10-Q
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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

or

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

 

2


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;

 

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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.

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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.

 

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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.

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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)

 

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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