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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 28, 2023

 

 

VROOM, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-39315		90-1112566
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

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, include area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 per share	VRM	The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

On February 28, 2023, Vroom, Inc. (the “Company”) issued a press release announcing its financial results for the quarter and year ended December 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

Item 7.01. Regulation FD Disclosure.

On March 1, 2023, members of the Company’s management will hold an earnings conference call to discuss the Company’s financial results for the quarter and year ended December 31, 2022, and the presentation furnished as Exhibit 99.2 to this Current Report on Form 8-K will accompany management’s comments.

 

The information contained in Item 2.02, including Exhibit 99.1 hereto and in Item 7.01, including Exhibit 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits relating to Item 2.02 and Item 7.01 shall be deemed to be furnished, and not filed:

 

Exhibit No.		Description
99.1		Press Release dated February 28, 2023.
99.2		Earnings Conference Call Presentation for the Quarter and Year Ended December 31, 2022.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		VROOM, INC.
Date: February 28, 2023		By:		/s/ Robert R. Krakowiak
				Robert R. Krakowiak
				Chief Financial Officer

 

 

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Exhibit 99.1

 

Vroom Announces Fourth Quarter and Full Year 2022 Results

Significant Sequential Cost Reductions and Continued Progress on Long-Term Roadmap

NEW YORK – February 28, 2023 – Vroom, Inc. (Nasdaq:VRM), a leading ecommerce platform for buying and selling used vehicles, today announced financial results for the fourth quarter and fiscal year ended December 31, 2022.

HIGHLIGHTS OF FOURTH QUARTER 2022 VERSUS THIRD QUARTER 2022

HIGHLIGHTS OF FISCAL YEAR 2022(1) VERSUS FISCAL YEAR 2021

(1) Fiscal year 2022 includes UACC's results of operations starting on February 1, 2022.

Tom Shortt, Chief Executive Officer of Vroom, said, “In the fourth quarter we continued to make progress on our three key objectives and four strategic initiatives. We significantly reduced operating expenses quarter over quarter and continued to improve our operations and customer experience. We improved our titling process enabling us to end the year with 87% of units available for sale or pending sale versus 52% at the end of Q3, however it also increased the age of our inventory available for sale and inventory sold.

Gross profit per unit declined from $4,206 in Q3 to $1,233 in Q4 primarily due to three items. The decline quarter over quarter was impacted primarily by three items. First, the percentage of sales from aged units increased 5X from Q3 to Q4; 36% of our units sold during the 4th quarter were aged units we’ve held >270 days. Second, increased industry wide market depreciation. Third, higher inventory reserves primarily driven by recent electric unit OEM price decreases.

During 2022 we strategically slowed down the business while we improved our customer experience and processes across titling and registration, pricing, marketing, reconditioning and logistics, and began to insource our sales function from our primary third-party resource. During 2023, we expect to resume growth, sell through aged vehicles, improve variable cost per unit and reduce fixed costs.”

Bob Krakowiak, Vroom’s Chief Financial Officer, commented, “During the fourth quarter we further maximized liquidity and strengthened our balance sheet by repurchasing $198 million of our convertible notes and unlocking $70 million of cash-in-inventory and restricted cash. Combined with earlier note repurchases, we repurchased $254 million of our convertible notes throughout 2022. During 2023, we will continue to pursue opportunities to enhance our liquidity.”

 

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FOURTH QUARTER 2022 FINANCIAL DISCUSSION

All financial comparisons for the fourth quarter are on a year-over-year basis unless otherwise noted.

 

Ecommerce Results

 

		Three Months Ended December 31,																			Year Ended December 31,
		2022					2021						Change				% Change				2022					2021						Change				% Change
		(in thousands, except unit data and average days to sale)																			(in thousands, except unit data and average days to sale)
Ecommerce units sold				4,144					21,243					(17,099	)			(80.5	)%				39,278					74,698					(35,420	)			(47.4	)%
Ecommerce revenue:
Vehicle revenue		$		131,069			$		715,874			$		(584,805	)			(81.7	)%		$		1,304,797			$		2,360,368			$		(1,055,571	)			(44.7	)%
Product revenue				10,689					22,846					(12,157	)			(53.2	)%				59,398					82,001					(22,603	)			(27.6	)%
Total ecommerce revenue		$		141,758			$		738,720			$		(596,962	)			(80.8	)%		$		1,364,195			$		2,442,369			$		(1,078,174	)			(44.1	)%
Ecommerce gross profit:
Vehicle gross profit		$		(5,579	)		$		10,042			$		(15,621	)			(155.6	)%		$		40,575			$		82,745			$		(42,170	)			(51.0	)%
Product gross profit				10,689					22,846					(12,157	)			(53.2	)%				59,398					82,001					(22,603	)			(27.6	)%
Total ecommerce gross profit		$		5,110			$		32,888			$		(27,778	)			(84.5	)%		$		99,973			$		164,746			$		(64,773	)			(39.3	)%
Average vehicle selling price per ecommerce unit		$		31,629			$		33,699			$		(2,070	)			(6.1	)%		$		33,220			$		31,599			$		1,621				5.1	%
Gross profit per ecommerce unit:
Vehicle gross profit per ecommerce unit		$		(1,346	)		$		473			$		(1,819	)			(384.6	)%		$		1,033			$		1,108			$		(75	)			(6.8	)%
Product gross profit per ecommerce unit				2,579					1,075					1,504				139.9	%				1,512					1,098					414				37.7	%
Total gross profit per ecommerce unit		$		1,233			$		1,548			$		(315	)			(20.3	)%		$		2,545			$		2,206			$		339				15.4	%
Ecommerce average days to sale				244					76					168				221.1	%				131					74					57				77.2	%

 

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Results by Segment

 

		Three Months Ended December 31,																Year Ended December 31,
		2022				2021(1)				Change				% Change				2022				2021(1)				Change				% Change
		(in thousands, except unit data)																(in thousands, except unit data)
Units:
Ecommerce			4,144				21,243				(17,099	)			(80.5	)%			39,278				74,698				(35,420	)			(47.4	)%
Wholesale			1,768				8,742				(6,974	)			(79.8	)%			20,876				37,163				(16,287	)			(43.8	)%
All Other (2)			350				2,105				(1,755	)			(83.4	)%			3,758				7,212				(3,454	)			(47.9	)%
Total units			6,262				32,090				(25,828	)			(80.5	)%			63,912				119,073				(55,161	)			(46.3	)%
Revenue:
Ecommerce		$	141,758			$	738,720			$	(596,962	)			(80.8	)%		$	1,364,195			$	2,442,369			$	(1,078,174	)			(44.1	)%
Wholesale			23,039				121,543				(98,504	)			(81.0	)%			293,528				498,981				(205,453	)			(41.2	)%
Retail Financing (3)			32,537				—				32,537				100.0	%			152,542				—				152,542				100.0	%
All Other (4)			12,015				74,228				(62,213	)			(83.8	)%			138,636				242,905				(104,269	)			(42.9	)%
Total revenue		$	209,349			$	934,491			$	(725,142	)			(77.6	)%		$	1,948,901			$	3,184,255			$	(1,235,354	)			(38.8	)%
Gross profit (loss):
Ecommerce		$	5,110			$	32,888			$	(27,778	)			(84.5	)%		$	99,973			$	164,746			$	(64,773	)			(39.3	)%
Wholesale			(4,359	)			7,783				(12,142	)			(156.0	)%			(10,620	)			18,120				(28,740	)			(158.6	)%
Retail Financing (3)			28,744				—				28,744				100.0	%			138,381				—				138,381				100.0	%
All Other (4)			(36	)			4,035				(4,071	)			(100.9	)%			17,053				19,233				(2,180	)			(11.3	)%
Total gross profit		$	29,459			$	44,706			$	(15,247	)			(34.1	)%		$	244,787			$	202,099			$	42,688				21.1	%
Gross profit (loss) per unit (5):
Ecommerce		$	1,233			$	1,548			$	(315	)			(20.3	)%		$	2,545			$	2,206			$	339				15.4	%
Wholesale		$	(2,465	)		$	890			$	(3,355	)			(377.0	)%		$	(509	)		$	488			$	(997	)			(204.3	)%

 

 

 

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SG&A

 

		Three Months Ended December 31,																		Year Ended December 31,
			2022					2021				Change				% Change					2022					2021				Change				% Change
		(in thousands)																		(in thousands)
Compensation & benefits		$		52,043			$		59,332			$	(7,289	)			(12.3	)%		$		251,153			$		204,913			$	46,240				22.6	%
Marketing expense				9,852					37,214				(27,362	)			(73.5	)%				79,670					125,481				(45,811	)			(36.5	)%
Outbound logistics				(902	)				27,800				(28,702	)			(103.2	)%				39,023					85,788				(46,765	)			(54.5	)%
Occupancy and related costs				5,955					4,849				1,106				22.8	%				23,363					17,448				5,915				33.9	%
Professional fees				6,870					8,435				(1,565	)			(18.6	)%				33,455					24,386				9,069				37.2	%
Software and IT costs				11,164					8,383				2,781				33.2	%				44,570					27,749				16,821				60.6	%
Other				5,778					20,328				(14,550	)			(71.6	)%				95,153					62,058				33,095				53.3	%
Total selling, general & administrative expenses		$		90,760			$		166,341			$	(75,581	)			(45.4	)%		$		566,387			$		547,823			$	18,564				3.4	%

 

Non-GAAP Financial Measures

 

In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance:

 

 

These non-GAAP financial measures have limitations as analytical tools in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with U.S. GAAP. We have reconciled all non-GAAP financial measures with the most directly comparable U.S. GAAP financial measures.

 

EBITDA, Adjusted EBITDA, Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues, Adjusted EBITDA excluding securitization gain, and Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues are supplemental performance measures that our management uses to assess our operating performance and the operating leverage in our business. Because each of these non-GAAP financial measures facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

 

EBITDA

 

We calculate EBITDA as net loss before interest expense, interest income, income tax expense and depreciation and amortization expense.

 

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Adjusted EBITDA

 

We calculate Adjusted EBITDA as EBITDA adjusted to exclude realignment costs, acquisition related costs, change in fair value of finance receivables, goodwill impairment charge, gain on debt extinguishment, acceleration of non-cash stock-based compensation, and other costs, which primarily relate to the impairment of long-lived assets. Changes in fair value of finance receivables can fluctuate significantly from period to period and relate primarily to historical loans and debt which have been securitized, and acquired on February 1, 2022 from UACC. Our ongoing business model is to originate or purchase finance receivables with the intent to sell which we recognize at the lower of cost or fair value. Therefore, these historical finance receivables acquired, which are accounted for under the fair value option, will experience fluctuations in value from period to period. We believe it is appropriate to remove this temporary volatility from our Adjusted EBITDA results to better reflect our ongoing business model. Additionally, these historical finance receivables acquired from UACC are expected to run-off within approximately 12 months.

 

Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues

 

We calculate Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues as Adjusted EBITDA adjusted to exclude the non-recurring costs incurred to address operational and customer experience issues, including rental cars for our customers and legal settlements with customers and state DMVs. While we expect to continue to incur these costs over the next few quarterly periods, we do not expect these costs to continue to be incurred once our operational issues have been resolved.

 

Adjusted EBITDA excluding securitization gain

 

We calculate Adjusted EBITDA excluding securitization gain as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC's finance receivables, and believe that it provides a useful perspective on the underlying operating results and trends and a means to compare our period-over-period results.

 

Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues

 

We calculate Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC’s finance receivables and the non-recurring costs incurred to address operational and customer experience issues.

 

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The following table presents a reconciliation of the foregoing non-GAAP financial measures to net loss, which is the most directly comparable U.S. GAAP measure:

 

		Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Net income (loss)		$	24,765			$	(129,792	)		$	(451,910	)		$	(370,911	)
Adjusted to exclude the following:
Interest expense			12,076				7,228				40,693				21,948
Interest income			(6,372	)			(3,053	)			(19,363	)			(10,341	)
Provision (benefit) for income taxes			2,405				375				(19,680	)			754
Depreciation and amortization			10,702				3,718				38,707				13,215
EBITDA		$	43,576			$	(121,524	)		$	(411,553	)		$	(345,335	)
Realignment costs		$	2,253			$	—			$	15,025			$	—
Acquisition related costs			—				1,678				5,653				5,090
Change in fair value of finance receivables			3,917				—				8,372				—
Goodwill impairment charge			—				—				201,703				—
Gain on debt extinguishment			(126,767	)			—				(164,684	)			—
Acceleration of non-cash stock-based compensation			2,439				—				2,439				—
Other			3,679				—				5,806				—
Adjusted EBITDA		$	(70,903	)		$	(119,846	)		$	(337,239	)		$	(340,245	)
Non-recurring costs to address operational and customer experience issues			374				—				25,433				—
Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues		$	(70,529	)		$	(119,846	)		$	(311,806	)		$	(340,245	)
Securitization gain			—