.31	)	$	(1.77	)	$	(2.65	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		136,766,015			121,123,472			136,256,901			53,731,475

See accompanying notes to these unaudited condensed consolidated financial statements.

Table of Contents

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE

PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

(unaudited)


	Redeemable Convertible Preferred Stock						Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount			Shares			Amount		Capital			Deficit			Deficit
Balance at December 31, 2019		83,568,628		$	874,332			8,650,922		$	8	$	—		$	(573,860	)	$	(573,852	)
Stock-based compensation		—		$	—			—		$	—	$	600		$	—		$	600
Exercise of stock options		—			—			2,774			—		6			—			6
Repurchase of common stock		—			—			(200,000	)		—		(606	)		(1,212	)		(1,818	)
Issuance of Series H redeemable convertible preferred stock, net of issuance costs		1,964,766			26,714			—			—		—			—			—
Net loss		—			—			—			—		—			(41,059	)		(41,059	)
Balance at March 31, 2020		85,533,394		$	901,046			8,453,696		$	8	$	—		$	(616,131	)	$	(616,123	)
Issuance of common stock		—		$	—			183,870		$	—	$	2,127		$	—		$	2,127
Conversion of redeemable convertible preferred stock to common stock		(85,533,394	)		(901,046	)		85,533,394			86		900,960			—			901,046
Conversion of redeemable convertible preferred stock warrant to common stock warrant		—			—			—			—		21,873			—			21,873
Issuance of common stock in IPO, net of offering costs		—			—			24,437,500			24		496,486			—			496,510
Stock-based compensation		—			—			—			—		4,100			—			4,100
Exercise of stock options		—			—			500			—		7			—			7
Exercise of common stock warrants		—			—			636,112			1		—			—			1
Vesting of restricted stock units		—			—			133,334			—		—			—			—
Common stock shares withheld to satisfy employee tax withholding obligations		—			—			(41,818	)		—		(878	)		—			(878	)
Net loss		—			—			—			—		—			(63,228	)		(63,228	)
Balance at June 30, 2020		—		$	—			119,336,588		$	119	$	1,424,675		$	(679,359	)	$	745,435
Issuance of common stock in follow-on public offering, net of offering costs		—		$	—			10,800,000		$	11	$	567,941		$	—		$	567,952
Stock-based compensation		—			—			—			—		4,230			—			4,230
Exercise of stock options		—			—			31,100			—		120			—			120
Vesting of restricted stock units		—			—			104,000			—		—			—			—
Common stock shares withheld to satisfy employee tax withholding obligations		—			—			(41,097	)		—		(2,037	)		—			(2,037	)
Net loss		—			—			—			—		—			(37,850	)		(37,850	)
Balance at September 30, 2020		—			—			130,230,591			130		1,994,929			(717,209	)		1,277,850

(Continued on following page)

Table of Contents

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE

PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

(in thousands, except share amounts)

(unaudited)


	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2020		—	$	—		134,043,969	$	132	$	2,004,841	$	(777,871	)	$	1,227,102
Issuance of common stock for CarStory acquisition		—	$	—		1,072,117	$	1	$	39,029	$	—		$	39,030
Fair value of unvested stock options assumed in CarStory acquisition		—		—		—		—		1,017		—			1,017
Stock-based compensation		—		—		—		—		2,820		—			2,820
Exercise of stock options		—		—		687,336		1		2,820		—			2,821
Vesting of restricted stock units		—		—		499,879		—		—		—			—
Net loss		—		—		—		—		—		(77,189	)		(77,189	)
Balance at March 31, 2021		—	$	—		136,303,301	$	134	$	2,050,527	$	(855,060	)	$	1,195,601
Stock-based compensation		—		—		—		—		5,392		—			5,392
Exercise of stock options		—		—		395,491		—		1,560		—			1,560
Vesting of restricted stock units		—		—		18,555		—		—		—			—
Net loss		—		—		—		—		—		(65,807	)		(65,807	)
Balance at June 30, 2021		—	$	—		136,717,347