SEC Filing | Vroom, Inc.

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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, 2022

☐ 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)

3600 W Sam Houston Pkwy S, Floor 4

Houston, Texas 77042

(Address of principal executive offices) (Zip code)

(518) 535-9125

(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 3, 2022, 138,173,418 shares of the registrants’ common stock were outstanding.

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TABLE OF CONTENTS




		Page
Part I - Financial Information		6
Item 1.	Financial Statements	6
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)	6
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	78
Part II - Other Information		79
Item 1.	Legal Proceedings	79
Item 1A.	Risk Factors	81
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	118
Item 3.	Defaults Upon Senior Securities	118
Item 4.	Mine Safety Disclosures	119
Item 5.	Other Information	119
Item 6.	Exhibits	120
	Signatures	122

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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 general economic and market conditions, 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.

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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SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include, but are not limited to, the following:

•

we may not successfully complete the execution of or achieve the expected benefits of our previously announced Realignment Plan and other cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations;

•

despite the cost saving measures, reduced growth rates and increased focus on liquidity and profitability contemplated by the Realignment Plan, we may need to raise additional capital through debt or equity financings to achieve our business objectives and there can be no assurance that such financings will be available in amounts or on terms acceptable to us, if at all;

•

the impact of the COVID-19 pandemic;

•

general business and economic conditions and risks related to the larger automotive ecosystem, including consumer demand;

•

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;

•

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 is not indicative of our near term growth under our Realignment Plan and, when we return to rapid growth, we may not be able to manage our growth effectively;

•

we may be unable to successfully integrate the United Auto Credit Corporation ("UACC") business into our business and develop UACC into a captive lending operation for Vroom, or realize the anticipated benefits of the UACC Acquisition or those benefits could take longer than anticipated;

•

UACC's ability to sell automotive finance receivables and generate gains on sales of these finance receivables may decline in the future; any material reduction could harm our business, results of operations, and financial condition;

•

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 difficulties experienced in these arrangements have and could continue to result in an interruption of our ability to sell our vehicles and value-added products;

•

our business, sales and results of operations are materially affected by our customer experience, our reputation and our brand;

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•

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 currently rely heavily 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;

•

we are optimizing 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 and where UACC has a high concentration of borrowers 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 or our third-party providers 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;

•

we operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations and failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations;

•

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.

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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,
	2022			2021
ASSETS
Current Assets:
Cash and cash equivalents	$	509,660		$	1,132,325
Restricted cash (including restricted cash of consolidated VIEs of $19.5 million and $0 million, respectively)		94,305			82,450
Accounts receivable, net of allowance of $26.7 million and $8.9 million, respectively		23,733			105,433
Finance receivables at fair value (including finance receivables of consolidated VIEs of $10.9 million and $0 million, respectively)		13,644			—
Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $137.1 million and $0 million, respectively)		210,729			—
Inventory		437,828			726,384
Beneficial interests in securitizations		23,984			—
Prepaid expenses and other current assets		58,576			55,700
Total current assets		1,372,459			2,102,292
Finance receivables at fair value (including finance receivables of consolidated VIEs of $135.8 million and $0 million, respectively)		166,382			—
Property and equipment, net		50,520			37,042
Intangible assets, net		165,668			28,207
Goodwill		—			158,817
Operating lease right-of-use assets		24,392			15,359
Other assets		29,539			25,033
Total assets	$	1,808,960		$	2,366,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	36,800		$	52,651
Accrued expenses		103,903			121,508
Vehicle floorplan		345,272			512,801
Warehouse credit facilities of consolidated VIEs		135,453			—
Current portion of securitization debt of consolidated VIEs at fair value		54,652			—
Deferred revenue		16,313			75,803
Operating lease liabilities, current		8,268			6,889
Other current liabilities		19,061			57,604
Total current liabilities		719,722			827,256
Long term debt, net of current portion (including securitization debt of consolidated VIEs of $40.8 million and $0 million at fair value, respectively)		607,790			610,618
Operating lease liabilities, excluding current portion		20,620			9,592
Other long-term liabilities		15,696			4,090
Total liabilities		1,363,828			1,451,556
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 138,154,063 and 137,092,891 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		135			135
Additional paid-in-capital		2,070,454			2,063,841
Accumulated deficit		(1,625,457	)		(1,148,782	)
Total stockholders’ equity		445,132			915,194
Total liabilities and stockholders’ equity	$	1,808,960		$	2,366,750

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,
	2022			2021			2022			2021
Revenue:
Retail vehicle, net	$	234,353		$	735,716		$	1,283,263		$	1,798,155
Wholesale vehicle		47,604			131,306			270,489			377,438
Product, net		13,181			26,544			51,954			64,422
Finance		40,654			—			120,005			—
Other		5,005			3,190			13,841			9,749
Total revenue		340,797			896,756			1,739,552			2,249,764
Cost of sales:
Retail vehicle		218,726			708,071			1,234,138			1,720,974
Wholesale vehicle		49,178			129,203			276,749			367,101
Finance		4,699			—			10,368			—
Other		863			1,393			2,969			4,296
Total cost of sales		273,466			838,667			1,524,224			2,092,371
Total gross profit		67,331			58,089			215,328			157,393
Selling, general and administrative expenses		134,643			148,718			475,627			381,482
Depreciation and amortization		9,833			3,376			27,728			9,276
Impairment charges		1,017			—			206,127			—
Loss from operations		(78,162	)		(94,005	)		(494,154	)		(233,365	)
Gain on debt extinguishment		(37,917	)		—			(37,917	)		—
Interest expense		9,704			7,028			28,617			14,720
Interest income		(5,104	)		(2,930	)		(12,991	)		(7,288	)
Other loss (income), net		5,383			(10	)		26,897			(58	)
Loss before provision for income taxes		(50,228	)		(98,093	)		(498,760	)		(240,739	)
Provision (benefit) for income taxes		899			29			(22,085	)		379
Net loss	$	(51,127	)	$	(98,122	)	$	(476,675	)	$	(241,118	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.37	)	$	(0.72	)	$	(3.46	)	$	(1.77	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		138,118,679			136,766,015			137,817,839			136,256,901

See accompanying notes to these unaudited condensed consolidated financial statements.

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VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)


	Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	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 acquisition of business		1,072,117		$	1	$	39,029		$	—		$	39,030
Fair value of unvested stock options assumed in acquisition of business		—			—		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		$	134	$	2,057,479		$	(920,867	)	$	1,136,746
Stock-based compensation		—		$	—	$	1,542		$	—		$	1,542
Exercise of stock options		164,631			1		703			—		$	704
Vesting of restricted stock units		21,649			—		—			—		$	—
Common stock shares cancelled to satisfy working capital adjustment related to the CarStory acquisition		(5,673	)		—		(219	)		—		$	(219	)
Net loss		—			—		—			(98,122	)	$	(98,122	)
Balance at September 30, 2021		136,897,954		$	135	$	2,059,505		$	(1,018,989	)	$	1,040,651

	Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount		Capital			Deficit			Equity
Balance at December 31, 2021		137,092,891		$	135	$	2,063,841		$	(1,148,782	)	$	915,194
Stock-based compensation		—		$	—	$	3,629		$	—		$	3,629
Vesting of restricted stock units		602,630			—		—			—			—
Net loss		—			—		—			(310,459	)		(310,459	)
Balance at March 31, 2022		137,695,521		$	135	$	2,067,470		$	(1,459,241	)	$	608,364
Stock-based compensation		—		$	—	$	1,776		$	—		$	1,776
Vesting of restricted stock units		50,516			—		—			—			—
Issuance of restricted stock purchase agreement		356,718			—		—