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 March 31, 2023

☐ 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

901112566

(State or Other Jurisdiction of
Incorporation or Organization)

(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, including area code)

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 Act). Yes ☐ No ☒

As of May 5, 2023, 138,830,093 shares of the registrants’ common stock were outstanding.

Table of Contents

TABLE OF CONTENTS


		Page

Part I - Financial Information		6
Item 1.	Financial Statements (unaudited)	6
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	6
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited)	7
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (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 Disclosure About Market Risk	71
Item 4.	Controls and Procedures	71

Part II - Other information		72
Item 1.	Legal Proceedings	72
Item 1A.	Risk Factors	74
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3.	Defaults Upon Senior Securities	79
Item 4.	Mine Safety Disclosures	79
Item 5.	Other Information	79
Item 6.	Exhibits	80
	Signatures	82

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 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.

Table of Contents

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:

•

despite the cost saving measures, reduced growth rates and increased focus on liquidity and profitability contemplated by our Business Realignment Plan and long-term roadmap, 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;

•

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 failure to meet the continued listing requirements of the Nasdaq Global Select Market could result in a delisting of our common stock;

•

our prior rapid growth is not indicative of our near term growth under our long-term roadmap and, if and when we return to rapid growth, we may not be able to manage our growth effectively;

•

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

•

UACC may be unable to sell automotive finance receivables and generate gains on sales of those finance receivables, which 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 and our transition away from 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;

•

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

Table of Contents

•

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.

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 March 31,			As of December 31,
	2023			2022
ASSETS
Current Assets:
Cash and cash equivalents	$	316,714		$	398,915
Restricted cash (including restricted cash of consolidated VIEs of $48.0 million and $24.7 million, respectively)		71,994			73,095
Accounts receivable, net of allowance of $10.0 million and $21.5 million, respectively		10,077			13,967
Finance receivables at fair value (including finance receivables of consolidated VIEs of $12.1 million and $11.5 million, respectively)		13,091			12,939
Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $163.7 million and $305.9 million, respectively)		186,777			321,626
Inventory		212,982			320,648
Beneficial interests in securitizations		7,976			20,592
Prepaid expenses and other current assets		59,357			58,327
Total current assets		878,968			1,220,109
Finance receivables at fair value (including finance receivables of consolidated VIEs of $508.3 million and $119.6 million, respectively)		523,179			140,235
Property and equipment, net		51,427			50,201
Intangible assets, net		152,155			158,910
Operating lease right-of-use assets		21,741			23,568
Other assets		24,166			26,004
Total assets	$	1,651,636		$	1,619,027
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	28,861		$	34,702
Accrued expenses		58,492			76,795
Vehicle floorplan		147,428			276,988
Warehouse credit facilities of consolidated VIEs		124,247			229,518
Current portion of securitization debt of consolidated VIEs at fair value		261,746			47,239
Deferred revenue		13,037			10,655
Operating lease liabilities, current		9,021			9,730
Other current liabilities		15,251			17,693
Total current liabilities		658,083			703,320
Long term debt, net of current portion (including securitization debt of consolidated VIEs of $199.2 million and $32.6 million at fair value, respectively)		554,655			402,154
Operating lease liabilities, excluding current portion		18,278			20,129
Other long-term liabilities		18,382			18,183
Total liabilities		1,249,398			1,143,786
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 138,802,011 and 138,201,903 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		135			135
Additional paid-in-capital		2,077,839			2,075,798
Accumulated deficit		(1,675,736	)		(1,600,692	)
Total stockholders’ equity		402,238			475,241
Total liabilities and stockholders’ equity	$	1,651,636		$	1,619,027

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 March 31,
	2023			2022
Revenue:
Retail vehicle, net	$	135,270		$	707,186
Wholesale vehicle		13,895			139,984
Product, net		11,500			24,449
Finance		31,988			47,687
Other		3,814			4,469
Total revenue		196,467			923,775
Cost of sales:
Retail vehicle		135,724			695,509
Wholesale vehicle		13,833			142,737
Product		897			—
Finance		6,214			2,724
Other		994			1,165
Total cost of sales		157,662			842,135
Total gross profit		38,805			81,640
Selling, general and administrative expenses		96,537			187,994
Depreciation and amortization		10,531			7,856
Impairment charges		—			201,703
Loss from operations		(68,263	)		(315,913	)
Gain on debt extinguishment		(8,709	)		—
Interest expense		9,919			9,380
Interest income		(5,942	)		(3,952	)
Other loss, net		11,240			12,358
Loss before provision (benefit) for income taxes		(74,771	)		(333,699	)
Provision (benefit) for income taxes		273			(23,240	)
Net loss	$	(75,044	)	$	(310,459	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.54	)	$	(2.26	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		138,530,884			137,259,629

See accompanying notes to these unaudited condensed consolidated financial statements.

Table of Contents

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, 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
	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2022		138,201,903	$	135	$	2,075,798	$	(1,600,692	)	$	475,241
Stock-based compensation		—	$	—	$	2,041	$	—		$	2,041
Vesting of restricted stock units		600,108		—		—		—			—
Net loss		—		—		—	$	(75,044	)		(75,044	)
Balance at March 31, 2023		138,802,011	$	135	$	2,077,839	$	(1,675,736	)	$	402,238

See accompanying notes to these unaudited condensed consolidated financial statements.

Table of Contents

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(75,044	)	$	(310,459	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charges		—			201,703
Gain on debt extinguishment		(8,709	)		—
Depreciation and amortization		10,637			7,895
Amortization of debt issuance costs		1,115			1,254
Realized gains on securitization transactions		—			(29,617	)
Deferred taxes		—			(23,855	)
Losses on finance receivables and securitization debt, net		16,603			15,725
Stock-based compensation expense		2,041			3,629
Provision to record inventory at lower of cost or net realizable value		(7,315	)		469
Provision for bad debt		(422	)		5,853
Provision to record finance receivables held for sale at lower of cost or fair value		(1,251	)		158
Amortization of unearned discounts on finance receivables at fair value		(5,320	)		(3,942	)
Other, net		(5,067	)		(274	)
Changes in operating assets and liabilities:
Finance receivables, held for sale
Originations of finance receivables held for sale		(143,174	)		(118,861	)
Principal payments received on finance receivables held for sale		20,731			2,659
Proceeds from sale of finance receivables held for sale, net		—			272,309
Other		1,850			(1,705	)
Accounts receivable		4,312			(4,331	)
Inventory		114,981			(15,453	)
Prepaid expenses and other current assets		13,006			6,928
Other assets		1,838			(2,763	)
Accounts payable		(5,841	)		(6,824	)
Accrued expenses		(18,915	)		8,036
Deferred revenue		2,382			(2,449	)
Other liabilities		(3,459	)		(21,163	)
Net cash used in operating activities		(85,021	)		(15,078	)
Investing activities
Finance receivables at fair value
Purchases of finance receivables at fair value		(3,392	)		—
Principal payments received on finance receivables at fair value		41,850			33,570
Proceeds from sale of finance receivables at fair value, net		—			29,043
Consolidation of VIEs		11,409			—
Principal payments received on beneficial interests		2,144			714
Purchase of property and equipment		(5,193	)		(7,096	)
Acquisition of business, net of cash acquired of $47.9 million		—			(268,194	)
Net cash provided by (used in) investing activities		46,818			(211,963	)
Financing activities
Proceeds from borrowings under secured financing agreements		238,735			—
Principal repayment under secured financing agreements		(42,784	)		(68,402	)
Proceeds from vehicle floorplan		41,180			801,971
Repayments of vehicle floorplan		(170,740	)		(744,831	)
Proceeds from warehouse credit facilities		135,900			49,000
Repayments of warehouse credit facilities		(241,351	)		(227,067	)
Repurchases of convertible senior notes		(5,883	)		—
Other financing activities		(156	)		(875	)
Net cash used in financing activities		(45,099	)		(190,204	)
Net decrease in cash, cash equivalents and restricted cash		(83,302	)		(417,245	)
Cash, cash equivalents and restricted cash at the beginning of period		472,010			1,214,775
Cash, cash equivalents and restricted cash at the end of period	$	388,708		$	797,530

(Continued on following page)

Table of Contents

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(unaudited)


Supplemental disclosure of cash flow information:
Cash paid for interest	$	12,335	$	5,991
Cash paid for income taxes	$	1,189	$	40
Supplemental disclosure of non-cash investing and financing activities:
Finance receivables from consolidation of 2022-2 securitization transaction	$	180,706	$	—
Elimination of beneficial interest from the consolidation of 2022-2 securitization transaction	$	9,811	$	—
Securitization debt from consolidation of 2022-2 securitization transaction	$	186,386	$	—
Reclassification of finance receivables held for sale to finance receivables at fair value, net	$	248,081